S-1/A

As filed with the Securities and Exchange Commission on December 23, 2009

Registration No. 333-161931

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 1

TO THE

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Harvard Illinois Bancorp, Inc. and

Harvard Savings Bank 401(k) Plan

(Exact Name of Registrant as Specified in Its Charter)

Maryland	6712	Being applied for
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

58 North Ayer Street

Harvard, Illinois 60033

(815) 943-5261

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Mr. Duffield J. Seyller, III

President and Chief Executive Officer

58 North Ayer Street

Harvard, Illinois 60033

(815) 943-5261

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Kip A. Weissman, Esq.

Robert B. Pomerenk, Esq.

Luse Gorman Pomerenk & Schick, P.C.

5335 Wisconsin Avenue, N.W., Suite 400

Washington, D.C. 20015

(202) 274-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  x

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price	Amount of registration fee
Common Stock, $0.01 par value per share	1,256,375 shares	$10.00	$12,563,750(1)	$701*
Participation interests	87,035(2)			(2)

* Previously Paid.

(1) Estimated solely for the purpose of calculating the registration fee.

(2) The securities of Harvard Illinois Bancorp, Inc. to be purchased by the Harvard Savings Bank 401(k) Plan are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests. In accordance with Rule 457(h) of the Securities Act of 1933, as amended, the registration fee has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such Plan.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

Harvard Illinois Bancorp, Inc.

(Proposed Holding Company for Harvard Savings Bank)

Up to 1,035,000 Shares of Common Stock

Harvard Illinois Bancorp, Inc., a Maryland corporation, is offering shares of common stock for sale in connection with the conversion of Harvard Savings, MHC from the mutual to the stock form of organization. All shares of common stock are being offered for sale at a price of $10.00 per share. We expect that our common stock will be quoted on the OTC Bulletin Board upon conclusion of the stock offering. There is currently no public market for the shares of our common stock.

We are offering up to 1,035,000 shares of common stock for sale on a best efforts basis. We may sell up to 1,190,250 shares of common stock because of demand for the shares or changes in market conditions without resoliciting subscribers. We must sell a minimum of 765,000 shares in order to complete the offering.

We are offering the shares of common stock in a “subscription offering.” Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering.” We also may offer for sale shares of common stock not purchased in the subscription offering or community offering through a “syndicated community offering” to be managed by Keefe, Bruyette & Woods, Inc.

The minimum number of shares of common stock you may order is 25 shares. The maximum number of shares of common stock that can be ordered through a single qualifying account is 20,000 shares, and no person by himself or with an associate or group of persons acting in concert may purchase more than 40,000 shares. The offering is expected to expire at 12:00 noon, Central Time, on [expiration date]. We may extend this expiration date without notice to you until [extension date], or such later date as the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation may approve, to the extent such approval is required, which may not be beyond [final date]. Once submitted, orders are irrevocable. However, if the offering is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 1,190,250 shares or decreased to fewer than 765,000 shares, we will resolicit subscribers, giving them an opportunity to change or cancel their orders. Funds received during the offering will be held in a segregated account at Harvard Savings Bank, or, in our discretion, at another insured depository institution, and will earn interest at 0.30%, which is our current passbook savings rate.

Keefe, Bruyette & Woods, Inc. will assist us in selling our shares of common stock on a best efforts basis. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of the common stock that are being offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc. has advised us that it intends to make a market in the common stock, but is under no obligation to do so.

This investment involves a degree of risk, including the possible loss of your investment.

Please read “Risk Factors” beginning on page 11.

OFFERING SUMMARY

Price: $10.00 per Share

	Minimum		Maximum		Adjusted Maximum
Number of shares		765,000		1,035,000		1,190,250
Gross offering proceeds	$	7,650,000	$	10,350,000	$	11,902,500
Estimated offering expenses (excluding selling agent fees)	$	690,000	$	690,000	$	690,000
Estimated selling agent fees(1)	$	180,000	$	180,000	$	180,000
Estimated net proceeds	$	6,780,000	$	9,480,000	$	11,032,500
Estimated net proceeds per share	$	8.86	$	9.16	$	9.27

(1) See “The Conversion; Plan of Distribution—Marketing and Distribution; Compensation” for a discussion of Keefe, Bruyette & Woods, Inc.’s compensation for this offering.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

For assistance, please call the Stock Information Center, toll free, at [stock info #].

KEEFE, BRUYETTE & WOODS

The date of this prospectus is [prospectus date].

TABLE OF CONTENTS

	Page
SUMMARY	2
RISK FACTORS	11
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA	24
RECENT DEVELOPMENTS OF HARVARD SAVINGS, MHC AND SUBSIDIARIES	26
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	31
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING	32
OUR POLICY REGARDING DIVIDENDS	33
MARKET FOR THE COMMON STOCK	34
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE	35
CAPITALIZATION	36
PRO FORMA DATA	38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	44
BUSINESS OF HARVARD ILLINOIS BANCORP, INC.	65
BUSINESS OF HARVARD SAVINGS BANK	65
SUPERVISION AND REGULATION	98
TAXATION	106
MANAGEMENT OF HARVARD ILLINOIS BANCORP, INC.	107
SUBSCRIPTIONS BY DIRECTORS, OFFICERS AND ADVISORY DIRECTORS	121
THE CONVERSION; PLAN OF DISTRIBUTION	122
RESTRICTIONS ON ACQUISITION OF HARVARD ILLINOIS BANCORP, INC.	145
DESCRIPTION OF CAPITAL STOCK	150
TRANSFER AGENT	151
EXPERTS	151
LEGAL AND TAX MATTERS	152
WHERE YOU CAN FIND ADDITIONAL INFORMATION	152
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF HARVARD SAVINGS, MHC	F-1

SUMMARY

The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the Consolidated Financial Statements and the notes to the Consolidated Financial Statements.

In this prospectus, the terms “we, “our,” and “us” refer to Harvard Illinois Bancorp, Inc. and Harvard Savings Bank, Harvard Savings, MHC and Harvard Illinois Financial Corporation, unless the context indicates another meaning.

Harvard Savings Bank

Harvard Savings Bank is an Illinois chartered savings bank headquartered in Harvard, Illinois. Harvard Savings Bank was organized in 1934, and reorganized into the mutual holding company structure in 2005 by forming Harvard Savings, MHC. Harvard Savings, MHC owns 100% of the outstanding shares of common stock of Harvard Illinois Financial Corporation, a federal corporation, which in turn owns 100% of the outstanding shares of common stock of Harvard Savings Bank.

In April 2008, Morris Building & Loan, s.b., a mutual institution, merged into Harvard Savings Bank. Morris Building & Loan, s.b., which had $36 million in assets at the time of the merger, currently operates as a division of Harvard Savings Bank. We provide financial services to individuals, families and businesses through our three banking offices located in the Illinois counties of McHenry and Grundy. See “Business of Harvard Savings Bank.”

Harvard Savings Bank’s executive offices are located at 58 North Ayer Street, Harvard, Illinois 60033. Our telephone number at this address is (815) 943-5261. Our website address is www.harvardsavingsbank.com. Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus.

Harvard Illinois Bancorp, Inc.

Harvard Illinois Bancorp, Inc. is a newly formed Maryland corporation that will own all of the outstanding shares of common stock of Harvard Savings Bank upon completion of the mutual-to-stock conversion and the offering. Harvard Illinois Bancorp, Inc. has not engaged in any business to date.

Our executive offices are located at 58 North Ayer Street, Harvard, Illinois 60033. Our telephone number at this address is (815) 943-5261.

Business Strategy

Over the last several years, we have modified our strategy to provide a broader array of financial services to consumers and businesses within our market area. Highlights of our current strategy include the following:

• continue to focus on residential lending, including home equity lines of credit;

• continue to increase our commercial real estate and commercial and industrial lending, including agricultural lending;

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• manage our interest rate risk while enhancing, to the extent practicable, our net interest margin;

• continue to build our “core” deposits consisting of demand, NOW, savings and money market accounts;

• continue to grow our operations in our Morris office, which is located in one of the faster growing parts of our market area;

• build strong asset quality; and

• maintain controlled growth of our assets and liabilities.

These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Strategy” for a further discussion of our business strategy.

Reasons for the Conversion

Our primary reasons for converting and raising additional capital through the offering are to: (1) compete more effectively in the financial services marketplace; (2) offer our depositors, employees and directors the opportunity to have an equity ownership interest in our institution and thereby obtain an economic interest in its future success; (3) increase our capital to support future growth and profitability; and (4) finance the expansion of our operations.

The reorganization and the capital raised in the offering are expected to:

• increase our lending capacity by providing us with additional capital to support new loans and higher lending limits; and

• support the growth of our banking franchise, including the modernization and, if practicable, expansion of our branch network.

The reorganization and stock offering also will allow us to establish stock-based benefit plans for management, directors and employees that will permit us to attract and retain qualified personnel and provide such personnel with a stake in our success.

Terms of the Conversion and the Offering

We are offering between 765,000 and 1,035,000 shares of common stock to eligible depositors and borrowers of Harvard Savings Bank, to our employee benefit plans and, to the extent shares remain available, to the general public. The number of shares of common stock to be sold may be increased to up to 1,190,250 as a result of demand for the shares or changes in the market for financial institution stocks. Unless the number of shares of common stock to be offered is increased to more than 1,190,250 or decreased to less than 765,000, or the offering is extended beyond [extension date], subscribers will not have the opportunity to change or cancel their stock orders.

The purchase price of each share of common stock to be issued in the offering is $10.00. Investors will not be charged a commission to purchase shares of common stock in the offering.

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Persons Who May Order Shares of Common Stock in the Offering

We are offering the shares of common stock in a “subscription offering” in the following descending order of priority:

• First, to depositors of Harvard Savings Bank with aggregate account balances of at least $50 as of the close of business on June 30, 2008.

• Second, to Harvard Savings Bank’s tax-qualified employee benefit plans.

• Third, to depositors of Harvard Savings Bank with aggregate account balances of at least $50 as of the close of business on [supplemental date].

• Fourth, to depositors of Harvard Savings Bank as of [other member date] and to the former borrowers of Morris Building & Loan, s.b. as of April 18, 2008 whose borrowings remain outstanding as of [other member date].

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to natural persons residing in the Illinois Counties of McHenry and Grundy.

How We Determined the Offering Range

The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of Harvard Illinois Bancorp, Inc., assuming the conversion and the offering are completed. RP Financial, LC, our independent appraiser, has estimated that, as of November 27, 2009, this market value ranged from $7.7 million to $10.4 million, with a midpoint of $9.0 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 765,000 shares to 1,035,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

Limits on How Much Common Stock You May Purchase

The minimum number of shares of common stock that may be purchased is 25. Generally, no individual, or individuals exercising subscription rights through a single qualifying account held jointly, may purchase more than 20,000 shares ($200,000) of common stock. If any of the following persons purchases shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 40,000 shares ($400,000):

• your spouse or relatives of you or your spouse living in your house;

• most companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior management position; or

• other persons who may be your associates or persons acting in concert with you.

See the detailed descriptions of “acting in concert” and “associate” in “The Conversion; Plan of Distribution—Limitations on Common Stock Purchases.”

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How We Intend to Use the Proceeds From the Offering

Assuming we sell 1,190,250 shares of common stock in the stock offering (the adjusted maximum of the offering range), and we have net proceeds of $11.0 million, we intend to distribute the net proceeds as follows:

• $6.6 million (60.0% of the net proceeds) will be invested in Harvard Savings Bank;

• $952,000 (8.6% of the net proceeds) will be loaned to our employee stock ownership plan to fund its purchase of our shares of common stock; and

• $3.5 million (31.4% of the net proceeds) will be retained by us.

We may use the funds we receive for investments, to pay cash dividends, to repurchase shares of common stock and for other general corporate purposes. Harvard Savings Bank may use the proceeds it receives from Harvard Illinois Bancorp, Inc. to support increased lending and other products and services, and to repay short-term borrowings. The net proceeds retained by Harvard Illinois Bancorp, Inc. and Harvard Savings Bank also may be used for future business expansion through acquisitions of banks, thrifts and other financial services companies, and opening or acquiring branch offices. We have no current arrangements or agreements with respect to any such acquisitions or branch offices. Initially, a substantial portion of the net proceeds will be invested in short-term investments and other securities consistent with our investment policy.

We do not anticipate the number of shares we sell in the stock offering will result in significant changes in the respective use of proceeds by Harvard Savings Bank and Harvard Illinois Bancorp, Inc. However, if we sell 765,000 shares of common stock in the stock offering (the minimum of the offering range), a larger percentage of the net proceeds will be invested in Harvard Savings Bank and a smaller percentage of the net proceeds will be retained by us. Please see the section of this prospectus entitled “How We Intend to Use the Proceeds From the Offering” for more information on the proposed use of the proceeds from the offering, including a table showing the distribution of net proceeds at different points in the offering range.

You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights.

Deadline for Orders of Common Stock

If you wish to purchase shares of common stock in the offering, we must receive a properly completed original stock order and certification form, together with full payment for the shares of common stock, at the Stock Information Center or any of our branch offices no later than 12:00 noon, Central Time, on [expiration date].

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Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 765,000 shares of common stock, we may take steps to issue the minimum number of shares of common stock in the offering range. Specifically, we may:

• increase the purchase limitations; and/or

• seek the approval, to the extent required, of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation to extend the offering beyond [extension date], so long as we resolicit subscriptions that we have previously received in the offering.

If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

Possible Change in the Offering Range

RP Financial, LC will update its appraisal before we complete the offering. If, as a result of demand for the shares, or changes in market conditions, RP Financial, LC determines that our pro forma market value has increased, we may sell up to 1,190,250 shares in the offering without further notice to you. If our pro forma market value at that time is either below $7.7 million or above $11.9 million, then, after consulting with the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, we may:

• terminate the stock offering and promptly return all funds;

• set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their purchase orders for shares of Harvard Illinois Bancorp, Inc.’s common stock; or

• take such other actions as may be permitted, to the extent such permission is required, by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation and the Securities and Exchange Commission.

Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of members of Harvard Savings, MHC that is being called to vote upon the conversion, and at any time after member approval with the approval, to the extent such approval is required, of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation.

We must sell a minimum of 765,000 shares to complete the offering. If we terminate the offering because we fail to sell the minimum number of shares or for any other reason, we will promptly return your funds with interest at our passbook savings rate and we will cancel deposit account withdrawal authorizations.

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Purchases by Officers and Directors

We expect our directors and officers, together with their associates, along with our Morris Advisory Directors, to subscribe for 54,100 shares of common stock in the offering, or 7.07% of the shares to be sold at the minimum of the offering range. See “Subscriptions by Directors and Officers.”

Benefits to Management and Potential Dilution to Stockholders Following the Conversion

We expect our tax-qualified employee stock ownership plan to purchase 8% of the total number of shares of common stock that we sell in the offering, or 82,800 shares of common stock, assuming we sell the maximum of the shares proposed to be sold. We also intend to implement one or more stock-based benefit plans no earlier than six months after completion of the conversion. Stockholder approval of these plans will be required, and the stock-based benefit plans cannot be implemented until at least six months after the completion of the conversion pursuant to applicable regulations.

We have not yet determined whether we will present these plans for stockholder approval within 12 months following the completion of the conversion or more than 12 months after the completion of the conversion. If presented more than 12 months after the completion of the conversion, these plans would require the approval of our stockholders by a majority of votes cast; otherwise, they would require the approval of our stockholders by a majority of votes eligible to be cast. Further, there are a number of restrictions that would apply to these plans if adopted within one year of the conversion, including limits on awards to non-employee directors and officers and vesting. See “Management of Harvard Illinois Bancorp, Inc. – Stock-Based Benefit Plans.”

If 4% of the shares of common stock sold in the offering are awarded under a stock-based benefit plan and come from authorized but unissued shares of common stock, stockholders would experience dilution of up to approximately 3.8% in their ownership interest in Harvard Illinois Bancorp, Inc. If 10% of the shares of common stock sold in the offering are issued upon the exercise of options granted under a stock-based benefit plan and come from authorized but unissued shares of common stock, stockholders would experience dilution of approximately 9.1% in their ownership interest in Harvard Illinois Bancorp, Inc.

We have entered into employment agreements with certain of our executive officers. See “Management of Harvard Illinois Bancorp, Inc.—Executive Officer Compensation” and “Risk Factors – We have entered into employment and change-in-control severance agreements that may increase our compensation costs” for a further discussion of these agreements, including their terms and potential costs, as well as a description of other benefits arrangements.

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The following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that are available under one or more stock-based benefit plans if such plans are adopted within one year following the completion of the conversion and the offering. The table shows the dilution to stockholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees. A portion of the stock grants shown in the table below may be made to non-management employees.

	Number of Shares to be Granted or Purchased(3)				Dilution Resulting From Issuance of Shares for Stock Benefit Plans
							Value of Grants (1)
	At Minimum of Offering Range	At Maximum of Offering Range	As a Percentage of Common Stock to be Issued (2)				At Minimum of Offering Range		At Maximum of Offering Range
							(Dollars in thousands)
Employee stock ownership plan	61,200	82,800	8.00	%	—		$             612	$          828
Stock awards	30,600	41,400	4.00		3.8	%	306	414
Stock options	76,500	103,500	10.00		9.1	%	363	491
Total	168,300	227,700	22.00	%	12.3	%	$          1,281	$       1,733

(1) The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $4.74 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0%; an expected option life of 10 years; a risk-free interest rate of 3.31%; and a volatility rate of 30.23% based on an index of publicly traded thrift institutions. The actual expense of stock options granted under a stock-based benefit plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted, which may or may not be the Black-Scholes model.

(2) The stock-based benefit plans may award a greater number of options and shares, respectively, if the plans are adopted more than 12 months after the completion of the conversion.

(3) For plans adopted within 12 months of the completion of the conversion, applicable regulations permit stock awards to encompass up to 4.0% and the ESOP and stock awards to encompass in the aggregate up to 12.0% of the shares issued, provided Harvard Savings Bank has tangible capital of 10.0% or more following the conversion.

The actual value of restricted stock grants will be determined based on their fair value (the closing market price of shares of common stock of Harvard Illinois Bancorp, Inc.) as of the date grants are made. The following table presents the total value of all shares to be available for awards of restricted stock under the stock-based benefit plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $16.00 per share at the time of the grant.

Share Price		30,600 Shares Awarded at Minimum of Offering Range		36,000 Shares Awarded at Midpoint of Offering Range		41,400 Shares Awarded at Maximum of Offering Range		47,610 Shares Awarded at Maximum of Offering Range, As Adjusted
(In thousands, except share price information)
$	8.00	$	245	$	288	$	331	$	381
	10.00		306		360		414		476
	12.00		367		432		497		571
	14.00		428		504		580		667
	16.00		490		576		662		762

The grant-date fair value of the stock options granted under the stock-based benefit plans will be based, in part, on the closing price of shares of common stock of Harvard Illinois Bancorp, Inc. on the date the options are granted. The fair value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted. The following table presents the total estimated value of the stock options to be available for grant under the stock-based benefit plans, assuming the range of market prices for the shares are $8.00 per share to $16.00 per share at the time of the grant.

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Exercise Price		Grant-Date Fair Value Per Option		76,500 Options at Minimum of Range		90,000 Options at Midpoint of Range		103,500 Options at Maximum of Range		119,025 Options at Maximum of Range, As Adjusted
(In thousands, except share price information)
$	8.00	$	3.79	$	290	$	341	$	392	$	451
	10.00		4.74		363		427		491		564
	12.00		5.68		435		511		588		676
	14.00		6.63		507		597		686		789
	16.00		7.58		580		682		785		902

The tables presented above are provided for informational purposes only. There can be no assurance that our stock price will not trade below $10.00 per share. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 11.

Market for Common Stock

We anticipate that the common stock sold in the offering will be traded and quoted on the OTC Bulletin Board. See “Market for the Common Stock.”

Our Policy Regarding Dividends

Our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. See “Our Policy Regarding Dividends.”

Conditions to Completion of the Conversion and the Offering

We cannot complete the conversion and the offering unless:

• the plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of Harvard Savings, MHC;

• we have received orders to purchase at least the minimum number of shares of common stock offered; and

• we receive all required final approvals of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation to complete the conversion and the offering.

Material Income Tax Consequences

The conversion qualifies as a tax-free reorganization. Neither Harvard Illinois Financial Corporation, Harvard Savings Bank, Harvard Savings, MHC nor Eligible Account Holders, Supplemental Eligible Account Holders or Other Members will recognize any gain or loss as a result of the conversion. See “—Material Income Tax Consequences” for a complete discussion of the income tax consequences of the transaction.

How You Can Obtain Additional Information

Our branch office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or the offering, please call our Stock

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Information Center, toll free, at [stock info #], Monday through Friday between 9:00 a.m. and 4:00 p.m., Central Time.

TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF [EXPIRATION DATE] IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED OR HAND-DELIVERED ANY LATER THAN FIVE DAYS OR TWO DAYS, RESPECTIVELY, PRIOR TO [EXPIRATION DATE].

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RIS K FACTORS

You should consider carefully the following risk factors in evaluating an investment in our shares of common stock.

Risks Related to Our Business

The current economic downturn has adversely impacted our operations and will likely continue to have an adverse effect on us.

Our success depends primarily on the general economic conditions in the Illinois Counties of McHenry and Grundy, and to a lesser extent, Walworth County in Wisconsin, as nearly all of our customers are in these markets. Accordingly, the local economic conditions in these markets have a significant impact on the ability of borrowers to repay loans as well as our ability to originate new loans. As such, a decline in real estate valuations in these markets would lower the value of the collateral securing those loans. In addition, a significant weakening in general economic conditions such as inflation, recession, unemployment or other factors beyond our control could negatively affect our financial results.

During the last 21 months, economic conditions within our market area have declined significantly. In particular, unemployment in the State of Illinois, on a seasonally adjusted basis, has increased from 5.3% as of December 31, 2007 to 10.5% as of September 30, 2009, and local real estate values have declined significantly. We believe that such conditions have contributed to recent increases in our non-performing assets as well as increases in our loan charge-offs and our provisions for loan losses. Nonperforming assets as a percent of total assets was 1.82% at September 30, 2009 compared to 0.81% at December 31, 2007. Net charge-offs totaled $773,000 for the nine months ended September 30, 2009 compared to $209,000 for the nine months ended September 30, 2008. The provision for loan losses totaled $1.0 million for the nine months ended September 30, 2009 compared to $248,000 for the nine months ended September 30, 2008. At September 30, 2009, the allowance for loan losses totaled $1.3 million, or 1.14% of total loans, compared to $675,000, or 0.56% of total loans at December 31, 2007.

According to data published by the Illinois Association of Realtors, the median price of all homes sold in the third quarter of 2009 compared to the third quarter of 2008 declined 7.3%, 1.7% and 12.9%, respectively, in McHenry and Grundy Counties, and for the State of Illinois. The median price of all homes sold in the third quarter of 2009 compared to the last quarter of 2007 declined 12.9%, 4.5% and 13.6%, respectively, in McHenry and Grundy Counties, and for the State of Illinois. These decreases in home values have reduced the collateral value for our loans and, therefore, have increased our lending risks.

We believe that these unfavorable economic conditions will continue to have an unfavorable impact on our operations as long as they persist.

We have increased our emphasis on commercial real estate and commercial and industrial lending, thus increasing our credit risk. Continued weakness or a deeper downturn in the real estate market and local economy could adversely affect our earnings.

We have increased our portfolio of commercial real estate and commercial and industrial loans, and recently hired a new commercial loan officer with substantial experience in commercial lending, including agricultural lending. At September 30, 2009, commercial real estate and commercial and industrial loans comprised 17.51% and 5.23%, respectively, of our loan portfolio, compared to

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13.67% and 3.98% at December 31, 2007. These loans generally have more credit risk than one- to four-family residential mortgage loans. Because the repayment of these loans depends on the successful management and operation of the borrower’s properties and/or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market and/or economy. In particular, the business and collateral value underlying our commercial real estate loans are vulnerable to today’s recessionary economy.

Some of our borrowers also have more than one commercial real estate or commercial and industrial loan outstanding with us. At September 30, 2009, our largest commercial real estate loan totaled $3.0 million and was secured by a mortgage on an automobile dealership outside of our market area in Cook County, Illinois. Our largest commercial and industrial loan relationship was a $1.0 million commercial line of credit to an automobile dealer in our market area. While both loans were performing in accordance with their terms at September 30, 2009, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Finally, if we foreclose on such a loan, our holding period for the collateral, if any, typically is longer than for one- to four-family residential mortgage loans because there are fewer potential purchasers of the collateral. We have increased the level of our allowance for loan losses because of the increased risk characteristics associated with these types of loans. Any further increase to our allowance for loan losses would adversely affect our earnings.

Our return on average assets (“ROA”) and return on average equity (“ROE”), two commonly employed measures of the profitability of financial institutions, have decreased in recent years as we recorded a net loss of $(416,000) for the nine months ended September 30, 2009, and net losses of $(1.2) million and $(674,000) for the years ended December 31, 2008 and 2007, respectively.

Our ROA for the nine months ended September 30, 2009, and the years ended December 31, 2008 and 2007 was (0.34)%, (0.74)% and (0.43)%, respectively, while our ROE over those same periods was (4.42)%, (8.86)% and (4.45)%, respectively. These performance measures were below those of our peer institutions. There have been several factors that have contributed to this poor performance. First, we completed our merger with Morris Building and Loan, s.b. in April 2008, which we accounted for in a manner similar to a pooling of interests. Our net losses for the years ended December 31, 2008 and 2007 included pre-merger net losses of Morris Building and Loan, s.b. of $(170,000) and $(845,000), respectively. Merger expenses totaled $55,000 and $618,000 for the years ended December 31, 2008 and 2007, respectively. These merger expenses and the higher operating expenses of Morris Building and Loan, s.b. were the primary factors for the increase in our efficiency ratios to 87.71%, 107.20% and 116.68% for the nine months ended September 30, 2009 and the years ended December 31, 2008 and 2007, respectively.

Second, our net income has been negatively affected in recent years by the continued compression of our net interest income, primarily due to high borrowing rates. Our net interest margin was 2.65%, 2.42% and 2.43% for the nine months ended September 30, 2009, and the years ended December 31, 2008 and 2007, respectively, compared to 2.83% for the year ended December 31, 2006. Further, as previously noted, the Federal Home Loan Bank of Chicago stopped paying dividends in 2007, which also adversely affected our net interest income. Specifically, we received dividend income from the Federal Home Loan Bank of Chicago of $218,000 and $430,000 for the years ended December 31, 2007 and 2006, respectively.

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Third, our net income has been negatively affected by losses from other than temporary impairment of equity securities totaling $(45,000), $(1.2) million and $(167,000) for the nine months ended September 30, 2009 and the years ended December 31, 2008 and 2007, respectively.

Fourth, our net income was negatively affected in 2009 by higher FDIC insurance premiums, which increased to $227,000 (including a $74,000 special assessment) for the nine months ended September 30, 2009 from $46,000 for the nine months ended September 30, 2008.

Finally, we recorded a provision for loan losses of $1.0 million and $634,000 for the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively, compared to a credit to the provision for loan losses of $180,000 for the year ended December 31, 2007.

Future changes in interest rates could reduce our profits.

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

• the interest income we earn on our interest-earning assets, such as loans and securities; and

• the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

We are vulnerable to changes in interest rates including the shape of the yield curve because of a mismatch between the terms to repricing of our assets and liabilities. Historically, our liabilities repriced more quickly than our assets, which made us vulnerable to increases in interest rates. During the last several years, we have taken certain actions which have made usless “liability sensitive,” including increasing our originations and purchases of commercial and consumer loans with relatively short terms to repricing, selling much of our new long term fixed-rate loan production and increasing our non-certificate of deposit “core” deposits. Nevertheless, our net interest income remains vulnerable to changes in interest rates.

For the nine months ended September 30, 2009 and the years ended December 31, 2008 and 2007, our net interest margin was 2.65%, 2.42% and 2.43%, respectively. Our Asset/Liability Management Committee utilizes a computer simulation model to provide an analysis of estimated changes in net interest income in various interest rate scenarios. At September 30, 2009, in the event of an immediate 100 basis point decrease in interest rates, our model projects a decrease in net interest income of $(338,000) or (8.05)%, and a decrease in our net portfolio value of $(1.2 million), or (8.76)%. In the event of an immediate 200 basis point increase in interest rates, our model projects an increase in net interest income of $380,000 or 9.05% and an increase in our net portfolio value of $556,000, or 3.92%.

Changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates results in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their debt in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Management of Market Risk.”

Our earnings could be adversely affected if we are not able to effectively grow our operations in our Morris, Illinois market.

In April 2008, we merged with Morris Building & Loan, s.b., and, in the process, acquired a branch office in Morris, Illinois, approximately 80 miles south of our main office in Harvard, Illinois. On the merger date, the Morris office had $35.9 million of assets (including $23.2 million in loans) and $26.3 in deposits. We believe that we could enjoy economies of scale and more effectively serve the Morris community if we are able to grow the deposits and loans of the Morris office. As of September 30, 2009, the Morris office had approximately $19 million of loans and $31 million of deposits.

Recent negative developments in the financial industry and the domestic and international credit markets may adversely affect our operations and results.

Negative developments in the latter half of 2007 and during 2008 and 2009 in the global credit and securitization markets have resulted in significant uncertainty in the financial markets. Loan portfolio quality has deteriorated at many institutions. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Bank and bank holding company stock prices have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets. Specifically, the Federal Deposit Insurance Corporation Quarterly Banking Profile has reported that, for financial institutions in its data base, noncurrent assets plus other real estate owned as a percentage of assets rose to 3.05% as of September 30, 2009, compared to 1.89% as of December 31, 2008 and 0.94% as of December 31, 2007. For the nine months ended September 30, 2009, the Federal Deposit Insurance Corporation Quarterly Banking Profile has reported that annualized return on average assets was 0.10% compared to 0.04% for the year ended December 31, 2008 and 0.81% for the year ended December 31, 2007.

The potential exists for additional federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be active in responding to concerns and trends identified in examinations, including the expected issuance of many formal enforcement orders. Actions taken to date, as well as potential actions, may not have the beneficial effects that are intended, particularly with respect to the extreme levels of volatility and limited credit availability currently being experienced. In addition, new laws, regulations, and other regulatory changes may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws, regulations, and other regulatory changes, along with negative developments in the financial industry and the domestic and international credit markets, may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability. Further, continued declines in the stock market in general, or for stock of financial institutions and their holding companies, could affect our stock performance.

The Federal Deposit Insurance Corporation has imposed an emergency assessment on financial institutions, which will decrease our earnings in 2009. The Federal Deposit Insurance Corporation also has required insured depository institutions to prepay their estimated quarterly risk-based assessments through 2012. In addition, new obligations assumed by the Federal Deposit Insurance Corporation may result in higher premiums and additional special assessments in the future.

The Federal Deposit Insurance Corporation recently has assumed significant additional obligations as a result of (i) a significant increase in bank and thrift failures, (ii) an increase in obligations assumed in assisted mergers, (iii) the implementation of the Temporary Liquidity Guarantee Program, (iv)

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the increase in the deposit insurance maximum to $250,000 and (v) the FDIC’s new role in guaranteeing financing in the U.S. Treasury’s Public-Private Investment Program. To finance these new obligations, the Federal Deposit Insurance Corporation adopted a final rule that imposed a special assessment of 5 basis points on each FDIC-insured depository institution’s assets minus its Tier 1 capital as of June 30, 2009. This special assessment resulted in an addition to our non-interest expense of $74,000 based on our assets and Tier 1 capital as of June 30, 2009. We fully accrued this amount in the period ended June 30, 2009. The final rule also permits the Federal Deposit Insurance Corporation to impose up to two additional special assessments of up to 5 basis points each during 2009 if the Federal Deposit Insurance Corporation estimates that the Deposit Insurance Fund reserve ratio will fall to a level that the Federal Deposit Insurance Corporation believes would adversely affect public confidence or to a level that will be close to or below zero.

The Federal Deposit Insurance Corporation recently amended its assessment regulations to require insured institutions to prepay, on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of calendar 2009 and for all of the calendar years 2010, 2011 and 2012. The amount of the prepayment is generally determined based upon an institution’s assessment rate in effect on September 30, 2009 and reflects a 5% annualized growth factor applied to the institution’s assessment base as well as an assessment rate increase of three cents per $100 of deposits effective January 1, 2011. Under the rule, our prepayment amount was $773,000. In recognition of the industry’s current weakened condition, the prepayment is intended to preclude any additional special assessments during 2009; however, such a prepayment requirement does not necessarily preclude the Federal Deposit Insurance Corporation from changing assessment rates or from revising the risk-based assessment system, pursuant to the existing notice-and-comment rulemaking framework.

If our investment in the Federal Home Loan Bank of Chicago is classified as other-than-temporarily impaired, our earnings and stockholders’ equity could decrease.

We own common stock of the Federal Home Loan Bank of Chicago. We are required to hold this stock in order to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Chicago’s advance program. The aggregate cost of our Federal Home Loan Bank of Chicago common stock as of September 30, 2009 was $6.5 million based on its par value. There is no market for our Federal Home Loan Bank of Chicago common stock.

Recent published reports indicate that the Federal Home Loan Bank of Chicago, may be subject to asset quality and other risks that could adversely affect its regulatory capital level. In an extreme situation, it is possible that the capital of the Federal Home Loan Bank of Chicago, could be substantially diminished or reduced to zero. This would have a significant adverse impact on our liquidity as we have relied on borrowings from the FHLB of Chicago to fund a portion of our operations and as a source of liquidity. Consequently, we believe that there is a risk that our investment in Federal Home Loan Bank of Chicago common stock could be impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the amount of the impairment charge.

The Federal Home Loan Bank of Chicago stopped paying dividends during the fourth quarter of 2007. This has negatively affected our earnings.

The Federal Home Loan Bank of Chicago has not declared any dividends on its common stock since the third quarter of 2007 due to the combined effect of the Federal Home Loan Bank of Chicago’s financial condition and a cease and desist order that prohibits the Federal Home Loan Bank of Chicago from declaring dividends without the prior approval of the Federal Housing Finance Agency. The cease and desist order imposes a similar prior approval requirement on the Federal Home Loan Bank of Chicago’s repurchase or redemption of common stock from existing and withdrawn members, subject to

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certain exceptions that are not applicable to the shares of Federal Home Loan Bank of Chicago common stock that we own. The Federal Home Loan Bank of Chicago has stated in its recent public filings that it cannot predict when it will resume paying dividends or repurchasing or redeeming common shares that are subject to the restrictions imposed by the cease and desist order.

We received $218,000 in dividends from the Federal Home Loan Bank of Chicago for fiscal year ended December 31, 2007. The absence of a dividend has had a significant adverse impact on our results of operations.

Lack of consumer confidence in financial institutions may decrease our level of deposits and increase the cost of our deposits.

Deposits at Harvard Savings Bank are insured by the Federal Deposit Insurance Corporation up to certain levels. However, our level of deposits may be affected by a recent lack of consumer confidence in financial institutions, which has caused depositors at financial institutions to withdraw deposits in excess of the applicable insurance levels. Such depositors may determine to place their excess funds in other institutions or to invest uninsured funds in investments perceived as being more secure, such as securities issued by the U.S. Department of the Treasury. These consumer preferences may require us to pay higher interest rates to retain deposits and may constrain liquidity as we seek to meet funding needs caused by reduced deposit levels.

Future legislative or regulatory actions responding to perceived financial and market problems could impair our rights against borrowers.

There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. If proposals such as these, or other proposals limiting our rights as a creditor, are implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor.

Legislative proposals have been introduced that would eliminate the Office of Thrift Supervision, which, upon completion of the conversion, would be the supervisor of Harvard Illinois Bancorp, Inc. As a result, Harvard Illinois Bancorp, Inc. may, depending upon the outcome of these proposals, be required to become a bank holding company supervised by the Federal Reserve, or may become subject to supervision by a new federal regulator.

The U.S. Treasury Department recently released a legislative proposal that would implement sweeping changes to the current bank regulatory structure. The proposal would create a new federal banking regulator, the National Bank Supervisor, and merge the Office of Thrift Supervision (which, upon completion of the conversion, would be the supervisor of Harvard Illinois Bancorp, Inc.) as well as the Office of the Comptroller of the Currency (the primary federal regulator for national banks) into this new federal bank regulator. Under the proposal, savings institution holding companies that were supervised and regulated by the Office of Thrift Supervision would be required to become bank holding companies supervised and regulated by the Board of Governors of the Federal Reserve System.

In addition to the U.S. Treasury Department’s proposal, the Financial Services Committee of the U.S. House of Representatives recently released a draft of its proposed restructuring legislation, which was developed in conjunction with the U.S. Treasury Department. The proposed legislation would establish a Financial Services Oversight Council and merge the Office of Thrift Supervision into the Office of the Comptroller of the Currency. The proposal also contemplates that a division of thrift supervision within the Office of the Comptroller of the Currency would regulate federal savings banks.

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As with the U.S. Treasury Department’s proposal, savings institution holding companies would, under the House proposal, be subject to supervision and regulation by the Federal Reserve.

The Senate Banking Committee Chairman, Senator Christopher Dodd, also recently released draft financial reform legislation. Among other changes, the Senate proposal would (i) remove bank and bank holding company regulatory powers from the Board of Governors of the Federal Reserve System, (ii) eliminate the Office of Thrift Supervision and the Office of the Comptroller of the Currency, and (iii) establish a single bank and bank holding company regulator known as the Financial Institutions Regulatory Administration. Under this proposal, savings and loan holding companies that were regulated by the Office of Thrift Supervision would become subject to supervision and regulation by this new regulator.

If the reforms contained in the U.S. Treasury Department or House Financial Service Committee proposals are fully enacted, Harvard Illinois Bancorp, Inc. would become a bank holding company subject to supervision by the Board of Governors of the Federal Reserve System as opposed to the Office of Thrift Supervision, and we expect we would become subject to the Federal Reserve’s regulations, including holding company capital requirements, that Harvard Illinois Bancorp, Inc. would not be subject to as a savings and loan holding company. Holding company capital requirements could reduce capital available for dividends and share repurchases. In addition, under the reforms contained in the Senate proposal, Harvard Illinois Bancorp, Inc. would become subject to supervision and regulation by the Financial Institutions Regulatory Administration, a new federal regulatory agency. Compliance with new regulations and being supervised by one or more new regulatory agencies could increase our expenses.

Non-residential loans increase our exposure to credit risks.

Over the last several years, we have begun to increase our non-residential lending in order to enhance the yield and reduce the duration of our assets. At September 30, 2009, our portfolio of commercial real estate, commercial and industrial, purchased indirect auto and other non-residential loans totaled $44.2 million, or 39.49% of total loans, compared to $34.9 million, or 33.52% of total loans at June 30, 2005. In addition, we recently hired a commercial loan officer with substantial experience in agricultural lending, and we intend to increase our lending in this area. Non-residential loans expose us to a greater risk of non-payment and loss than residential real estate loans because, in the case of commercial loans, repayment often depends on the successful operations and income stream of the borrowers and, in the case of consumer loans, the applicable collateral is subject to rapid depreciation. Additionally, commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans.

Also, non-residential loans are generally considered to be more vulnerable to adverse economic conditions than residential loans because of the disproportionate impact of an economic recession on businesses and consumers.

Strong competition within our market areas may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively and originate or purchase larger loans than we do, which could affect our ability to grow and remain profitable on a long-

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term basis. Our profitability depends upon our continued ability to successfully compete in our market areas. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected. For additional information see “Business of Harvard Savings Bank—Competition.”

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable incurred losses in our loan portfolio, resulting in additions to our allowance and a reduction in our earnings. While our allowance for loan losses was 1.14% of total loans at September 30, 2009, significant additions to our allowance could materially decrease our net income.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities will have a material adverse effect on our financial condition and results of operations.

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision, and examination by the Illinois Department of Financial and Professional Regulation, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. Such regulators govern the activities in which we may engage, primarily for the protection of depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank, and the adequacy of a bank’s allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on us and our operations. Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change. There can be no assurance that proposed laws, rules and regulations, or any other laws, rules or regulations, will not be adopted in the future, which could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

We rely on our management team for the successful implementation of our business strategy.

Our future success will be largely due to the efforts of our senior management team consisting of Duffield J. Seyller, III, President and Chief Executive Officer, Donn L. Claussen, Executive Vice President and Chief Financial Officer, and Michael T. Neese, Vice President and Loan Officer. The loss of services of one or more of these individuals may have a material adverse effect on our ability to implement our business plan.

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Risks Related to this Stock Offering

Our stock price may decline when trading commences.

If you purchase shares in the offering, you may not be able to sell them at or above the $10.00 purchase price. After the shares of our common stock begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded.

The capital we raise in the stock offering will reduce our return on equity. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. For the fiscal year ended December 31, 2008, we had a negative return on equity. Following the stock offering, we expect our consolidated equity to increase from $12.2 million to between $18.0 million at the minimum of the offering range and $21.8 million at the adjusted maximum of the offering range. Based upon our earnings for the fiscal year ended December 31, 2008, and these pro forma equity levels, we anticipate that our return on equity will remain negative. We expect our return on equity to remain negative or only slightly positive until we are able to leverage the additional capital we receive from the stock offering. Although we anticipate increasing net interest income using proceeds of the stock offering, our return on equity will be reduced by the capital raised in the stock offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based benefit plan we intend to adopt. Until we can increase our net interest income and non-interest income, our return on equity may reduce the value of our shares of common stock.

We will need to implement additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements.

The obligations of being a public company, including substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. These obligations will increase our operating expenses and could divert management’s attention from our banking operations. Federal regulations also will require us to certify the adequacy of our internal controls and procedures, which could require us to upgrade our systems, and/or hire additional staff, which would increase our operating costs.

Our stock-based benefit plans will increase our costs, which will reduce our income.

We anticipate that our employee stock ownership plan will purchase 8% of the total shares of common stock sold in the stock offering. We will record annual employee stock ownership plan expense in an amount equal to the fair value of shares of common stock committed to be released to employees. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.

We also intend to adopt a stock-based benefit plan after the stock offering that would award participants shares of our common stock (at no cost to them) and/or options to purchase shares of our common stock. The number of shares of restricted stock or stock options reserved for issuance under any initial stock-based benefit plan may not exceed 4% and 10%, respectively, of our total outstanding shares,

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if these plans are adopted within 12 months after the completion of the conversion. We may grant shares of common stock and stock options in excess of these amounts provided the stock-based benefit plan is adopted more than one year following the stock offering. Assuming the market price of the common stock is $10.00 per share; the options are granted with an exercise price of $10.00 per share; the dividend yield on the stock is 0%; the expected option life is 10 years; the risk free interest rate is 3.31% (based on the ten-year Treasury rate) and the volatility rate on the shares of common stock is 30.23% (based on an index of publicly traded thrift institutions), the estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis is $4.74 per option granted. Assuming this value is amortized over a five-year vesting period, the corresponding annual pre-tax expense associated with the stock options would be $113,000 at the adjusted maximum. In addition, assuming that all shares of restricted stock are awarded at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual pre-tax expense associated with restricted stock awarded under the stock-based benefit plan would be $95,000 at the adjusted maximum. However, if we grant shares of common stock or options in excess of these amounts, such grants would increase our costs further.

The shares of restricted stock granted under the stock-based benefit plan will be expensed by us over their vesting period at the fair market value of the shares on the date they are awarded. If the shares of restricted stock to be granted under the plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by Harvard Illinois Bancorp, Inc.) and cost the same as the purchase price in the stock offering, the reduction to stockholders’ equity due to the plan would be between $306,000 at the minimum of the offering range and $476,000 at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders’ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders’ equity would be less than the range described above.

The implementation of stock-based benefit plans may dilute your ownership interest.

We intend to adopt one or more stock-based benefit plans, which will allow participants to be awarded shares of common stock (at no cost to them) and/or options to purchase shares of our common stock, following the stock offering. If these stock-based benefit plans are funded from the issuance of authorized but unissued shares of common stock, stockholders would experience a reduction in ownership interest totaling 12.3%.

Although the implementation of the stock-based benefit plan will be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.

We have not determined whether we will adopt stock-based benefit plans more than one year following the stock offering. Stock-based benefit plans adopted more than one year following the stock offering may exceed regulatory restrictions on the size of stock-based benefit plans adopted within one year, which would increase our costs.

If we adopt stock-based benefit plans within one year following the completion of the stock offering, then we may grant shares of common stock or stock options under our stock-based benefit plans for up to 4% and 10%, respectively, of our total outstanding shares. The amount of stock awards and stock options available for grant under the stock-based benefit plans may exceed these amounts, provided the stock-based benefit plans are adopted more than one year following the stock offering. Although the implementation of the stock-based benefit plan will be subject to stockholder approval, the determination

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as to the timing of the implementation of such a plan will be at the discretion of our Board of Directors. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans will increase our costs, which will reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans will dilute your ownership interest.”

We have entered into employment agreements, a change-in-control severance agreement and salary continuation agreements that may increase our compensation costs.

We have entered into employment agreements with each of our President and our Chief Financial Officer, and we have entered into a change-in-control agreement with our Secretary-Treasurer. In addition, we have entered into salary continuation agreements with each of these executives. In the event of involuntary or good reason termination of employment, or certain types of termination following a change in control, the employment and change-in-control agreements provide for cash severance benefits that would cost approximately $1.1 million in the aggregate based on a change in control and termination occurring as of September 30, 2009. The salary continuation agreements provide for benefits that would cost us approximately $456,000 in the event of the a change in control and termination occurring as of September 30, 2009, payable in 180 monthly installments. In the event of the executives’ termination without cause at September 30, 2009, other than following a change in control, an aggregate of approximately $634,000 would be required to be paid. In addition, the executives would be entitled to benefits, the present value of which is approximately $188,000, payable in 180 monthly installments. For additional information see “Management of Harvard Illinois Bancorp, Inc.—Executive Officer Compensation.”

We have broad discretion in using the proceeds of the stock offering. Our failure to effectively use such proceeds could reduce our profits.

We will use a portion of the net proceeds to finance the purchase of shares of common stock in the stock offering by the employee stock ownership plan, and may use the remaining net proceeds to pay dividends to stockholders, repurchase shares of common stock, purchase investment securities, deposit funds in Harvard Savings Bank, acquire other financial services companies or for other general corporate purposes. Harvard Savings Bank may use the proceeds it receives to fund new loans, establish or acquire new branches, purchase investment securities, reduce a portion of our borrowings, or for general corporate purposes. We have not identified specific amounts of proceeds for any of these purposes and we will have significant flexibility in determining the amount of net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively could reduce our profitability. We have not established a timetable for the deployment of the proceeds and we cannot predict how long we will require to effectively deploy the proceeds.

Our stock value may be negatively affected by federal and state regulations that restrict takeovers.

For three years following the stock offering, applicable regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Office of Thrift Supervision and the Illinois Department of Financial and Professional Regulation. Applicable regulations also require approval or nonobjection for any acquisition of “control” of the Harvard Illinois Bancorp, Inc. which may include an acquisition of as little as 10% of our outstanding shares. See “Restrictions on Acquisition of Harvard Illinois Bancorp, Inc.” for a discussion of applicable regulations regarding acquisitions.

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The corporate governance provisions in our articles of incorporation and bylaws, and the corporate governance provisions under Maryland law, may prevent or impede the holders of our common stock from obtaining representation on our board of directors and may impede takeovers of the company that our board might conclude are not in the best interest of Harvard Illinois Bancorp, Inc. or its stockholders. In addition, the Illinois Savings Bank Act and regulations issued thereunder may make takeovers of Harvard Illinois Bancorp, Inc. more difficult.

Provisions in our articles of incorporation and bylaws may prevent or impede holders of our common stock from obtaining representation on our Board of Directors and may make takeovers of Harvard Illinois Bancorp, Inc. more difficult. For example, our Board of Directors is divided into three staggered classes. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Our articles of incorporation include a provision that no person will be entitled to vote any shares of our common stock in excess of 10% of our outstanding shares of common stock. This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan established by us. In addition, our articles of incorporation and bylaws restrict who may call special meetings of stockholders and how directors may be removed from office. Additionally, in certain instances, the Maryland General Corporation Law requires a supermajority vote of our stockholders to approve a merger or other business combination with a large stockholder, if the proposed transaction is not approved by a majority of our directors. Furthermore, the acquisition or change of control of Harvard Illinois Bancorp, Inc. is subject to applicable provisions of the Illinois Savings Bank Act and regulations issued thereunder, which may make takeovers of Harvard Illinois Bancorp, Inc. more difficult. See “Restrictions on Acquisition of Harvard Illinois Bancorp, Inc.”

We have never issued common stock and there is no guarantee that a liquid market will develop.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be quoted on the OTC Electronic Bulletin Board, subject to completion of the offering and compliance with certain conditions. Keefe Bruyette & Woods, Inc. has advised us that it intends to make a market in shares of our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

We may take other actions to meet the minimum required sales of shares if we cannot find enough purchasers in the community.

If we are not able to reach the minimum of the offering range, we may do any of the following: increase the maximum purchase limitations and allow all maximum purchase subscribers to increase their orders to the new maximum purchase limitations; terminate the offering and promptly return all funds; set

22

a new offering range, notifying all subscribers of the opportunity to confirm, cancel or change their orders; or take such other actions as may be permitted, to the extent such permission is required, by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation.

The distribution of subscription rights could have adverse income tax consequences.

If the subscription rights granted to certain depositors of Harvard Savings Bank and certain borrowers of Morris Building & Loan, s.b. are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion from RP Financial, LC that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.

23

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The summary information presented below at each date or for each of the periods presented is derived in part from the consolidated financial statements of Harvard Savings, MHC. The data for all of the periods set forth below includes financial information for Morris Building & Loan, s.b., which merged with and into Harvard Savings Bank effective as of April 18, 2008. Such merger was accounted for in a manner similar to a pooling of interests. The financial condition data at December 31, 2008 and 2007, and the operating data for the years ended December 31, 2008 and 2007 were derived from the audited consolidated financial statements of Harvard Savings, MHC included herein. The information at and for the nine months ended September 30, 2009 and 2008 is unaudited. However, in the opinion of management of Harvard Savings, MHC, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made. The selected operating data presented below for the nine months ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 or for future periods. The following information is only a summary, and should be read in conjunction with our financial statements and notes beginning on page F-1 of this prospectus.

	At or For the Nine Months Ended September 30,						At or For the Years Ended December 31,
	2009			2008			2008			2007
	(In thousands)
Financial Condition Data:
Total assets	$	157,196		$	160,275		$	158,653		$	158,335
Cash and cash equivalents		15,009			13,274			14,019			10,994
Other interest-bearing deposits		7,216			—			—			—
Securities		7,811			7,652			7,094			14,710
Loans, net		110,226			122,475			120,749			117,822
Federal Home Loan Bank stock		6,549			6,549			6,549			6,549
Deposits		122,581			118,052			117,302			113,778
Federal Home Loan Bank advances		19,778			26,514			26,064			27,225
Total equity		12,180			12,940			12,527			14,094
Operating Data:
Interest and dividend income	$	5,979		$	6,525		$	8,551		$	8,976
Interest expense		2,988			3,805			4,932			5,424
Net interest income		2,991			2,720			3,619			3,552
Provision for (credit to) loan losses		1,048			248			634			(180	)
Net interest income after provision for (credit to) loan losses		1,943			2,472			2,985			3,732
Noninterest income (loss):
Losses on other-than-temporary impairment of equity securities		(45	)		(1,074	)		(1,248	)		(167	)
Other non-interest income		744			464			590			620
Total non-interest income		699			(610	)		(658	)		453
Non-interest expense		3,282			3,470			4,583			4,855
Loss before income taxes		(640	)		(1,608	)		(2,256	)		(670	)
Provision (benefit) for income taxes		(224	)		(865	)		(1,065	)		4
Net loss	$	(416	)	$	(743	)	$	(1,191	)	$	(674	)

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	At or For the Nine Months Ended September 30,				At or For the Years Ended December 31,
	2009		2008		2008		2007
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets (annualized)	(0.34	)%	(0.61	)%	(0.74	)%	(0.43	)%
Return on average equity (annualized)	(4.42	)%	(7.23	)%	(8.86	)%	(4.45	)%
Interest rate spread (annualized) (1)	2.51	%	2.19	%	2.22	%	2.14	%
Net interest margin (annualized) (2)	2.65	%	2.41	%	2.42	%	2.43	%
Efficiency ratio (3)	87.71	%	106.74	%	107.20	%	116.68	%
Non-interest expense to average total assets (annualized)	2.70	%	2.86	%	2.84	%	3.09	%
Average interest-earning assets to average interest-bearing liabilities	105.34	%	106.48	%	106.16	%	107.81	%
Capital Ratios:
Total risk-based capital to risk-weighted assets (4)	11.41	%	11.15	%	11.04	%	12.93	%
Tier 1 risk-based capital to risk-weighted assets (4)	10.22	%	10.52	%	10.15	%	12.13	%
Tier 1 leverage (core) capital to adjusted tangible assets (4)	6.92	%	7.41	%	7.19	%	8.58	%
Equity to total assets	7.75	%	8.07	%	7.90	%	8.90	%
Average equity to average total assets	7.75	%	8.47	%	8.34	%	9.66	%
Asset Quality Ratios:
Total non-performing assets to total assets (5)	1.82	%	1.22	%	2.19	%	0.81	%
Total non-performing assets and troubled debt restructurings to total assets (5)	2.33	%	1.71	%	2.19	%	0.81	%
Total non-performing loans to total loans (6)	2.37	%	0.87	%	2.26	%	1.04	%
Total non-performing loans and troubled debt restructurings to total loans (6)	3.08	%	1.51	%	2.26	%	1.04	%
Allowance for loan losses to total non-performing loans and troubled debt restructurings (6)	37.02	%	38.26	%	36.32	%	54.09	%
Allowance for loan losses to non-performing loans (6)	48.11	%	66.60	%	36.32	%	54.09	%
Allowance for loan losses to total loans	1.14	%	0.58	%	0.82	%	0.56	%
Net charge-offs (recoveries) to average total loans (annualized)	0.89	%	0.23	%	0.25	%	(0.15	)%
Other Data:
Number of full service offices	3		3		3		3
Number of full-time equivalent employees	29		30		30		32

(1) The interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2) The net interest margin represents net interest income as a percent of average interest-earning assets.

(3) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income, excluding gains and losses on securities and losses on other-than-temporary impairment of equity securities.

(4) For Harvard Savings Bank only.

(5) Non-performing assets consist of non-performing loans, other real estate owned and repossessed automobiles.

(6) Non-performing loans consist of non-accrual loans and accruing loans past due 90 days or more.

25

RECENT DEVELOPMENTS OF HARVARD SAVINGS, MHC AND SUBSIDIARIES

The following financial information and other data should be read together with the consolidated financial statements and the notes thereto beginning on page F-1 of this document. The data for all of the periods set forth below include financial information for Morris Building & Loan, s.b., which merged with and into Harvard Savings Bank effective as of April 18, 2008. Such merger was accounted for in a manner similar to a pooling of interests. The financial condition data at December 31, 2008 was derived from the audited consolidated financial statements of Harvard Savings, MHC included herein. The data at November 30, 2009 and September 30, 2009, and for the two and eleven months ended November 30, 2009 and 2008, are unaudited. However, in the opinion of management of Harvard Savings, MHC, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made. The selected operating data presented below for the two and eleven months ended November 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 or for future periods.

	At November 30, 2009 (unaudited)		At September 30, 2009 (unaudited)		At December 31, 2008
	(Dollars in thousands)
Financial Condition Data:
Total assets	$	155,862	$	157,196	$	158,653
Cash and cash equivalents		14,284		15,009		14,019
Other interest-bearing deposits		6,885		7,216		—
Securities		7,222		7,811		7,094
Loans, net		110,069		110,226		120,749
Federal Home Loan Bank Stock		6,549		6,549		6,549
Deposits		123,473		122,581		117,302
Federal Home Loan Bank Advances		16,928		19,778		26,064
Total equity		12,238		12,180		12,527

	For the Two Months Ended November 30,						For the Eleven Months Ended November 30,
	2009			2008			2009			2008
	(Unaudited) (Dollars in thousands)
Operating Data
Interest and dividend income	$	1,319		$	1,340		$	7,298		$	7,865
Interest expense		556			754			3,544			4,559
Net interest income		763			586			3,754			3,306
Provision for loan losses		80			186			1,128			434
Net interest income after provision for loan losses		683			400			2,626			2,872
Noninterest income (loss):
Losses on other than temporary impairment of equity securities		(8	)		—			(53	)		(1,074	)
Other noninterest income		102			115			846			579
Total noninterest income (loss)		94			115			793			(495	)
Noninterest expense		665			779			3,947			4,249
Income (loss) before income taxes		112			(264	)		(528	)		(1,872	)
Provision (benefit) for income taxes		33			(100	)		(191	)		(965	)
Net income (loss)	$	79		$	(164	)	$	(337	)	$	(907	)

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	At or For the Two Months Ended November 30,				At or For the Eleven Months Ended November 30,
	2009		2008		2009		2008
Performance Ratios:
Return on average assets (annualized)	0.30	%	(0.62	)%	(2.23	)%	(0.61	)%
Return on average equity (annualized)	3.92	%	(7.68	)%	(2.96	)%	(7.31	)%
Interest rate spread (annualized)(1)	3.02	%	2.23	%	2.60	%	2.20	%
Net interest margin (annualized)(2)	3.13	%	2.38	%	2.74	%	2.41	%
Efficiency ratio(3)	76.88	%	111.13	%	85.67	%	107.52	%
Noninterest expense to average total assets (annualized)	2.54	%	2.93	%	2.67	%	2.87	%
Average interest-earning assets to average interest-bearing liabilities	104.92	%	104.99	%	105.27	%	106.21	%
Capital Ratios:
Total risk-based capital to risk-weighted assets(4)	11.77	%	10.93	%	11.77	%	10.93	%
Tier 1 risk-based capital to risk-weighted assets(4)	10.42	%	10.19	%	10.42	%	10.19	%
Tier 1 leverage (core) capital to adjusted tangible assets(4)	7.10	%	7.28	%	7.10	%	7.29	%
Equity to total assets	7.85	%	7.95	%	7.85	%	7.95	%
Average equity to average total assets	7.69	%	8.03	%	7.70	%	8.39	%
Asset Quality Ratios:
Total non-performing assets to total assets(5)	1.27	%	2.50	%	1.27	%	2.50	%
Total non-performing assets and troubled debt restructurings to total assets(5)	1.78	%	2.50	%	1.78	%	2.50	%
Total non-performing loans to total loans(6)	1.33	%	2.63	%	1.33	%	2.63	%
Total non-performing loans and troubled debt restructurings to total loans(6)	2.04	%	2.63	%	2.04	%	2.63	%
Allowance for loan losses to total non-performing loans and troubled debt restructurings (6)	62.17	%	25.68	%	62.17	%	25.68	%
Allowance for loan losses to non-performing loans(6)	95.13	%	25.68	%	95.13	%	25.68	%
Allowance for loan losses to total loans	1.27	%	0.68	%	1.27	%	0.68	%
Net charge-offs (recoveries) to average total loans (annualized)	(0.37	)%	0.32	%	0.67	%	0.24	%
Other Data:
Number of full service offices	3		3		3		3
Number of full-time equivalent employees	30		30		30		30

(1) The interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2) The net interest margin represents net interest income as a percent of average interest-earning assets.

(3) The efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income, excluding gains and losses on securities and losses on other than temporary impairment of equity securities.

(4) For Harvard Savings bank only.

(5) Nonperforming assets consist of nonperforming loans, other real estate owned and repossessed automobiles.

(6) Nonperforming loans consist of nonaccrual loans and accruing loans past due 90 days or more.

27

Comparison of Financial Condition at November 30, 2009 and September 30, 2009

At November 30, 2009, our assets were $155.9 million, a decrease of $1.3 million, or 0.8%, from $157.2 million at September 30, 2009. The net loan portfolio decreased $157,000 or 0.1% to $110.1 million at November 30, 2009 from $110.2 million at September 30, 2009. The decrease in the loan portfolio was primarily due to the increase in the allowance for loan losses of $150,000 or 11.8% to $1.4 million, or 1.27% of total loans at November 30, 2009, compared to $1.3 million, or 1.14% of total loans at September 30, 2009. Our nonperforming loans and troubled debt restructurings decreased by $1.2 million or 33.4% to $2.3 million or 2.04% of loans at November 30, 2009, from $3.4 million or 3.08% of loans at September 30, 2009.

Securities and interest-bearing deposits with other financial institutions decreased $920,000, or 6.1%, to $14.1 million at November 30, 2009 from $15.0 million at September 30, 2009. The decrease was primarily due to repayments and maturities on those securities.

Deposits increased $892,000 or 0.7% to $123.5 million at November 30, 2009 from $122.6 million at September 30, 2009. This increase was due to competitive pricing strategies to increase our deposits and repay our Federal Home Loan Bank advances as they mature. Cash flows provided by the increase in deposits and the decreases in securities and interest-bearing deposits with other financial institutions were used to reduce advances from the Federal Home Loan Bank by $2.9 million or 14.4% to $16.9 million at November 30, 2009 from $19.8 million at September 30, 2009.

Total equity increased $58,000 or 0.5% to $12.2 million at November 30, 2009 from $12.2 million at September 30, 2009. The increase was due to $79,000 in net income for the two months ended November 30, 2009 partially offset by a decrease in accumulated other comprehensive income of $21,000, net of tax, which pertained to the change in net unrealized gains of available-for-sale securities.

Comparison of Financial Condition at November 30, 2009 and December 31, 2008

At November 30, 2009, our assets were $155.9 million, a decrease of $2.8 million, or 1.8%, from $158.7 million at December 31, 2008. The net loan portfolio decreased $10.6 million, or 8.8%, to $110.1 million at November 30, 2009 from $120.7 million at December 31, 2008. The decrease in the loan portfolio was due to repayments, early payoffs and loan sales from refinancing activity. Our strategy is to reduce asset duration by expanding our commercial real estate and commercial and industrial loan portfolios to enhance yields and reduce concentrations in our residential mortgage and purchased indirect automobile portfolios. The allowance for loan losses increased $425,000, or 42.5%, to $1.4 million, or 1.27% of total loans at November 30, 2009, compared to $1.0 million, or 0.82% of total loans at December 31, 2008. Our nonperforming loans and troubled debt restructurings decreased $461,000 or 33.4% to $2.3 million, or 2.04% of loans at November 30, 2009, from $2.8 million, or 2.26% of loans at December 31, 2008.

Securities available for sale decreased $2.2 million, or 38.2%, to $3.3 million at November 30, 2009 from $5.5 million at December 31, 2008.

Deposits increased $6.2 million, or 5.3%, to $123.5 million at November 30, 2009 from $117.3 million at December 31, 2008. This increase was due primarily to competitive pricing strategies to increase our core deposit base, which increased by $4.3 million, or 9.3%, to $50.5 million at November 30, 2009 from $46.2 million at December 31, 2008. The liquidity generated from the increase in deposits and the decreases in loans and securities available for sale was used to reduce advances from the Federal

28

Home Loan Bank by $9.2 million, or 35.2%, to $16.9 million at November 30, 2009 from $26.1 million at December 31, 2008. The remaining liquidity was primarily used to increase the securities held to maturity and interest-bearing deposits portfolios by $2.3 million and $6.9 million to $3.9 million and $6.9 million, respectively, at November 30, 2009.

Total equity decreased $289,000, or 2.3%, to $12.2 million at November 30, 2009 from $12.5 million at December 31, 2008. The decrease was due to a net loss for the eleven months ended November 30, 2009 of $337,000 partially offset by an increase in accumulated other comprehensive income of $48,000, net of tax.

Comparison of Operating Results for the Two Months Ended November 30, 2009 and November 30, 2008

Net income for the two months ended November 30, 2009 was $79,000 compared to a net loss of $164,000 for the same period in 2008, an increase of $243,000 or 148.3%. Interest income decreased $21,000 due to a three basis point decrease in the average yield on interest-earning assets to 5.42% for the two months ended November 30, 2009 from 5.45% for the comparable period in 2008 combined with a $1.3 million decrease in average interest-earning assets to $146.1 million from $147.4 million. Offsetting the decrease in interest income was a decrease in interest expense of $198,000 reflecting a decrease in our cost of funds for the two month period ended November 30, 2009 of 82 basis points to 2.40% from 3.22% and a decrease in average interest-bearing liabilities of $1.2 million. The provision for loan losses decreased $106,000 to $80,000 for the two months ended November 30, 2009 from the comparable period in 2008 based on our review of the performance of our loan portfolio during the period.

Our net charge-offs on loans decreased by $136,000 or 206.1% to a net recovery total of $(70,000) or (0.37)% of average loans for the two months ended November 30, 2009, from $66,000 or 0.32% of average loans for the two months ended November 30, 2008. Recoveries totaled $174,000, which included a recovery of $158,000 pertaining to loans charged off in 2004, for the two months ended November 30, 2009 compared to total recoveries of $1,000 for the comparable period in 2008. The allowance for loan losses was $1.4 million, or 1.27% of total loans at November 30, 2009, compared to $834,000 or 0.68% of total loans at November 30, 2008. Our nonperforming loans and troubled debt restructurings decreased by $956,000 or 29.4% to $2.3 million or 2.04% of loans at November 30, 2009, from $3.2 million or 2.63% of loans at November 30, 2008.

Noninterest income decreased $21,000 to $94,000 for the two months ended November 30, 2009 from $115,000 for the two months ended November 30, 2008. The decrease was primarily due to lower customer fees, which decreased $9,000 to $37,000 in 2009, and lower brokerage commissions which decreased $11,000 to $6,000 in 2009.

Noninterest expense decreased $114,000 to $665,000 for the two months ended November 30, 2009 compared to $779,000 for the comparable period in 2008. The decrease was primarily due to lower losses on foreclosed assets, which decreased $97,000 to $0 in 2009, and lower compensation and benefit costs, which decreased $32,000 to $366,000 in 2009, partially offset by higher expense for FDIC deposit insurance, which increased $31,000 to $35,000 in 2009. Our efficiency ratio decreased to 76.88% for the two months ended November 30, 2009 from 111.13% for the comparable period in 2008.

The provision for income taxes increased to $33,000 for the two months ended November 30, 2009 from a benefit utilized for income taxes of $(100,000) for the same period in 2008, primarily due to the results of operations for the period.

29

Comparison of Operating Results for the Eleven Months Ended November 30, 2009 and November 30, 2008

Net loss for the eleven months ended November 30, 2009 was $337,000 compared to a net loss of $907,000 for the same period in 2008, a decrease of $570,000, or 62.8%. Interest income decreased $567,000 due to a 41 basis point decrease in the yield on interest-earning assets to 5.32% for the eleven months ended November 30, 2009 from 5.73% for the comparable period in 2008, and a $176,000 decrease in average interest-earning assets to $149.6 million from $149.8 million. Offsetting the decrease in interest income was a decrease in interest expense of $1.0 million, reflecting a decrease in our cost of funds for the eleven month period ended November 30, 2009 of 81 basis points to 2.72% from 3.53%, offset by an increase in interest-bearing liabilities for the same period of $1.1 million. The provision for loan losses increased $694,000 to $1.1 million for the eleven months ended November 30, 2009 from the comparable period in 2008, due to the performance of our loan portfolio during the period.

Our net charge-offs on loans increased $428,000, or 155.6%, to $703,000 or 0.67% of average loans for the eleven months ended November 30, 2009, from $275,000 or 0.24% of average loans for the eleven months ended November 30, 2008. The allowance for loan losses was $1.4 million, or 1.27% of total loans at November 30, 2009, compared to $834,000 or 0.68% of total loans at November 30, 2008. Our nonperforming loans and troubled debt restructurings decreased $956,000, or 29.4%, to $2.3 million or 2.04% of loans at November 30, 2009, from $3.2 million, or 2.63% of loans at November 30, 2008.

Noninterest income increased $1.3 million to $793,000 for the eleven months ended November 30, 2009 from a loss of $495,000 for the eleven months ended November 30, 2008. The increase was primarily due to a $1.1 million impairment charge on equity securities for the eleven months ended November 30, 2008 compared to a $53,000 charge for the same period in 2009.

Noninterest expense decreased $302,000 to $3.9 million for the eleven months ended November 30, 2009 compared to $4.2 million for the comparable period in 2008. The decrease in noninterest expense in 2009 was due in part to synergies realized from our merger dated April 18, 2008 with Morris Building and Loan, s.b., which are reflected in our efficiency ratio that decreased to 85.67% for the eleven months ended November 30, 2009 from 107.52% for the comparable period in 2008. The decrease in noninterest expense was offset by higher expense for FDIC deposit insurance, which increased $212,000 (which included a special assessment totaling $74,000) to $262,000 for the eleven months ended November 30, 2009 compared to $50,000 for the same period in 2008. The benefit utilized for income taxes decreased $774,000 to $191,000 for the eleven months ended November 30, 2009 from $965,000 for the eleven months ended November 30, 2008, primarily due to the results of operations for the period. In addition, the benefit for income taxes in 2008 included an income tax benefit of $300,000 recognized as a result of the reversal of valuation allowances recorded on deferred tax assets acquired in the merger with Morris Building & Loan, s.b., offset by an increase in the valuation allowance of $136,000 for deferred tax assets related to capital losses on equity securities. Also, in 2008 an income tax benefit of $100,000 was recognized for a tax credit related to the completion of the main office renovation.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;

• statements regarding our business plans, prospects, growth and operating strategies;

• statements regarding the asset quality of our loan and investment portfolios; and

• estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

• general economic conditions, either nationally or in our market areas, that are worse than expected;

• competition among depository and other financial institutions;

• our ability to maintain and improve our asset quality even as we increase our non-residential lending;

• our success in increasing our commercial real estate and commercial business lending, including agricultural lending;

• changes in the interest rate environment that reduce our margins or reduce the fair value of our financial instruments;

• adverse changes in the securities markets;

• changes in laws or government regulations or policies affecting financial institutions, including changes in deposit insurance premiums, regulatory fees and capital requirements, which increase our compliance costs;

• our ability to enter new markets successfully and capitalize on growth opportunities;

• our ability to successfully grow our Morris operations;

• changes in consumer spending, borrowing and savings habits;

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• changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

• changes in our organization, compensation and benefit plans;

• loan delinquencies and changes in the underlying cash flows of our borrowers;

• changes in our financial condition or results of operations that reduce capital available to pay dividends; and

• changes in the financial condition or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see “Risk Factors” beginning on page 11.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $6.8 million and $9.5 million, or $11.0 million if the offering range is increased by 15%.

We intend to distribute the net proceeds from the stock offering as follows:

	Based Upon the Sale at $10.00 Per Share of
	765,000 Shares				900,000 Shares				1,035,000 Shares				1,190,250 Shares (1)
	Amount		Percent of Net Proceeds		Amount		Percent of Net Proceeds		Amount		Percent of Net Proceeds		Amount		Percent of Net Proceeds
	(Dollars in thousands)
Stock offering proceeds	$	7,650	112.8		$	9,000	110.7		$	10,350	109.2		$	11,903	107.9
Less offering expenses		870	12.8			870	10.7			870	9.2			870	7.9
Net offering proceeds	$	6,780	100.0	%	$	8,130	100.0	%	$	9,480	100.0	%	$	11,033	100.0	%
Use of net proceeds:
To Harvard Savings Bank	$	6,102	90.0	%	$	6,301	77.5	%	$	6,399	67.5	%	$	6,620	60.0
To fund loan to employee stock ownership plan		612	9.0			720	8.9			828	8.7			952	8.6
Retained by Harvard Illinois Bancorp, Inc.	$	66	1.0	%	$	1,109	13.6	%	$	2,253	23.8	%	$	3,461	31.4	%

(1) As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of Harvard Savings Bank’s deposits. The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription and community offerings.

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Harvard Illinois Bancorp, Inc. may use the proceeds it retains from the stock offering:

• to fund a loan to the employee stock ownership plan to purchase shares of common stock in the stock offering;

• to invest in short-term and other securities consistent with our investment policy;

• to pay cash dividends to stockholders;

• to repurchase shares of our common stock; and

• for other general corporate purposes.

With the exception of the funding of the loan to the employee stock ownership plan, Harvard Illinois Bancorp, Inc. has not quantified its plans for use of the offering proceeds for each of the foregoing purposes. Initially, we intend to invest a substantial portion of the net proceeds in short-term investments, investment-grade debt obligations and mortgage-backed securities.

Under currently applicable regulations, we may not repurchase shares of our common stock during the first year following the conversion, except to fund equity benefit plans other than stock options or except when extraordinary circumstances exist and with prior regulatory approval.

Harvard Savings Bank will receive a capital contribution equal to at least 50% of the net proceeds of the offering plus such additional amounts as may be necessary so that, upon completion of the offering, Harvard Savings Bank will have a tangible capital to assets ratio of at least 10%. Harvard Savings Bank may use the net proceeds it receives from the Offering:

• to invest in commercial real estate, commercial and industrial and other loans, including agricultural loans;

• to expand its banking franchise by establishing or acquiring new branches, or by acquiring other financial institutions or other financial services companies, although no such transactions are contemplated at this time;

• to invest in short-term and other securities consistent with our investment policy;

• to repay short-term borrowings; and

• for other general corporate purposes.

Harvard Savings Bank has not quantified its plans for use of the offering proceeds for each of the foregoing purposes.

OUR POLICY REGARDING DIVIDENDS

Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the payment of dividends. In determining whether to pay a cash dividend and the amount of such cash dividend, the Board of Directors is expected to take into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic

33

conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by applicable law, regulations and policy, may be paid in addition to, or in lieu of, regular cash dividends. We will file a consolidated tax return with Harvard Savings Bank. Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes. Additionally, pursuant to Office of Thrift Supervision regulations, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

Pursuant to our Articles of Incorporation, we are authorized to issue preferred stock. If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock—Common Stock.”

Dividends we can declare and pay will depend, in part, upon receipt of dividends from Harvard Savings Bank, because initially we will have no source of income other than dividends from Harvard Savings Bank, earnings from the investment of proceeds from the sale of shares of common stock, and interest payments received in connection with the loan to the employee stock ownership plan. Applicable regulations impose significant limitations on “capital distributions” by depository institutions. See “Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

Any payment of dividends by Harvard Savings Bank to us that would be deemed to be drawn out of Harvard Savings Bank’s bad debt reserves would require a payment of taxes at the then-current tax rate by Harvard Savings Bank on the amount of earnings deemed to be removed from the reserves for such distribution. Harvard Savings Bank does not intend to make any distribution to us that would create such a federal tax liability. See “Taxation—Federal Taxation” and “—State Taxation.”

MARKET FOR THE COMMON STOCK

Harvard Illinois Bancorp, Inc. is a newly formed company and has never issued capital stock. Harvard Savings, MHC, as a mutual institution, has never issued capital stock. Harvard Illinois Bancorp, Inc. anticipates that its common stock will be traded in the over-the-counter market and quoted on the OTC Bulletin Board. Keefe, Bruyette & Woods, Inc. has advised us that it intends to make a market in our common stock following the reorganization and offering, but it is under no obligation to do so.

The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At September 30, 2009, Harvard Savings Bank exceeded all of the applicable regulatory capital requirements. The table below sets forth the historical equity capital and regulatory capital of Harvard Savings Bank at September 30, 2009, and the pro forma regulatory capital of Harvard Savings Bank, after giving effect to the sale of shares of common stock at a $10.00 per share purchase price. The table assumes the receipt by Harvard Savings Bank of at least 50% of the net offering proceeds plus such additional amounts as may be necessary so that, upon completion of the offering, Harvard Savings Bank will have a tangible capital to assets ratio of at least 10%. See “How We Intend to Use the Proceeds from the Offering.”

	Harvard Savings Bank Historical at September 30, 2009				Pro Forma at September 30, 2009, Based Upon the Sale in the Offering of
					765,000 Shares			900,000 Shares					1,035,000 Shares					1,190,250 Shares (1)
	Amount		Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)
	(Dollars in thousands)
Equity	$	12,083	7.69	%	$	17,573		10.76	%	$	17,664		10.81	%	$	17,654		10.79	%	$	17,750		10.84	%
Tangible capital (3)(4)	$	10,961	6.92	%	$	16,451		10.00	%	$	16,542		10.04	%	$	16,532		10.03	%	$	16,628		10.07	%
Tangible requirement		2,377	1.50			2,468		1.50			2,471		1.50			2,473		1.50			2,476		1.50
Excess	$	8,584	5.42	%	$	13,983		8.50	%	$	14,071		8.54	%	$	14,059		8.53	%	$	14,152		8.57	%
Core capital (3)(4)	$	10,961	6.92	%	$	16,451		10.00	%	$	16,542		10.04	%	$	16,532		10.03	%	$	16,628		10.07	%
Core requirement (5)		6,338	4.00			6,582		4.00			6,590		4.00			6,594		4.00			6,603		4.00
Excess	$	4,623	2.92	%	$	9,869		6.00	%	$	9,952		6.04	%	$	9,938		6.03	%	$	10,025		6.07	%
Tier 1 risk-based capital	$	10,961	10.22	%	$	16,451		14.91	%	$	16,542		14.98	%	$	16,532		14.97	%	$	16,628		15.04	%
Risk-based requirement		4,291	4.00			4,413		4.00			4,417		4.00			4,419		4.00			4,423		4.00
Excess	$	6,670	6.22	%	$	12,038		10.91	%	$	12,125		10.98	%	$	12,113		10.97	%	$	12,205		11.04	%
Total risk-based capital (3)	$	12,236	11.41	%	$	17,726		16.07	%	$	17,817		16.14	%	$	17,807		16.12	%	$	17,903		16.19	%
Risk-based requirement		8,581	8.00			8,825		8.00			8,833		8.00			8,837		8.00			8,846		8.00
Excess	$	3,655	3.41	%	$	8,901		8.07	%	$	8,984		8.14	%	$	8,970		8.12	%	$	9,057		8.19	%
Reconciliation of capital infused into Harvard Savings Bank:
Net proceeds					$	6,102				$	6,301				$	6,399				$	6,620
Less: Common stock acquired by employee stock ownership plan						(612	)				(720	)				(828	)				(952	)
Pro forma increase					$	5,490				$	5,581				$	5,571				$	5,667

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) The current core capital requirement for financial institutions is 3% of total adjusted assets for financial institutions that receive the highest supervisory rating for safety and soundness and a 4% to 5% core capital ratio requirement for all other financial institutions.

(3) Tangible and core capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.

(4) Pro forma capital levels assume that the employee stock ownership plan purchases 8% of the shares of common stock to be outstanding immediately following the stock offering with funds we lend. Pro forma GAAP and regulatory capital have been reduced by the amount required to fund this plan. See “Management of Harvard Illinois Bancorp, Inc.” for a discussion of the employee stock ownership plan.

(5) Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 50% risk weighting.

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CAPITALIZATION

The following table presents the historical consolidated capitalization of Harvard Savings, MHC at September 30, 2009 and the pro forma consolidated capitalization of Harvard Illinois Bancorp, Inc., after giving effect to the conversion and the offering, based upon the assumptions set forth in the “Pro Forma Data” section.

	Harvard Savings, MHC Historical at September 30, 2009			Harvard Illinois Bancorp, Inc. Pro Forma, Based Upon the Sale in the Offering at $10.00 per Share of
				765,000 Shares			900,000 Shares			1,035,000 Shares			1,190,250 Shares (1)
	(Dollars in thousands)
Deposits (2)	$	122,581		$	122,581		$	122,581		$	122,581		$	122,581
Borrowings		19,778			19,778			19,778			19,778			19,778
Total deposits and borrowed funds	$	142,359		$	142,359		$	142,359		$	142,359		$	142,359
Stockholders’ equity:
Preferred stock $0.01 par value, 1,000,000 shares authorized; none issued or outstanding	$	—		$	—		$	—		$	—		$	—
Common stock $0.01 par value, 30,000,000 shares authorized; assuming shares outstanding as shown (3)		—			8			9			10			12
Additional paid-in capital (4)		—			6,772			8,121			9,470			11,021
Retained earnings (5)		12,096			12,096			12,096			12,096			12,096
Accumulated other comprehensive income		84			84			84			84			84
Less:
Common stock to be acquired by employee stock ownership plan (6)		—			(612	)		(720	)		(828	)		(952	)
Common stock to be acquired by stock-based benefit plans (7)		—			(306	)		(360	)		(414	)		(476	)
Total stockholders’ equity	$	12,180		$	18,042		$	19,230		$	20,418		$	21,784
Total stockholders’ equity as a percentage of total assets (2)		7.75	%		11.06	%		11.71	%		12.34	%		13.06	%

(1) As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for shares or changes in market conditions following the commencement of the subscription and community offerings.

(2) Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.

(3) No effect has been given to the issuance of additional shares of Harvard Illinois Bancorp, Inc. common stock pursuant to one or more stock-based benefit plans. If these plans are implemented within 12 months following the completion of the stock offering, an amount up to 10% and 4% of the shares of Harvard Illinois Bancorp, Inc. common stock sold in the offering will be reserved for issuance upon the exercise of stock options and for issuance as restricted stock awards, respectively. See “Management of Harvard Illinois Bancorp, Inc.”

(4) The sum of the par value of the total shares outstanding and additional paid-in capital equals the net stock offering proceeds at the offering price of $10.00 per share.

(5) The retained earnings of Harvard Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion; Plan of Distribution—Liquidation Rights” and “Supervision and Regulation.”

(footnotes continue on following page)

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(continued from previous page)

(6) Assumes that 8% of the shares sold in the offering will be acquired by the employee stock ownership plan financed by a loan from Harvard Illinois Bancorp, Inc. The loan will be repaid principally from Harvard Savings Bank’s contributions to the employee stock ownership plan. Since Harvard Illinois Bancorp, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no asset or liability will be reflected on Harvard Illinois Bancorp, Inc.’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.

(7) Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering will be purchased for grant by one or more stock-based benefit plans in open market purchases. The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As Harvard Illinois Bancorp, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the stock-based benefit plans, the credit to equity will be offset by a charge to noninterest expense. Implementation of the stock stock-based benefit plans will require stockholder approval. The funds to be used by the stock-based benefit plans will be provided by Harvard Illinois Bancorp, Inc.

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PRO FORMA DATA

The following tables summarize historical data of Harvard Savings, MHC and pro forma data of Harvard Illinois Bancorp, Inc. at and for the fiscal year ended December 31, 2008 and the nine months ended September 30, 2009. This information is based on assumptions set forth below and in the table, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering.

The net proceeds in the tables are based upon the following assumptions:

• all shares of common stock will be sold in the subscription and community offerings;

• our employee stock ownership plan will purchase 8% of the shares of common stock sold in the stock offering with a loan from Harvard Illinois Bancorp, Inc. The loan will be repaid in substantially equal payments of principal and interest over a period of 15 years;

• Keefe Bruyette & Woods, Inc. will receive a fee equal to $180,000; and

• expenses of the stock offering, other than fees to be paid to Keefe Bruyette & Woods, Inc., will be $690,000.

We calculated pro forma consolidated net income for the nine months ended September 30, 2009 and the year ended December 31, 2008 as if the estimated net proceeds were received had been invested at an assumed interest rate of 1.45% and 1.00%, respectively (0.88% and 0.61% on an after-tax basis). This represents the three-year United States Treasury Note as of September 30, 2009 and December 31, 2008, which, in light of current market interests rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earnings assets and the weighted average rate paid on our deposits.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. We adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the shares of common stock were outstanding at the beginning of each period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of stock-based benefit plans. Subject to the receipt of stockholder approval, we have assumed that the stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of our outstanding shares of common stock at the same price for which they were sold in the stock offering. We assume that shares of common stock are granted under the plans in awards that vest over a five-year period.

We have also assumed that the stock-based benefit plans will grant options to acquire shares of common stock equal to 10% of our outstanding shares of common stock. In preparing the tables below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $4.74 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 30.23% for the shares of

38

common stock, a dividend yield of 0.0%, an expected option life of 10 years and a risk-free interest rate of 3.31%.

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of our total outstanding shares if the stock-based benefit plans are adopted more than one year following the stock offering. In addition, we may grant options and award shares that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the stock offering.

As discussed under “How We Intend to Use the Proceeds from the Stock Offering,” we intend to contribute at least 50%, plus such additional amounts as may be necessary so that, upon completion of the offering, Harvard Savings Bank will have a tangible capital to assets ratio of at least 10%. We will retain the remainder of the net proceeds from the stock offering and use a portion of the proceeds we retain for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

The pro forma table does not give effect to:

• withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the stock offering;

• our results of operations after the stock offering; or

• changes in the market price of the shares of common stock after the stock offering.

The following pro forma information may not represent the financial effects of the stock offering at the date on which the stock offering actually occurs and you should not use the table to indicate future results of operations. Pro forma stockholders’ equity represents the difference between the stated amount of our assets and liabilities, computed in accordance with GAAP. We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Pro forma stockholders’ equity does not give effect to the impact of intangible assets, the liquidation account we will establish in the conversion or tax bad debt reserves in the unlikely event we are liquidated.

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	At or For the Fiscal Year Ended December 31, 2008 Based Upon the Sale at $10.00 Per Share of
	765,000 Shares			900,000 Shares			1,035,000 Shares			1,190,250 Shares (1)
	(Dollars in thousands, except per share amounts)
Gross Proceeds of Offering	$	7,650		$	9,000		$	10,350		$	11,903
Less: expenses		(870	)		(870	)		(870	)		(870	)
Estimated net proceeds		6,780			8,130			9,480			11,033
Less: Common stock purchased by ESOP (2)		(612	)		(720	)		(828	)		(952	)
Less: Common stock awarded under stock-based benefit plans (3)		(306	)		(360	)		(414	)		(476	)
Estimated net cash proceeds	$	5,862		$	7,050		$	8,238		$	9,604
For the Fiscal Year Ended December 31, 2008
Consolidated net loss:
Historical	$	(1,191	)	$	(1,191	)	$	(1,191	)	$	(1,191	)
Pro forma income on net proceeds		36			43			50			59
Pro forma ESOP adjustment(2)		(25	)		(29	)		(34	)		(39	)
Pro forma stock award adjustment (3)		(37	)		(44	)		(51	)		(58	)
Pro forma stock option adjustment (4)		(65	)		(77	)		(89	)		(102	)
Pro forma net loss	$	(1,282	)	$	(1,298	)	$	(1,315	)	$	(1,331	)
Per share net loss:
Historical	$	(1.68	)	$	(1.43	)	$	(1.24	)	$	(1.08	)
Pro forma income on net proceeds		0.05			0.05			0.05			0.05
Pro forma ESOP adjustment (2)		(0.04	)		(0.03	)		(0.04	)		(0.04	)
Pro forma stock award adjustment (3)		(0.05	)		(0.05	)		(0.05	)		(0.05	)
Pro forma stock option adjustment (4)		(0.09	)		(0.09	)		(0.09	)		(0.09	)
Pro forma net loss per share (5)	$	(1.81	)	$	(1.55	)	$	(1.37	)	$	(1.21	)
Offering price as a multiple of pro forma net earnings per share		NM			NM			NM			NM
Number of shares outstanding for pro forma net loss per share calculations (5)		707,880			832,800			957,720			1,101,378
At December 31, 2008
Stockholders’ equity:
Historical	$	12,527		$	12,527		$	12,527		$	12,527
Estimated net proceeds		6,780			8,130			9,480			11,033
Less: Common stock acquired by ESOP (2)		(612	)		(720	)		(828	)		(952	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(306	)		(360	)		(414	)		(476	)
Pro forma stockholders’ equity	$	18,389		$	19,577		$	20,765		$	22,131
Stockholders’ equity per share:
Historical	$	16.38		$	13.92		$	12.10		$	10.52
Estimated net proceeds		8.86			9.03			9.16			9.27
Less: Common stock acquired by ESOP (2)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma stockholders’ equity per share (6)	$	24.04		$	21.75		$	20.06		$	18.59
Offering price as percentage of pro forma stockholders’ equity per share		41.60	%		45.98	%		49.85	%		53.79	%
Number of shares outstanding for pro forma book value per share calculations		765,000			900,000			1,035,000			1,190,250

(footnotes begin on following page)

40

(Footnotes from previous page)

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) Assumes that 8% of shares of common stock sold in the offering will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Harvard Illinois Bancorp, Inc. at a rate per annum equal to the Prime Rate. Harvard Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Harvard Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 15 equal annual installments of principal and interest. Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans” (“SOP 93-6”), requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Harvard Savings Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 39.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 4,080, 4,800, 5,520 and 6,348 shares were committed to be released during the fiscal year at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations.

(3) If approved by Harvard Illinois Bancorp, Inc.’s stockholders, one or more stock-based benefit plans plan may purchase an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Harvard Illinois Bancorp, Inc. or through open market purchases. The funds to be used by the stock-based benefit plans to purchase the shares will be provided by Harvard Illinois Bancorp, Inc. The table assumes that (i) the stock-based benefit plans acquire the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the stock-based benefit plans is amortized as an expense during the fiscal year and (iii) the stock-based benefit plans expense reflects an effective combined federal and state tax rate of 39%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.8%.

(4) If approved by Harvard Illinois Bancorp, Inc.’s stockholders, one or more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock options to be granted under stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $4.74 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. The actual expense of the stock options to be granted under the stock-based benefit plans will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based benefit plans is obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share would decrease. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock used to fund stock options (equal to 10% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 9.1%.

(5) Income per share computations are determined by taking the number of shares assumed to be sold in the offering and, in accordance with applicable accounting standards for employee stock ownership plans, subtracting the employee stock ownership plan shares that have not been committed for release during the period and subtracting non-vested stock awards granted under one or more stock-based benefit plans. See note 2, above.

(6) The retained earnings of Harvard Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion; Plan of Distribution—Liquidation Rights” and “Supervision and Regulation.” The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

41

	At or For the Nine Months Ended September 30, 2009 Based Upon the Sale at $10.00 Per Share of
	765,000 Shares			900,000 Shares			1,035,000 Shares			1,190,250 Shares (1)
	(Dollars in thousands, except per share amounts)
Gross Proceeds of Offering	$	7,650		$	9,000		$	10,350		$	11,903
Less: expenses		(870	)		(870	)		(870	)		(870	)
Estimated net proceeds		6,780			8,130			9,480			11,033
Less: Common stock purchased by ESOP (2)		(612	)		(720	)		(828	)		(952	)
Less: Common stock awarded under stock-based benefit plans (3)		(306	)		(360	)		(414	)		(476	)
Estimated net cash proceeds	$	5,862		$	7,050		$	8,238		$	9,604
For the Nine Months Ended September 30, 2009
Consolidated net loss:
Historical	$	(416	)	$	(416	)	$	(416	)	$	(416	)
Pro forma income on net proceeds		39			47			55			64
Pro forma ESOP adjustment(2)		(19	)		(22	)		(26	)		(29	)
Pro forma stock award adjustment (3)		(28	)		(33	)		(38	)		(44	)
Pro forma stock option adjustment (4)		(49	)		(58	)		(67	)		(77	)
Pro forma net loss	$	(472	)	$	(482	)	$	(492	)	$	(502	)
Per share net loss
Historical	$	(0.59	)	$	(0.50	)	$	(0.43	)	$	(0.38	)
Pro forma income on net proceeds		0.06			0.06			0.06			0.06
Pro forma ESOP adjustment (2)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Pro forma stock award adjustment (3)		(0.04	)		(0.04	)		(0.04	)		(0.04	)
Pro forma stock option adjustment (4)		(0.07	)		(0.07	)		(0.07	)		(0.07	)
Pro forma net loss per share (5)	$	(0.67	)	$	(0.58	)	$	(0.51	)	$	(0.46	)
Offering price as a multiple of pro forma net earnings per share		NM			NM			NM			NM
Number of shares outstanding for pro forma net loss per share calculations (5)		706,860			831,600			956,340			1,099,791
At September 30, 2009
Stockholders’ equity:
Historical	$	12,180		$	12,180		$	12,180		$	12,180
Estimated net proceeds		6,780			8,130			9,480			11,033
Less: Common stock acquired by ESOP (2)		(612	)		(720	)		(828	)		(952	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(306	)		(360	)		(414	)		(476	)
Pro forma stockholders’ equity	$	18,042		$	19,230		$	20,418		$	21,784
Stockholders’ equity per share:
Historical	$	15.92		$	13.53		$	11.77		$	10.23
Estimated net proceeds		8.86			9.03			9.16			9.27
Less: Common stock acquired by ESOP (2)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma stockholders’ equity per share (6)	$	23.58		$	21.36		$	19.73		$	18.30
Offering price as percentage of pro forma stockholders’ equity per share		42.41	%		46.82	%		50.68	%		54.64	%
Number of shares outstanding for pro forma book value per share calculations		765,000			900,000			1,035,000			1,190,250

NM: Not meaningful

(footnotes begin on following page)

42

(Footnotes from previous page)

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) Assumes that 8% of shares of common stock sold in the offering will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Harvard Illinois Bancorp, Inc. at a rate per annum equal to the Prime Rate. Harvard Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Harvard Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 15 equal annual installments of principal and interest. Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans” (“SOP 93-6”), requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Harvard Savings Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 39.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 3,060, 3,600, 4,140 and 4,761 shares were committed to be released during the nine months ended September 30, 2009 at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations.

(3) If approved by Harvard Illinois Bancorp, Inc.’s stockholders, one or more stock-based benefit plans plan may purchase an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Harvard Illinois Bancorp, Inc. or through open market purchases. The funds to be used by the stock-based benefit plans to purchase the shares will be provided by Harvard Illinois Bancorp, Inc. The table assumes that (i) the stock-based benefit plans acquire the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the stock-based benefit plans is amortized as an expense during the fiscal year and (iii) the stock-based benefit plans expense reflects an effective combined federal and state tax rate of 39%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.8%.

(4) If approved by Harvard Illinois Bancorp, Inc.’s stockholders, one of more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock options to be granted under stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $4.74 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. The actual expense of the stock options to be granted under the stock-based benefit plans will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based benefit plans is obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share would decrease. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock used to fund stock options (equal to 10% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 9.1%.

(5) Income per share computations are determined by taking the number of shares assumed to be sold in the offering and, in accordance with applicable accounting standards for employee stock ownership plans, subtracting the employee stock ownership plan shares that have not been committed for release during the period and subtracting non-vested stock awards granted under one or more stock-based benefit plans. See note 2, above.

(6) The retained earnings of Harvard Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion; Plan of Distribution—Liquidation Rights” and “Supervision and Regulation.” The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This section is intended to help potential investors understand the financial performance of Harvard Savings, MHC and its subsidiaries through a discussion of the factors affecting our financial condition at September 30, 2009 and December 31, 2008 and our results of operations for the nine months ended September 30, 2009 and 2008 and for the years ended December 31, 2008 and 2007. The data for all periods includes financial information for Morris Building & Loan, s.b., which was merged with and into Harvard Savings Bank as of April 18, 2008. Such merger was accounted for in a manner similar to a pooling of interest. This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in this prospectus.

Overview

A significant portion of our assets consist of residential mortgage loans and mortgage-backed securities, which we have funded primarily with deposit accounts and Federal Home Loan Bank of Chicago advances. Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities and other interest-earning assets, and the interest paid on our interest-bearing liabilities, consisting primarily of savings and transaction accounts, certificates of deposit, and Federal Home Loan Bank of Chicago advances. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts, gains on loans sold, servicing income, net income on bank-owned life insurance and miscellaneous other income, offset by impairment charges on securities. Non-interest expense currently consists primarily of compensation and employee benefits, net losses on foreclosed assets, occupancy and equipment expenses, data processing, professional fees, office expense, deposit insurance premiums and assessments, and other operating expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

During recent years, in order to reduce our vulnerability to changes in interest rates and enhance our net interest spread, we have begun to increase our originations of commercial real estate and commercial and industrial loans, sell most of our fixed rate one- to four-family loan production, and increase our core deposits (which we consider to be deposits other than certificates of deposit). We have purchased a significant amount of indirect automobile loans. During 2008 we significantly reduced our acquisitions of such loans as a part of our effort to diversify our loan portfolio as well as in recognition of the current adverse economic climate. In connection with the continued execution of our business strategy, we hired a new Executive Vice President and a new Chief Commercial Loan officer in 2007. In December 2009, we hired a commercial loan officer with over 20 years of agricultural and commercial lending experience in the Harvard community. With this hire, we intend to increase our origination of agricultural operating lines of credit, intermediate-term loans, and real estate loans for the purchase of farmland in our market area.

Our non-performing assets and troubled debt restructurings totaled 2.33% of total assets at September 30, 2009. Our total nonperforming loans to total loans ratio was 2.37% at September 30, 2009. Total loans 30 days or more delinquent as of September 30, 2009 were $6.6 million.

Anticipated Increase in Non-Interest Expense Due to Stock Benefit Plans

44

Following the completion of the reorganization and stock offering, we anticipate that our non-interest expense will increase as a result of increased compensation expenses associated with the implementation of our employee stock ownership plan and the implementation of a stock-based incentive plan, if that incentive plan is approved by our stockholders.

Assuming that the adjusted maximum number of shares is sold in the offering:

• the employee stock ownership plan will acquire 95,220 shares of common stock with a $1.0 million loan that is expected to be repaid over 15 years, resulting in an annual expense (after-tax) of approximately $39,000 (assuming that the common stock maintains a value of $10.00 per share);

• the stock-based incentive plan would grant options to purchase shares equal to 10.0% of the total outstanding shares, or 119,025 shares, to eligible participants, which would result in compensation expense over the vesting period of the options. Assuming the market price of the common stock is $10.00 per share; the options are granted with an exercise price of $10.00 per share; the dividend yield on the stock is zero; the expected option life is 10 years; the risk free interest rate is 3.31% (based on the 10-year Treasury rate) and the volatility rate on the common stock is 30.23% (based on an index of publicly traded thrift institutions), the estimated grant-date fair value of the options utilizing the Black-Scholes option pricing model is $4.74 per option granted. Assuming this value is amortized over a five-year vesting period, the corresponding annual expense (after-tax) associated with the stock options would be approximately $102,000; and

• the stock-based incentive plan would award a number of restricted shares of common stock equal to 4.0% of the outstanding shares, or 47,610 shares, to eligible participants, which would be expensed as the awards vest. Assuming that all shares awarded under the stock-based incentive plan have a value of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual expense (after-tax) associated with restricted shares awarded under the stock-based incentive plan would be approximately $58,000.

These estimates are subject to change. The actual expense that will be recorded for the employee stock ownership plan will be determined by the fair market value of the shares of common stock as they are released to employees over the term of the loan, and whether the loan is repaid faster than its contractual term. Accordingly, increases in the stock price above $10.00 per share will increase the total employee stock ownership plan expense, and any accelerated repayment of the loan will increase the annual employee stock ownership plan expense. Further, the actual expense of the stock awards issued under the stock-based incentive plan will be determined by the fair market value of the stock on the grant date, which might be greater than $10.00 per share. The actual expense of the stock options issued under the stock-based incentive plan will be determined by the grant-date fair value of the options which will depend on a number of factors, including the valuation assumptions used in the Black-Scholes option pricing model.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies:

45

Allowance for Loan Losses. Our allowance for loan losses is the estimated amount considered necessary to reflect probable incurred credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for Harvard Savings, MHC. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

Since a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans.

Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the value of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision based on changes in economic and real estate market conditions.

The analysis of the allowance for loan losses has two components: specific and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment loss is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating classified loans from the remaining loans, and then categorizing each group by type of loan. Loans within each type exhibit common characteristics including terms, collateral type, and other risk characteristics. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allocations. The Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation require the recognition of adjustments to the allowance for loan losses based on their judgment of information available to them at the time of their examinations. Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results.

Other Real Estate Owned. Other real estate owned acquired through loan foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair value when the property is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a charge to operations through noninterest expense is recorded. Operating costs associated with the asset after acquisition are also recorded as noninterest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other noninterest expense.

46

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change.

Additionally, we review our uncertain tax positions annually. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount actually recognized is the largest amount of tax benefit that is greater than 50% likely to be recognized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. A significant amount of judgment is applied to determine both whether the tax position meets the “more likely than not” test as well as to determine the largest amount of tax benefit that is greater than 50% likely to be recognized. Differences between the position taken by management and that of taxing authorities could result in a reduction of a tax benefit or increase to tax liability, which could adversely affect future income tax expense.

Investment in Debt and Equity Securities. We classify our investments in debt and equity securities as either held-to-maturity or available-for-sale. Securities classified as held-to-maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting our financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, we evaluate whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and we determine that the impairment is other-than-temporary, a further determination is made as to the portion of impairment that is related to credit loss. The impairment of the investment that is related to credit is expensed in the period in which the event or change occurred. The remainder of the impairment is recorded in other comprehensive income.

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. The Company’s valuation methods consider factors such as liquidity and concentration concerns. Other factors such as model assumptions, market dislocations, and unexpected correlations can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded.

Accounting standards establish a framework for measuring the fair value of financial instruments that considers the attributes specific to particular assets or liabilities and establishes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the fair value measurement date. The three levels are defined as follows:

47

• Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3: Inputs that are unobservable and significant to the fair value measurement.

At the end of each quarter, we assess the valuation hierarchy for each asset or liability measured. From time to time, assets or liabilities may be transferred within hierarchy levels due to changes in availability of observable market inputs to measure fair value at the measurement date. Transfers into or out of hierarchy levels are based upon the fair value at the beginning of the reporting period. A more detailed description of the fair values measured at each level of the fair value hierarchy can be found in Note 15 of the notes to our consolidated financial statements, which appear in the prospectus beginning on page F-1.

Business Strategy

We have focused primarily on improving the execution of our community oriented retail banking strategy. Highlights of our current business strategy include the following:

• Continue to Focus on Residential Lending. We have been and will continue to be primarily a one- to four-family residential mortgage lender for borrowers in our market area. As of September 30, 2009, $55.9 million, or 49.93%, of our total loan portfolio consisted of one- to four-family residential mortgage loans. In 2000, we developed a secondary mortgage capacity so that we can offer loans, including long-term fixed-rate loans, to our customers that we do not wish to retain in our loan portfolio from an asset/liability management standpoint. We consider our current portfolio balance as well as general market conditions in making decisions as to whether to hold our originated mortgage loans for investment or to sell the loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint.

• Increase Commercial Real Estate and Commercial and Industrial Lending, Including Agricultural Lending. While we will continue to emphasize one- to four-family residential mortgage loans, we also have increased and intend to continue to increase our origination and purchase of commercial real estate and commercial and industrial loans, including agricultural loans, in order to increase the yield of, and reduce the term to repricing of, our total loan portfolio. We recently hired a commercial loan officer with substantial experience in agricultural lending. We originated and purchased $6.4 million and $6.4 million of commercial real estate and commercial and industrial loans during the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively. At September 30, 2009, $25.5 million, or 22.74%, of our total loan portfolio consisted of commercial real estate and commercial and industrial loans. The additional capital raised in the stock offering will increase our commercial real estate and commercial and industrial lending capacity by enabling us to originate and purchase more loans. This will also permit us to serve commercial borrowers with larger lending needs and to originate larger commercial real estate and commercial and industrial loans than we have in the past.

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• Manage Interest Rate Risk While Enhancing to the Extent Practicable our Net Interest Margin. During the last several years, we have taken several steps that are intended to enhance our interest rate margin (in relation to what it would have been had we remained exclusively a residential lender) as well as our ability to manage our interest rate risk in the future. In particular, we have attempted to increase our acquisitions of non residential loans including commercial real estate loans, commercial and industrial loans and indirect automobile loans, all of which generally have shorter terms to maturity and higher yields than fixed-rate one- to four-family loans. In addition, we developed a secondary market capability so that we can originate and sell long-term fixed-rate loans that do not fit within our asset/liability management parameters. Finally, we have stressed non-certificate “core” deposits in our deposit gathering efforts because we believe that they are generally lower cost and more resistant to interest rate changes than certificates of deposit.

• Build Our Core Deposits. We are seeking to build our demand, NOW, passbook and money market deposits and seeking to reduce our reliance on borrowings and certificates of deposit. We believe such core deposits not only have the favorable cost and interest rate change resistance set forth above but also allow us greater opportunity to connect with our customers and offer them other financial services and products.

• Continue to Grow our Morris, Illinois Operations. We merged with Morris Building & Loan, s.b. in 2008 and in the process acquired a new branch in Morris, Illinois, a small community located on the edge of rapidly growing commercial and bedroom communities in the collar counties of Chicago. Since the date of the merger, we have grown deposits 16.3% to $30.6 million at September 30, 2009. We will continue to focus on growth in this market area.

• Build Strong Asset Quality. We have sought to build strong asset quality by following conservative underwriting guidelines, sound loan administration, and focusing on loans secured by real estate located within our market area only. However, as a result in part of the current recessionary economy, our non-performing assets and troubled debt restructurings totaled $3.7 million or 2.33% of total assets at September 30, 2009. Our total nonperforming loans to total loans ratio was 2.37% at September 30, 2009. Total loan delinquencies, greater than 30 days, as of September 30, 2009 were $6.6 million, or 5.86% of total loans.

• Maintain Controlled Growth of Our Assets and Liabilities. Overhead costs for community financial institutions have increased, and we believe that they will continue to increase as a result of competitive factors, increasing technological demands and new regulatory requirements. We believe that our best strategy to address these challenges is to opportunistically grow our assets and liabilities to increase our earnings base. This was one of the key factors underlying our decision to merge with Morris Building & Loan, s.b. in 2008.

Comparison of Financial Condition at September 30, 2009 and December 31, 2008

Assets. Total assets at September 30, 2009 were $157.2 million compared to $158.7 million at December 31, 2008, a decrease of $1.5 million or 0.9%. Cash and cash equivalents increased $990,000 or 7.1% to $15.0 million at September 30, 2009 from $14.0 million at December 31, 2008. Interest-bearing deposits increased $7.2 million at September 30, 2009 from $0 at December 31, 2008. These deposits are certificates of deposit we have placed with other financial institutions with terms from

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six months to two years; all are fully covered by FDIC insurance. The investment reflects our decision to increase liquidity moderately in the current interest rate environment. This investment was funded primarily by a $5.3 million increase in deposits during the nine-month period ended September 30, 2009 and a $10.5 million decrease in the net loan portfolio as we sold most of our new one- to four-family residential loan production during the period based on asset/liability management considerations. The liquidity generated during the period was also used to reduce advances from the Federal Home Loan Bank by $6.3 million or 24.1% to $19.8 million at September 30, 2009 from $26.1 million at December 31, 2008 and purchase $4.5 million in securities classified as “held-to-maturity.”

The net loan portfolio decreased $10.5 million or 8.7% to $110.2 million at September 30, 2009 from $120.7 million at December 31, 2008. During the first nine months of 2009, we continued our strategy of expanding our commercial real estate and commercial and industrial loan portfolios to increase our yield and reduce asset duration. These two loan portfolios combined increased $3.8 million or 17.6% to $25.5 million at September 30, 2009 from $21.6 million at December 31, 2008. Of this increase, commercial real estate loans increased $3.3 million or 20.0% to $19.6 million at September 30, 2009, and represented 17.5% of the total loan portfolio, compared to $16.3 million or 13.4% of the total loan portfolio at December 31, 2008. These increases were offset primarily by decreases in total one-to four-family loans of $6.9 million and purchased indirect automobile loans, net of dealer reserve, of $5.6 million. The decrease in our one-to four-family loans during 2009 was primarily due to repayments, early payoffs and $24.2 million in loans sold to Fannie Mae from refinancing activity, which generated $265,000 in net gains on loan sales; offset by loan originations and purchases of $35.7 million and $1.5 million, respectively. The decrease in the one-to four-family loan portfolio reflects our strategy to sell substantially all our conforming one-to four-family loans based on yield and duration considerations. The decrease in our purchased indirect automobile loan portfolio at September 30, 2009 from December 31, 2008 was primarily due to normal amortization, payoffs, and our strategy to reduce our concentration in purchased indirect automobile loans by discontinuing our practice of purchasing these types of loans.

Available-for-sale securities decreased $1.9 million or 33.7% to $3.6 million at September 30, 2009 from $5.5 million at December 31, 2008. This decrease was caused by $495,000 in securities sales, with a related net loss of $7,000, repayments and maturities on those securities. Held-to-maturity securities totaled $4.2 million at September 30, 2009, an increase of $2.6 million or 160.9% from $1.6 million at December 31, 2008. The increase was primarily due to our strategy to increase yields while decreasing asset duration, in part, through the purchase of seasoned privately-issued collateralized mortgage obligations totaling $4.5 million in 2009. The collateralized mortgage obligations purchased have been packaged by U.S. financial institutions, are all “AAA” rated senior tranches with an average life of approximately three years, and have been performing as anticipated.

Liabilities. Deposits increased $5.3 million or 4.5% to $122.6 million at September 30, 2009 from $117.3 million at December 31, 2008. Savings, NOW and money market accounts totaled $48.7 million at September 30, 2009 compared to $42.3 million at December 31, 2008, an increase of $6.4 million or 15.3%. This increase was due to competitive pricing and promotional interest rates offered during the first nine months of 2009 consistent with our strategy to grow our core deposits. Certificates of deposit increased $852,000 while brokered certificates of deposit and demand deposits decreased $1.0 million and $1.0 million, respectively, during the same nine month period of 2009.

Federal Home Loan Bank advances decreased to $19.8 million from $26.1 million at September 30, 2009 from December 31, 2008, a decrease of $6.3 million or 24.1%. This decrease was due to our liquidity and capital strategy which sets as one of its goals to depend less on advances from the Federal Home Loan Bank and to grow deposits to provide liquidity and fund our operations in the current interest rate environment.

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Equity. Total equity at September 30, 2009 decreased $347,000 or 2.8% to $12.2 million from $12.5 million at December 31, 2008. The decrease was the result of a net loss for the nine months ended September 30, 2009 of $416,000, offset by an increase in accumulated other comprehensive income of $69,000, net of tax which pertains to the change in unrealized gains or losses in the available-for-sale securities portfolio.

Comparison of Financial Condition at December 31, 2008 and December 31, 2007

Assets. Total assets at December 31, 2008 were $158.7 million, a $318,000 or 0.2% increase from $158.3 million at December 31, 2007. Cash and cash equivalents increased $3.0 million or 27.5% to $14.0 million at December 31, 2008 from $11.0 million at December 31, 2007. This increase was due to our intention to increase our liquidity position at December 31, 2008 based on low market interest rates. Available-for-sale securities decreased $8.2 million to $5.5 million at December 31, 2008 from $13.7 million at December 31, 2007. This decrease was primarily due to the recognition during 2008 of $1.2 million in losses on other than temporary impairment on equity securities, securities sales of $4.1 million with a related gain of $66,000, and scheduled amortization and maturities. The net loan portfolio increased $2.9 million or 2.5% to $120.7 million at December 31, 2008 from December 31, 2007. Historically, we have emphasized one-to four-family lending and home equity lines of credit. During 2008 those total loan portfolios increased $4.1 million and $1.3 million, respectively, and combined comprised 60.6% of the overall total loan portfolio. We also continued our strategy of expanding our commercial and industrial loan portfolio to enhance the yield on our loan portfolio and shorten its duration. Commercial and industrial loans increased $523,000 or 10.9% at December 31, 2008 to $5.3 million from $4.8 million at December 31, 2007. Included in our loan strategy was a goal to reduce the concentration of purchased indirect automobile loans, and we discontinued these purchases in 2008. Our portfolio of purchased indirect automobile loans decreased to $18.2 million at December 31, 2008 from $23.2 million at December 31, 2007, a $5.0 million or 21.5% decrease. Foreclosed assets held for sale increased to $718,000 at December 31, 2008 from $40,000 at December 31, 2007, an increase of $678,000. This increase was primarily due to foreclosure of one commercial real estate property of $475,000 in 2008. Deferred income taxes increased $1.1 million at December 31, 2008 from December 31, 2007, primarily due to the reversal of valuation allowances previously recorded on net operating loss carryforwards and other components of deferred tax assets acquired in the merger with Morris Building & Loan, s.b. in 2008, and the impact of our 2008 net loss, as we met the criteria for realization of those deferred tax assets.

Liabilities. Deposits totaled $117.3 million at December 31, 2008 compared to $113.8 million at December 31, 2007, an increase of $3.5 million or 3.1%. Savings, NOW and money market accounts increased $4.2 million or 11.0% at December 31, 2008 from December 31, 2007. This increase was the result of our intention to increase liquidity and reduce our Federal Home Loan Bank advances replacing them with lower-cost core deposits. To increase the core deposit base we competitively priced our core deposit products and offered promotional rates periodically. Our non-brokered certificates of deposit decreased $936,000 or 1.4% at December 31, 2008 from December 31, 2007 due to our maintaining pricing discipline in a competitive environment. Federal Home Loan Bank advances decreased $1.2 million or 4.3% at December 31, 2008 from December 31, 2007 to $26.1 million. This decrease was due to our plan to reduce advances and replace them with lower-cost core deposits.

Equity. Total equity at December 31, 2008 decreased $1.6 million or 11.1% to $12.5 million from $14.1 million at December 31, 2007. The decrease was the result of a net loss for the year ended December 31, 2008 of $1.2 million and a decrease in accumulated other comprehensive income of $376,000, net of tax which pertains to the change in unrealized gains or losses in the available-for-sale securities portfolio.

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Comparison of Operating Results for the Nine Months Ended September 30, 2009 and September 30, 2008

General. Net loss for the nine months ended September 30, 2009 was $416,000, compared to a net loss of $743,000 for the same period in 2008, a decrease of $327,000 or 44.0%. This decrease in net loss was due to increases in net interest income of $271,000, noninterest income of $1.3 million and a decrease in noninterest expense of $188,000, offset by an increase in the provision for loan losses of $800,000 and a decrease in the benefit for income taxes of $641,000.

Interest and Dividend Income. Total interest and dividend income decreased $546,000 or 8.4% to $6.0 million for the nine months ended September 30, 2009 from $6.5 million for the same period in 2008. This decrease was primarily due to a decrease in interest and fees on loans of $565,000 or 9.5% to $5.4 million from $5.9 million for the nine months ended September 30, 2009 and 2008, respectively. The average balance of loans decreased $7.1 million to $115.9 million while the average yield on loans decreased 26 basis points to 6.19% from 6.45% for the nine months ended September 30, 2009 from the comparable period in 2008. These decreases reflected the interest rate environment and loans sales of $24.2 million during the period. The remainder of the variance in this category was the result of yields on securities, interest-bearing deposits and Federal Home Loan Bank stock decreasing 51 basis points to 2.32% from 2.83% while the average balance for these accounts increased $7.1 million reflecting our emphasis on increasing our liquidity levels in this lower interest rate environment. During 2007, the Federal Home Loan Bank suspended paying dividends on its common stock, resulting in no dividend income for the nine months ended September 30, 2009 and 2008, respectively.

Interest Expense. Total interest expense decreased $817,000 or 21.5% to $3.0 million for the nine months ended September 30, 2009 from $3.8 million for the nine months ended September 30, 2008. Interest expense on deposit accounts decreased $680,000 or 23.1% to $2.3 million for the nine months ended September 30, 2009 from $3.0 million for the same period in 2008. This decrease was primarily due to a decrease in interest expense on savings, NOW and money market accounts of $200,000 during the period while interest expense on certificates of deposit and non-brokered certificate accounts decreased $439,000 and $41,000, respectively. Average savings, NOW and money market accounts increased $6.9 million while the cost of these deposits decreased 80 basis points during the nine months ended September 30, 2009 from the nine months ended September 30, 2008. The movement in these accounts was the result of our competitive pricing and promotional events pricing to increase our liquidity while decreasing our utilization of Federal Home Loan Bank advances. The average balance in non-brokered certificates of deposit decreased $787,000 between the nine month periods ended September 30, 2009 and 2008, respectively, with the cost of these deposits decreasing 81 basis points during the same periods. Interest expense on Federal Home Loan Bank advances decreased $137,000 to $718,000 for the nine months ended September 30, 2009 from $855,000 for the nine months ended September 30, 2008. The average balance for advances decreased $3.2 million while the average cost of this funding decreased 18 basis points for the nine months ended September 30, 2009 from the nine months ended September 30, 2008. The decrease in the average balance of advances was due to adhering to our capital and liquidity plans to lessen our reliance on advances. The decrease in the cost of these funds was a reflection of the interest rate environment at that time.

Net Interest Income. Net interest income increased $271,000 or 10.0% to $3.0 million for the nine months ended September 30, 2009 from $2.7 million for the nine months ended September 30, 2008, primarily as a result of an increase in our net interest rate spread of 32 basis points to 2.51% from 2.19% during the comparable periods of 2009 and 2008, respectively. The

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increase in our net interest rate spread reflects the more rapid repricing of our interest-bearing liabilities in a decreasing interest rate environment compared to our interest-earning assets.

Provision for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

We evaluate the allowance for loan losses on a regular basis and the provision is based upon our periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. The factors we considered in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar loan characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, we do not separately identify individual consumer and residential loans for impairment measurements.

Based upon our evaluation of these factors, a provision of $1.0 million was recorded for the first nine months ended September 30, 2009, an increase of $800,000 or 322.6% from $248,000 for the nine months ended September 30, 2008. The provision for loan losses reflected net charge offs of $773,000 for the nine months ended September 30, 2009, compared to $209,000 for the nine months ended September 30, 2008. The allowance for loan losses was $1.3 million, or 1.14% of total loans at September 30, 2009, compared to $714,000, or 0.58% of total loans at September 30, 2008. At September 30, 2009, we had identified substandard loans totaling $3.8 million, all of which were considered impaired, and established an allowance for loan losses of $394,000. At September 30, 2008, we considered all substandard loans totaling $2.2 million impaired and established an allowance for loan losses of $189,000. We used the same methodology in assessing the allowance for each period. We increased the impact of qualitative factors during the second half of 2008 to reflect further deterioration in the economy. In particular, allocations to the allowance for commercial real estate, construction and land development and other graded loans were increased. Although we used the same methodology in assessing the allowance for each period, the larger provision for loan losses in 2009 is primarily due to the greater proportional effect of qualitative factors throughout the entire loan portfolio, a higher level of impaired loans and an increase during the nine months of 2009, of $564,000 in charge offs from the same period in 2008. To the best of our knowledge,

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we have recorded all losses that are both probable and reasonably estimable for the nine months ended September 30, 2009 and 2008, respectively.

Noninterest Income. Noninterest income increased $1.3 million to $699,000 for the nine months ended September 30, 2009 from a loss of $610,000 for the nine months ended September 30, 2008. The increase was primarily related to losses or other than temporary impairment of equity securities which was $1.1 million for the nine months ended September 30, 2008, compared to $45,000 for the same period in 2009, a decrease of $1.0 million. In addition, increases in net realized gains on loan sales were $220,000 or 488.9% to $265,000 in 2009 from $45,000 in 2008. These sales reflect our decision in 2000 to increase our sales of long-term fixed rate one- to four-family loans in an attempt to shorten the duration in our loan portfolio so that it is more responsive to the changes in interest rates. Gains on loan sales included the net increase in fair value of mortgage servicing rights of $79,000 in 2009 and $12,000 in 2008, an increase of $67,000 primarily due to an increase in the size of our mortgage servicing portfolio. The $45,000 other than temporary impairment of equity securities in 2009 was related to our investment in Fannie Mae and Freddie Mac common stock and the Shay Asset Management mutual funds.

Noninterest Expense. Noninterest expense decreased $188,000 or 5.4% to $3.3 million for the nine months ended September 30, 2009 from $3.5 million for the nine months ended September 30, 2008. The decrease was primarily due to expenses related to our merger with Morris Building & Loan, s.b. that occurred in the first nine months of 2008, with no corresponding expense recognized during the first nine months of 2009. The decrease in 2009 was also due to decreases in compensation and benefits, office occupancy and data processing expenses of $63,000, $43,000 and $106,000, respectively, professional fees of $28,000, servicing expense of $44,000, bank merger expenses of $55,000 and other operating expenses of $78,000 during the first nine months of 2009. These decreases were offset by increases in marketing expense of $13,000, FDIC insurance premiums of $181,000, including a special assessment totaling $74,000, and an increase in losses on foreclosed assets, net of $52,000.

Provision for Income Taxes. The benefit for income taxes was $224,000 for the nine months ended September 30, 2009 compared to a benefit of $865,000 for the same period in 2008. The effective tax benefit as a percent of pre-tax loss was (35.0)% and (53.8)% for the nine months ended September 30, 2009 and 2008, respectively. The benefit for income taxes in 2008 included an income tax benefit of $300,000 recognized as a result of the reversal of valuation allowances recorded on deferred tax assets acquired in the merger with Morris Building & Loan, s.b., offset by an increase in the valuation allowance of $136,000 for deferred tax assets related to capital losses on equity securities. Also, in 2008 an income tax benefit of $100,000 was recognized for a tax credit related to the completion of the main office renovation.

Comparison of Operating Results for the Years Ended December 31, 2008 and December 31, 2007

General. Net loss for the year ended December 31, 2008 was ($1.2 million) compared to a net loss of ($674,000) for the year ended December 31, 2007, an increase in losses of $517,000 or 76.7%. The increase in the net loss was due to increases in the provision for loan losses of $814,000 and a decrease in noninterest income of $1.1 million offset by an increase in net interest income of $67,000, an increase in the benefit from income taxes of $1.1 million and a decrease in noninterest expense of $272,000.

Interest and Dividend Income. Total interest and dividend income decreased $425,000 or 4.7% to $8.6 million for the year ended December 31, 2008 from $9.0 million for the year ended December 31, 2007. This decrease was primarily due to decreases in interest income from both taxable and tax-exempt

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securities of $231,000 with the average balance in these securities decreasing $5.9 million for the year ended December 31, 2008 from the year ended December 31, 2007 offset by the average yield on these securities which increased by 16 basis points to 4.37% from 4.21% for the comparable years. During 2007, the Federal Home Loan Bank of Chicago suspended paying dividends on its common stock, resulting in a $218,000 decrease in dividend income for the year ended December 31, 2008 compared to the year ended December 31, 2007. Interest income from securities purchased under agreements to resell and other interest-bearing deposits decreased $211,000 and $125,000 to $204,000 and $54,000, respectively, for the year ended December 31, 2008 from $415,000 and $179,000 for the year ended December 31, 2007 reflecting the lower interest rate environment during 2008. Offsetting these decreases was an increase in interest and fees on loans of $360,000 or 4.8% to $7.8 million from $7.5 million for the years ended December 31, 2008 and 2007, respectively. The average balance of loans increased $10.4 million to $123.2 million while the average yield on loans decreased 27 basis points to 6.36% from 6.63% for the year ended December 31, 2008 from the 2007 year end. The increase in the average balance of loans was due primarily to $43.9 million in loan originations and purchases during 2008 offset by loan repayments of $32.6 million and loan sales of $8.4 million the majority of which occurred in the fourth quarter of 2008. The decrease in the average yield in the loan portfolio was the result of the interest rate environment in 2008 as overall interest rates declined.

Interest Expense. Total interest expense decreased $492,000 or 9.1% to $4.9 million for the year ended December 31, 2008 from $5.4 million for the year ended December 31, 2007. Interest expense on deposit accounts decreased $382,000 or 9.1% to $3.8 million for the year ended 2008 from $4.2 million for the same period in 2007. This decrease was primarily due to a decrease in interest expense on non-brokered certificates of deposit of $341,000 or 10.6% to $2.9 million for the year ended December 31, 2008 from $3.2 million for the year ended December 31, 2007. The average balance in non-brokered certificates of deposit increased $1.3 million between the years ended December 31, 2008 and 2007, respectively, with the average cost of these deposits decreasing 59 basis points during the same time periods. Interest expense on savings, NOW and money market accounts decreased $106,000 to $759,000 from $865,000 for the years ended December 31, 2008 and 2007. Average savings, NOW and money market accounts increased $2.3 million while the cost of these deposits decreased 37 basis points during the year ended December 31, 2008 from the year ended December 31, 2007. The increase in the balances in these accounts was the result of our competitive pricing and promotional events pricing to increase our liquidity while decreasing our utilization of Federal Home Loan Bank advances. Interest on brokered certificates of deposit increased $65,000 to $169,000 for the year ended December 31, 2008 from $104,000 for the year ended December 31, 2007, respectively. Average brokered certificates of deposit increased $1.3 million while the average cost of these funds increased 38 basis points for the years ended December 31, 2008 and 2007, respectively. Interest expense on Federal Home Loan Bank advances decreased $110,000 to $1.1 million for the year ended December 31, 2008 from $1.2 million for the year ended December 31, 2007. The average balance for advances increased $320,000 while the average cost of this funding decreased 48 basis points for the year ended December 31, 2008 from the year ended December 31, 2007.

Net Interest Income. Net interest income remained relatively stable, increasing $67,000 or 1.9% for the year ended December 31, 2008 compared to the year ended December 31, 2007. Our net interest rate spread increased 8 basis points to 2.22% in 2008 from 2.14% in 2007. The average yield on interest-earning assets decreased 42 basis points to 5.72% from 6.14% while our cost of funds decreased 50 basis points to 3.50% from 4.00% for the years ended December 31, 2008 and 2007, respectively.

Provision for Loan Losses. A provision of $634,000 was recorded for the year ended December 31, 2008, an increase of $814,000 from $(180,000) for the year ended December 31, 2007. The provision for loan losses reflected net charge offs of $309,000 for the year ended December 31, 2008 compared to net recoveries of $174,000 for the year ended December 31, 2007. The credit in the provision for 2007

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was due to a recovery of a receivable previously charged-off against the allowance. The allowance for loan losses was $1.0 million, or 0.82% of total loans at December 31, 2008 compared to $675,000, or 0.56% of total loans at December 31, 2007. We used the same methodology in assessing the allowance for each period. At December 31, 2008 we had substandard loans, all of which were considered impaired, totaling $3.1 million, and established a related allowance totaling $411,000. At December 31, 2007, we considered all substandard loans totaling $1.7 million impaired and established a related allowance totaling $145,000. We increased the impact of qualitative factors in 2008 to reflect deterioration in the economy, increasing the allocation to the allowance for commercial real estate, construction and land development loans. Although we used the same methodology in assessing the allowance for each period, the larger provision for loan losses in 2008 was primarily due to the impact of qualitative factors, the higher level of impaired loans and related allowance, and the increase in net charge offs in 2008. To the best of our knowledge, we have recorded all losses that are both probable and estimable for the years ended December 31, 2008 and 2007, respectively.

Noninterest Income (Loss). Noninterest income (loss) decreased $1.1 million to a loss of ($658,000) for the year ended December 31, 2008 from income of $453,000 for the year ended December 31, 2007. The decrease was primarily related to an increase in the charge for other-than-temporary impairment of equity securities, which increased $1.1 million to $1.2 million during the year ended December 31, 2008 from a charge of $167,000 for the year ended December 31, 2007. The increased charge in 2008 to other-than-temporary impairment of equity securities was primarily related to (i) a $792,000 impairment loss on our investment in the common stock of Fannie Mae and Freddie Mac, which were placed into conservatorship during 2008 and (ii) a $456,000 impairment in the value of our holdings of the AMF Ultra Short and AMF Ultra Short Mortgage mutual funds due to a decline in value of the underlying securities, many of which were “private label” mortgage-backed securities.

Noninterest Expense. Noninterest expense decreased $272,000 to $4.6 million for the year ended December 31, 2008 from $4.9 million for the year ended December 31, 2007. The decrease was primarily due to merger related expenses incurred during 2007 in anticipation of the merger with Morris Building & Loan, s.b., with lower similar expenses in 2008. Merger expenses decreased $563,000 to $55,000 for the year ended December 31, 2008 from $618,000 for the year ended December 31, 2007 primarily as a result of costs related to the termination of a data center contract of $467,000 incurred in 2007. Decreases in professional fees of $123,000, and other noninterest operating expenses of $58,000 were primarily due to post merger synergies. These decreases were offset by increases in compensation and benefits of $99,000, office occupancy of $28,000, and data processing of $104,000 which relate to additional costs incurred in the integration of operations with Morris Building & Loan, s.b. during 2008. Losses on foreclosed assets, net, increased $166,000 to $172,000 for the year ended December 31, 2008 from $6,000 for the year ended December 31, 2007 primarily due to losses incurred due to repossessions in our purchased indirect automobile loan portfolio.

Provision for Income Taxes. The provision for income taxes decreased $1.1 million to a benefit of ($1.1 million) for the year ended December 31, 2008 from a provision of $4,000 for the year ended December 31, 2007. The effective tax rate (benefit) as a percent of pre-tax loss was (47.2)% and 0.6% for the years ended December 31, 2008 and 2007, respectively. The benefit for income taxes in 2008 included an income tax benefit of $649,000 recognized as a result of the reversal of valuation allowances recorded on deferred tax assets acquired in the merger with Morris Building & Loan, s.b., offset by an increase in the valuation allowance of $305,000 for deferred tax assets related to capital losses on equity securities. The provision for income taxes in 2007 included an increase in valuation allowances recorded on deferred tax assets of $319,000, primarily for the net loss of Morris Building & Loan, s.b. which was acquired in 2008. Also, in 2008 an income tax benefit of $100,000 was recognized for a tax credit related to the completion of the main office renovation.

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Analysis of Net Interest Income

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

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The following tables set forth average balance sheets, average yields and costs, and certain other information at or for the periods indicated. Average balances are predominantly derived from daily average balances, and to a lesser extent, from month end balances. Management does not believe that the limited use of month end balances rather than daily balances has caused any material differences in the information presented. Non-accrual loans were included in the computation of average balances, but have been reflected in the tables as loans carrying a zero yield. No tax equivalent yield adjustments have been made. The yields set forth below include the effect of loan fees, discounts and premiums that are amortized or accreted to interest income.

	At September 30, 2009				For the Nine Months Ended September 30,
					2009						2008
	Actual Balance		Yield/Cost		Average Balance		Interest Income / Expense		Yield/Cost		Average Balance		Interest Income / Expense		Yield/Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Interest-earning deposits	$	8,959	1.97	%	$	7,006	$	121	2.30	%	$	2,072	$	33	2.12	%
Securities purchased under agreements to resell Investment securities		12,250	1.91			12,804		185	1.93			7,357		164	2.97
Securities, tax-exempt (1)		683	4.50			763		26	4.54			3,172		94	3.95
Securities, taxable (1)		7,128	5.13			7,407		268	4.82			8,220		290	4.70
Loans (2)		110,226	6.04			115,897		5,379	6.19			122,965		5,944	6.45
Federal Home Loan Bank stock		6,549	—			6,549		—	—			6,549		—	—
Total interest-earning assets		145,795	5.12	%		150,426		5,979	5.30	%		150,335		6,525	5.79	%
Noninterest-earning assets		11,401				11,619						11,358
Total assets	$	157,196			$	162,045					$	161,693
Liabilities and equity:
Interest-bearing liabilities:
Savings accounts	$	13,569	0.42	%	$	13,356		43	0.43		$	11,735		93	1.06	%
NOW and money market accounts		35,179	0.96			35,777		347	1.29			30,460		497	2.18
Certificates of deposit		68,141	3.01			68,052		1,780	3.49			68,839		2,219	4.30
Brokered certificates of deposit		2,820	4.63			2,926		100	4.56			4,227		141	4.45
Federal Home Loan Bank advances		19,778	4.07			22,683		718	4.22			25,931		855	4.40
Total interest-bearing liabilities		139,487	2.42	%		142,794		2,988	2.79	%		141,192		3,805	3.59	%
Non-interest-bearing deposits		2,872				3,496						3,467
Other non-interest-bearing liabilities		2,657				3,194						3,333
Total liabilities		145,016				149,484						147,992
Total equity		12,180				12,561						13,701
Total liabilities and equity	$	157,196			$	162,045					$	161,693
Net interest income							$	2,991					$	2,720
Interest rate spread (3)									2.51	%					2.19	%
Net interest margin (4)									2.65	%					2.41	%
Average interest-earning assets to average interest-bearing liabilities									105.34	%					106.48	%

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	For the Years Ended December 31,
	2008						2007
	Average Balance		Interest Income / Expense		Yield/Cost		Average Balance		Interest Income / Expense		Yield/Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Interest-earning deposits	$	1,876	$	54	2.88	%	$	3,298	$	179	5.43	%
Securities purchased under agreements to resell		7,464		204	2.73			7,300		415	5.68
Securities, tax-exempt (1)		2,714		108	3.98			4,474		180	4.02
Securities, taxable (1)		7,712		348	4.51			11,862		507	4.27
Loans (2)		123,226		7,837	6.36			112,791		7,477	6.63
Federal Home Loan Bank stock		6,549		—	—			6,549		218	3.33
Total interest-earning assets		149,541		8,551	5.72	%		146,274		8,976	6.14	%
Noninterest-earning assets		11,575						10,680
Total assets	$	161,116					$	156,954
Liabilities and equity:
Interest-bearing liabilities:
Savings accounts	$	12,059		120	1.00	%	$	11,547		134	1.16	%
NOW and money market accounts		29,889		639	2.14			28,096		731	2.60
Certificates of deposit		68,960		2,885	4.18			67,651		3,226	4.77
Brokered certificates of deposit		3,828		169	4.41			2,578		104	4.03
Federal Home Loan Bank advances		26,126		1,119	4.28			25,806		1,229	4.76
Total interest-bearing liabilities		140,862		4,932	3.50	%		135,678		5,424	4.00	%
Non-interest-bearing deposits		3,409						3,803
Other non-interest-bearing liabilities		3,404						2,310
Total liabilities		147,675						141,791
Total equity		13,441						15,163
Total liabilities and equity	$	161,116					$	156,954
Net interest income			$	3,619					$	3,552
Interest rate spread (3)					2.22	%					2.14	%
Net interest margin (4)					2.42	%					2.43	%
Average interest-earning assets to average interest-bearing liabilities					106.16	%					107.81	%

(1) Securities include unamortized premiums and unaccreted discounts. Securities include both available-for-sale and held-to-maturity securities. Fair value adjustments on available-for-sale securities have been included in the average balance for non-interest earning assets.

(2) The allowance for loan losses has been included in the average balance for non-interest earning assets.

(3) The interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4) The net interest margin represents net interest income as a percent of average interest-earning assets.

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Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008	Rate			Volume			Net
	(In thousands)
Interest income:
Interest-earning deposits	$	3		$	85		$	88
Securities purchased under agreements to resell		(19	)		40			21
Securities, tax-exempt		17			(85	)		(68	)
Securities, taxable		8			(30	)		(22	)
Loans		(231	)		(334	)		(565	)
Federal Home Loan Bank stock		—			—			—
Total		(223	)		(323	)		(546	)
Interest expense:
Savings accounts		(65	)		15			(50	)
NOW and money market accounts		(263	)		113			(150	)
Certificates of deposit		(414	)		(25	)		(439	)
Brokered certificates of deposit		4			(45	)		(41	)
Federal Home Loan Bank advances		(33	)		(104	)		(137	)
Total		(772	)		(45	)		(817	)
Increase (decrease) in net interest income	$	549		$	(278	)	$	271

2008 Compared to 2007	Rate			Volume			Net
	(In thousands)
Interest income:
Interest-earning deposits	$	(65	)	$	(60	)	$	(125	)
Securities purchased under agreements to resell		(221	)		10			(211	)
Securities, tax-exempt		(2	)		(70	)		(72	)
Securities, taxable		30			(189	)		(159	)
Loans		(282	)		642			360
Federal Home Loan Bank stock		(218	)		—			(218	)
Total		(757	)		332			(425	)
Interest expense:
Savings accounts		(20	)		6			(14	)
NOW and money market accounts		(143	)		51			(92	)
Certificates of deposit		(405	)		64			(341	)
Brokered certificates of deposit		11			54			65
Federal Home Loan Bank advances		(125	)		15			(110	)
Total		(683	)		191			(492	)
Increase (decrease) in net interest income	$	(74	)	$	141		$	67

2007 Compared to 2006	Rate			Volume			Net
	(In thousands)
Interest income:
Interest-earning deposits	$	8		$	91		$	99
Securities purchased under agreements to resell		5			95			100
Securities, tax-exempt		(6	)		107			101
Securities, taxable		(151	)		138			(13	)
Loans		149			239			388
Federal Home Loan Bank stock		(74	)		(138	)		(212	)
Total		(70	)		533			463
Interest expense:
Savings accounts		32			(39	)		(7	)
NOW and money market accounts		156			27			183
Certificates of deposit		511			310			821
Brokered certificates of deposit		—			10			10
Federal Home Loan Bank advances		61			(97	)		(36	)
Total		760			211			971
Increase (decrease) in net interest income	$	(830	)	$	322		$	(508	)

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Management of Market Risk

Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal goalof our operations is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates.

Our board of directors is responsible for the review and oversight of our asset/liability strategies. The Asset/Liability Committee of the board of directors meets quarterly and is charged with developing an asset/liability management plan. Our board of directors has established an Asset/Liability Management Committee, consisting of senior management. This committee meets twice per month to review pricing and liquidity needs and to assess our interest rate risk. This committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

Among the techniques we are currently using to manage interest rate risk are: (i) selling into the secondary mortgage market a significant portion of our fixed-rate one- to four-family residential mortgage loan originations; (ii) expanding our commercial real estate, commercial and industrial and indirect automobile loans as they generally reprice more quickly than one- to four-family residential mortgage loans; and (iii) emphasizing less interest rate sensitive and lower-cost “core deposits.” We also maintain a portfolio of short term or adjustable rate assets and from time to time have used fixed-rate Federal Home Loan Bank advances and brokered deposits to extend the term to repricing of our liabilities.

While we believe these strategies have helped manage our interest rate exposure, they do pose risks. For example, commercial real estate, commercial and industrial and indirect automobile loans generally present a higher level of credit risk than residential one- to four-family loans. In addition, core deposit accounts generally cost more to maintain and market than certificates of deposit.

An important measure of interest rate risk is the amount by which the net present value of an institution’s cash flow from assets, liabilities and off balance sheet items changes in the event of a range of assumed changes in market interest rates. We have utilize a computer simulation model to provide an analysis of estimated changes to our net portfolio value (“NPV”) under the assumed parallel instantaneous changes in the United States treasury yield curve. The financial model uses a discounted cash flow analysis and an option-based pricing approach to measuring the interest rate sensitivity of the NPV.

Set forth below is an analysis of the changes to the economic value of our equity that would occur to our NPV as of September 30, 2009 in the event of designated changes in the United States treasury yield curve. At September 30, 2009, our economic value of equity exposure related to these hypothetical changes in market interest rates was within the current guidelines we have established.

Change in Interest Rates (Basis Points) (2)	Estimated NPV (3)		Estimate Increase (Decrease) in NPV				NPV as a Percentage of Present Value of Assets (1)
			Amount		Percent		NPV Ratio (4)		Change in Basis Points
(Dollars in Thousands)
300+	$	14,930	756		5.33	%	9.83	%	96
200+		14,730	556		3.92	%	9.52	%	65
100+		14,661	487		3.44	%	9.31	%	44
—		14,174	—		0.00	%	8.87	%	—
100-		12,932	(1,242	)	(8.76	)%	8.01	%	(86	)

(1) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(2) Estimated NPV assumes an instantaneous uniform change in interest rates at all maturities.

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(3) NPV is the discounted present value of expected cash flows from assets, liabilities and off balance sheet contracts.

(4) NPV Ratio represents NPV divided by the present value of assets.

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In addition to modeling changes in NPV, we also analyze estimated changes to net interest income (“NII”) for a prospective twelve-month period under the interest rate scenarios set forth above. The following table sets forth our NII model as of September 30, 2009.

Change in Interest Rates (Basis Points)	Estimated Net Interest Income (1)		Increase (Decrease) in Estimated Net Interest Income
			Amount			Percent
300+	$	4,813	$	613		14.60	%
200+		4,580		380		9.05
100+		4,336		136		3.24
—		4,200		—		—
100-		3,862		(338	)	(8.05	)

(1) Estimated net interest income assumes an instantaneous uniform change in interest rates at all maturities.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. The tables also do not measure the changes in credit risk that may occur as a result of changes in general interest rates. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and net interest income and will differ from actual results.

Our policies do not permit hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

Liquidity and Capital Resources

Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from maturities and calls of securities, and Federal Home Loan Bank advances. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including securities repurchase agreements. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities were $369,000 and $(90,000) for the nine months ended September 30, 2009 and 2008, respectively. Net cash from investing activities consisted primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, and proceeds from maturing securities and pay downs on mortgage-backed securities. Net cash provided by (used in) investing activities were $1.9 million and $(1.1) million for the nine months ended September 30, 2009 and 2008, respectively. Net cash provided by financing activities consisted primarily of the activity in deposit accounts and Federal Home Loan Bank borrowings. The net cash provided by (used in) financing

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activities was $(1.3) million and $3.5 million for the nine months ended September 30, 2009 and 2008, respectively.

At September 30, 2009, we exceeded all of our regulatory capital requirements with a Tier 1 (core) capital level of $11.0 million, or 6.9% of adjusted total assets, which is above the required level of $6.3 million, or 4.0%; and total risk-based capital of $12.2 million, or 11.4% of risk-weighted assets, which is above the required level of $8.6 million, or 8.0%. Accordingly Harvard Savings Bank was categorized as well capitalized at September 30, 2009. Management is not aware of any conditions or events since the most recent notification that would change our category.

At September 30, 2009, we had outstanding commitments to originate loans of $2.3 million, commitments under unused lines of credit of $9.9 million and undisbursed portions of construction loans of $762,000. We anticipate that we will have sufficient funds available to meet our current loan origination commitments. Certificates of deposit that are scheduled to mature in less than one year from September 30, 2009 totaled $30.2 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, lines of credit and standby letters of credit. For information about our loan commitments, unused lines of credit and standby letters of credit, see Note 17 of the Notes to our Consolidated Financial Statements.

We have not engaged in any other off-balance-sheet transactions in the normal course of our lending activities.

Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see Note 1 of the notes to our consolidated financial statements beginning on page F-1 of this prospectus.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States of America which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

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BUSINESS OF HARVARD ILLINOIS BANCORP, INC.

Harvard Illinois Bancorp, Inc. is incorporated in the State of Maryland. We have not engaged in any business to date. Upon completion of the conversion, we will own all of the issued and outstanding stock of Harvard Savings Bank. We intend to contribute at least 50% of the net proceeds from the stock offering to Harvard Savings Bank, plus such additional amounts as may be necessary so that, upon completion of the offering, Harvard Savings Bank will have a tangible capital to assets ratio of at least 10%. Harvard Illinois Bancorp, Inc. will retain the remainder of the net proceeds from the stock offering and use a portion of the retained net proceeds to make a loan to the employee stock ownership plan. At a later date, we may use the net proceeds to pay dividends to stockholders and repurchase shares of common stock, subject to our capital needs and regulatory limitations. We will invest our initial capital as discussed in “How We Intend to Use the Proceeds from the Offering.”

After the conversion and the offering is complete, Harvard Illinois Bancorp, Inc., as the holding company of Harvard Savings Bank, will be authorized to pursue other business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See “Supervision and Regulation—Holding Company Regulation” for a discussion of the activities that are permitted for savings and loan holding companies. We currently have no understandings or agreements to acquire other financial institutions. We may also borrow funds for reinvestment in Harvard Savings Bank.

Following the offering, our cash flow will depend on earnings from the investment of the net proceeds from the offering that we retain, and any dividends we receive from Harvard Savings Bank. Initially, Harvard Illinois Bancorp, Inc. will neither own nor lease any property, but will instead pay a fee to Harvard Savings Bank for the use of its premises, equipment and furniture. At the present time, we intend to employ only persons who are officers of Harvard Savings Bank to serve as officers of Harvard Illinois Bancorp, Inc. We will, however, use the support staff of Harvard Savings Bank from time to time. We will pay a fee to Harvard Savings Bank for the time devoted to Harvard Illinois Bancorp, Inc. by employees of Harvard Savings Bank. However, these persons will not be separately compensated by Harvard Illinois Bancorp, Inc. Harvard Illinois Bancorp, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future.

BUSINESS OF HARVARD SAVINGS BANK

General

Harvard Savings Bank is an Illinois-chartered savings bank headquartered in Harvard, Illinois. Harvard Savings Bank was organized in 1934, and reorganized into the mutual holding company structure in 2005. In April 2008, Morris Building & Loan, s.b., a mutual institution, merged into Harvard Savings Bank. Morris Building & Loan, s.b., which had $36 million in assets at the time of the merger, currently operates as a division of Harvard Savings Bank.

Harvard Savings Bank is the wholly owned subsidiary of Harvard Illinois Financial Corporation, a federal corporation, which is the wholly owned subsidiary of Harvard Savings, MHC, a federal mutual holding company. On a consolidated basis, Harvard Savings, MHC had total assets of $157.2 million, net loans of $110.2 million, total deposits of $122.6 million and equity of $12.2 million as of September 30, 2009.

Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations and borrowings, in one- to four-family residential mortgage loans and, to a lesser extent commercial real estate loans, home equity

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loans, purchased indirect automobile loans, commercial and industrial loans and construction, agricultural and land loans. We also invest in U.S. Government and federal agency securities, mortgage-backed securities, collateralized mortgage obligations and, to a lesser extent, securities of state and political subdivisions, mutual funds that invest in those securities and other securities. At September 30, 2009, 59.1% of our assets were mortgage loans and lines of credit, and 3.2% were mortgage-backed securities, including collateralized mortgage obligations. Our revenues are derived principally from the interest on loans and securities, loan origination, sales and servicing fees, fees levied on deposit accounts and net income from bank-owned life insurance. Our primary sources of funds are principal and interest payments on loans and securities, deposits and advances from the Federal Home Loan Bank of Chicago.

Our website address is www.harvardsavingsbank.com. The website address for our Morris division is www.morrisbl.com. Information on these websites should not be considered a part of this prospectus.

Market Area and Competition

We conduct business through our main office and one branch office located in Harvard, Illinois and an additional branch office located in Morris, Illinois. All three of our offices are located in McHenry and Grundy Counties, Illinois. Harvard, Illinois is located approximately 70 miles to the Northwest of Chicago while Morris, Illinois is located approximately 60 miles to the Southwest of Chicago.

Our primary market area consists of McHenry, Grundy and, to a lesser extent, Boone counties, Illinois, and Walworth county, Wisconsin. This area includes small towns, rural communities as well as bedroom communities of Chicago. The regional economy is fairly diversified, with services, wholesale/retail trade, manufacturing and government providing the primary support for the area economy. Although Harvard is a small, relatively rural community with a relatively small population base, it is located next to faster-growing commercial and bedroom communities near the Northwest collar counties of Chicago. Morris also is a small town with a relatively small population base, located close to faster-growing commercial and bedroom communities near the Southwest collar counties of Chicago.

While the local economy has been affected by the recession, the downturn in the McHenry and Grundy counties economy has been somewhat mitigated by the diversity of the employment base and the relatively stable housing market. McHenry and Grundy Counties’ and Illinois’ respective September 2009 unemployment rates were 9.3%, 11.4% and 10.2%, as compared to U.S. unemployment rate of 9.5%. In 2009, according to published sources, per capita income for McHenry and Grundy Counties were $34,218 and $27,938, respectively, and the median household incomes were $83,224 and $66,608, respectively, compared to per capita income for the United States and the State of Illinois of $27,277 and $28,587, respectively, and median household income of $54,719 and $60,823, respectively.

We face competition within our market area both in making loans and attracting deposits. Our market area has a moderate concentration of financial institutions including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. As of June 30, 2009, based on the most recent available FDIC data, our market share of deposits represented 1.4% and 3.1% of FDIC-insured deposits in McHenry and Grundy Counties, Illinois, respectively.

Competition for financial services in our primary market area is significant, particularly in light of the large number of institutions that maintain a presence in the counties. Among our competitors are much larger and more diversified institutions, which have greater resources than we maintain. Financial institution competitors in our primary market area include other locally based thrifts and banks, as well as

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regional, super regional and money center banks. To meet our competition, we seek to emphasize our community orientation, local and timely decision making and superior customer service.

Lending Activities

Our principal lending activity is originating one- to four-family residential mortgage loans and, to a lesser extent, commercial real estate, commercial and industrial, home equity, construction, agricultural and other loans. Historically, we also have purchased a significant number of indirect automobile loans, although during 2008 we determined to substantially reduce our purchases due to loan concentration issues and economic conditions. In recent years we have expanded our commercial real estate loan portfolio in an effort to diversify our overall loan portfolio, increase the yield of our loans and shorten asset duration. We have focused our efforts in this area on borrowers seeking loans in the $1.0 million or less range. As a long-standing community lender, we believe we can effectively compete for this business by emphasizing superior customer service and local underwriting, which differentiates us from larger commercial banks in our primary market area. We expect commercial real estate and commercial and industrial lending will continue to be an area of loan growth.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

						At December 31,
	At September 30, 2009					2008					2007
	Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Real estate loans:
One- to four-family	$	55,920	(1)	49.93	%	$	62,809		51.52	%	$	58,704		48.85	%
Home equity line of credit and other 2nd mortgage		11,670		10.42			11,115		9.12			9,778		8.14
Multi-family		178		0.16			1,114		0.91			1,349		1.12
Commercial		19,610		17.51			16,340		13.40			16,425		13.67
Construction and land development		5,572		4.98			6,112		5.01			4,815		4.01
Total real estate loans		92,950		83.00			97,490		79.96			91,071		75.79
Commercial and industrial		5,858		5.23			5,308		4.36			4,785		3.98
Consumer loans:
Purchased indirect automobile		12,625		11.27			18,203		14.93			23,191		19.30
Other		556		0.50			916		0.75			1,123		0.93
Total consumer loans		13,181		11.77			19,119		15.68			24,314		20.23
Total loans		111,989		100.00	%		121,917		100.00	%		120,170		100.00	%
Deferred loan costs (fees)		(30	)				(45	)				(80	)
Loans in process		(458	)				(123	)				(1,593	)
Allowance for losses		(1,275	)				(1,000	)				(675	)
Loans, net	$	110,226				$	120,749				$	117,822

(1) Includes $5.3 million of loans for non owner occupied properties at September 30, 2009.

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Contractual Maturities and Interest Rate Sensitivity. The following table sets forth the contractual maturities of our total loan portfolio at December 31, 2008. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The table presents contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities may differ.

	Real Estate
	One- to Four- Family Residential		HELOC & Other 2nd Mortgage		Multi-Family		Commercial Real Estate		Construction & Land Development		Commercial & Industrial		Purchased Indirect Automobile		Other Consumer		Total
	(Dollars in thousands)
Amounts due in:
One year or less	$	1,116	$	717	$	—	$	1,069	$	1,512	$	1,939	$	429	$	177	$	6,959
More than one to two years		1,127		683		927		—		421		358		1,681		211		5,408
More than two to three years		2,711		857		—		2,957		1,033		62		3,465		182		11,267
More than three to five years		7,129		2,163		—		9,888		2,504		2,949		10,084		319		35,036
More than five to ten years		17,239		5,317		49		1,880		17		—		2,544		27		27,073
More than ten to fifteen years		6,584		1,378		—		186		162		—		—		—		8,310
More than fifteen years		26,903		—		138		360		463		—		—		—		27,864
Total	$	62,809	$	11,115	$	1,114	$	16,340	$	6,112	$	5,308	$	18,203	$	916	$	121,917

The following table sets forth our fixed and adjustable-rate loans at December 31, 2008 that are contractually due after December 31, 2009.

	Real Estate
	One- to Four- Family Residential		HELOC & Other 2nd Mortgage		Multi-Family		Commercial Real Estate		Construction & Land Development		Commercial & Industrial		Purchased Indirect Automobile		Other Consumer		Total
	(Dollars in thousands)
Interest rate terms on amounts due after one year:
Fixed-rate loans	$	53,068	$	2,675	$	976	$	13,607	$	3,416	$	1,375	$	17,774	$	734	$	93,625
Adjustable-rate loans		8,625		7,723		138		1,664		1,184		1,994		—		5		21,333
Total	$	61,693	$	10,398	$	1,114	$	15,271	$	4,600	$	3,369	$	17,774	$	739	$	114,958

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Loan Approval Procedures and Authority. Pursuant to applicable law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 25% of our total capital plus general loan loss reserves. At September 30, 2009, our largest loan totaled $3.0 million and was secured by a mortgage on an auto dealership in the Chicagoland area. At September 30, 2009, this loan was performing in accordance with its terms.

Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, financial statements and tax returns.

Under our loan policy, the individual processing an application is responsible for ensuring that all documentation is obtained prior to the submission of the application to an officer for approval. An officer then reviews these materials and verifies that the requested loan meets our underwriting guidelines described below.

All one- to four-family residential loans up to $500,000, vacant land loans up to $250,000, and any consumer loans require approval of our loan committee consisting of three officers. All such loan approvals are reported at the next board meeting following said approval. All secured commercial loans, including agricultural loans, up to $1,500,000 and unsecured loans up to $250,000 must be approved by our commercial credit management committee, which currently consists of our Chief Executive Officer, Executive Vice President and our two Vice Presidents – Commercial Loan Officers. These approvals are reported at the next board meeting following said approval. All other loans must be approved by the board.

Generally, we require title insurance or title searches on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan.

One- to Four-Family Residential Real Estate Lending. The cornerstone of our lending program has long been the origination of long-term permanent loans secured by mortgages on owner-occupied one- to four-family residences. At September 30, 2009, $55.9 million, or 49.93% of our total loan portfolio consisted of permanent loans on one- to four-family residences. At that date, our average outstanding one- to four-family residential loan balance was $104,000. Virtually all of the residential loans we originate are secured by properties located in our market area. See “—Originations, Sales and Purchases of Loans.”

Due to consumer demand in the current low market interest rate environment, many of our recent originations are 10- to 30-year fixed-rate loans secured by one- to four-family residential real estate. We generally originate our fixed-rate one- to four-family residential loans in accordance with secondary market standards to permit their sale. During the last several years, consistent with our asset-liability management strategy, we have sold most of the fixed rate one- to four-family residential loans we originated with original terms to maturity in excess of ten years.

During recent years, as a part of our asset/liability management policy, we have also originated seven-year balloon loans with up to 30-year amortization schedules secured by one- to four-family real estate. At September 30, 2009, we had $19.0 million of such loans.

In order to reduce the term to repricing of our loan portfolio, we also originate adjustable-rate one- to four-family residential mortgage loans. However, our ability to originate such loans is limited in

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the current low interest rate environment due to low consumer demand. Our current adjustable-rate mortgage loans carry interest rates that adjust annually at a margin over the one year U.S. Treasury index. Many of our adjustable-rate one- to four-family residential mortgage loans have fixed rates for initial terms of three to five years. Such loans carry terms to maturity of up to 30 years. The adjustable-rate mortgage loans currently offered by us generally provide for a 200 basis point annual interest rate change cap and a lifetime cap of 600 basis points over the initial rate.

Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically reprice, as interest rates increase, the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by the maximum periodic and lifetime rate adjustments permitted by our loan documents. Moreover, the interest rates on many of our adjustable-rate loans do not adjust for the first three to five years. As a result, the effectiveness of adjustable-rate mortgage loans may be limited during periods of rapidly rising interest rates. At September 30, 2009, $6.7 million, or 11.93% of our one- to four-family residential loans, had adjustable rates of interest.

We evaluate both the borrower’s ability to make principal, interest and escrow payments and the value of the property that will secure the loan. Our one- to four-family residential mortgage loans do not currently include prepayment penalties, are non-assumable and do not produce negative amortization. Our one- to four-family residential mortgage loans customarily include due-on-sale clauses giving us the right to declare the loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage. We currently originate residential mortgage loans for our portfolio with loan-to-value ratios of up to 75% for one- to four-family homes, with higher limits applicable to loans with private mortgage insurance on owner-occupied residences.

At September 30, 2009, we had $2.9 million of one- to four-family residential mortgage loans that were 60 days or more delinquent.

Commercial Real Estate Lending. In recent years, in an effort to enhance the yield and reduce the term to maturity of our loan portfolio, we have sought to increase our commercial real estate loans. At September 30, 2009, we had $19.6 million in commercial real estate loans, representing 17.51% of our total loan portfolio.

Most of our commercial real estate loans have balloon loan terms of three to ten years with amortization terms of 15 to 25 years and fixed interest rates. The maximum loan-to-value ratio of our commercial real estate loans is generally 75%. At September 30, 2009, our largest commercial real estate loan totaled $3.0 million and was secured by a mortgage on an automobile dealership outside our market area in Cook County, Illinois. At September 30, 2009, this loan was performing in accordance with its terms.

Set forth below is information regarding our commercial real estate loans at September 30, 2009.

Type of Loan	Number of Loans	Balance
		(In thousands)
Auto Dealership	1	$	3,045
Retail, Other	14		5,707
Industrial	1		153
Mixed Use	24		9,814
Agricultural	3		479
Other	2		412
Total	45	$	19,610

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We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). All commercial real estate loans are appraised by outside independent appraisers approved by the board of directors or by internal evaluations, where permitted by regulation. Personal guarantees are generally obtained from the principals of commercial real estate loans.

Loans secured by commercial real estate generally are larger than one- to four-family residential loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general, including today’s economic recession. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate.

In December 2009, we hired Verne Sisson, a commercial loan officer with over 20 years of agricultural and commercial lending experience in the Harvard community. With this hire, we intend to increase our origination of agricultural operating lines of credit, intermediate-term loans, and real estate loans for the purchase of farmland in our market area.

We generally expect our agricultural mortgage loans will have various terms up to 10 years with a balloon payment based on a 15-25 year amortization schedule. Such loans will be originated with fixed rates and generally will include personal guarantees. In addition, we may sell into the secondary market longer-term fixed rate agricultural mortgage loans, which we service for the secondary market purchaser. Our loan-to-value ratio on agricultural mortgage loans is generally expected to be no higher than 75%.

While we may earn higher yields on agricultural mortgage loans than on single-family residential mortgage loans, agricultural-related lending involves a greater degree of risk than single-family residential mortgage loans because of the typically larger loan amounts and potential volatility in the market. In addition, repayments on agricultural loans are substantially dependent on the successful operation of the underlying business and the value of the property collateralizing the loan, both of which are affected by many factors, such as weather and changing market prices, outside the control of the borrower.

Multi-Family Real Estate Lending. We make a limited number of loans on multi-family residences in our market area. Such loans have terms and are underwritten similarly to our commercial real estate loans and are subject to similar risks.

Home Equity Lending. We originate variable-rate home equity lines-of-credit and, to a lesser extent, fixed- and variable-rate loans secured by a lien on the borrower’s primary residence. Our home equity products are limited to 75% of the property value less any other mortgages. Prior to 2009, we originated home equity loans up to 90% of the property value to our customers where we serviced their first lien mortgage loan. As of September 30, 2009, we had no home equity loans that were originated at loan to value ratios above 90%. We use the same underwriting standards for home equity lines-of-credit and loans as we use for one- to four-family residential mortgage loans. Our home equity line-of-credit product carries an interest rate tied to the prime rate published in the Wall Street Journal. The product has a rate ceiling of 18%. Our home equity line-of-credit loans originated in 2009 have a rate floor of 4 -

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4.25%. We currently offer home equity loans with fixed-rate terms that amortize over a period of up to 15 years. Our home equity lines-of-credit provide for an initial draw period of up to ten years, with monthly payments of interest calculated on the outstanding balance. At the end of the initial ten years, the line may be paid in full or restructured at our then current home equity program.

At September 30, 2009, we had $11.7 million or 10.42% of total loans in home equity loans and outstanding advances under home equity lines and an additional $8.7 million of funds committed, but not advanced, under the home equity lines-of-credit. We intend to continue promoting the equity line-of-credit product as an important piece of our loan portfolio and to help us manage our asset/liability position.

Construction and Land Lending. We make construction loans to builders and developers for the construction of one- to four- and multi-family residential units and to individuals for the construction of their primary or secondary residence. We also make a limited amount of land loans to developers, primarily for the purpose of developing residential subdivisions.

At September 30, 2009, we had one outstanding one- to four-family construction loan commitment for $15,000.

The application process includes a submission to us of plans, specifications and costs of the project to be constructed or developed. These items are used as a basis to determine the appraised value of the subject property. Loans are based on the lesser of current appraised value and/or the cost of construction (land plus building). Our construction loan agreements generally provide that loan proceeds are disbursed in increments as construction progresses. Outside independent licensed appraisers or title company representatives under a construction loan escrow agreement inspect the progress of the construction of the dwelling before disbursements are made.

We occasionally make loans to builders and developers “on speculation” to finance the construction of residential property. At September 30, 2009, we had one construction loan secured by a one- to four-family residential property built on speculation. This loan had a balance of $346,000 and was secured by a property located in Cook County, Illinois.

We also make construction loans for commercial development projects such as multi-family, apartment and other commercial buildings. These loans generally have an interest-only phase during construction then convert to permanent financing. Disbursements of construction loan funds are at our discretion based on the progress of construction. The maximum loan-to-value ratio limit applicable to these loans is generally 75%. At September 30, 2009, we had three construction loans with an outstanding aggregate balance of $3.0 million representing 2.7% of the total loan portfolio and $762,000 of undrawn commitments which were secured by commercial property. Our largest construction loan commitment totaled $1.4 million and was made to a builder/developer for a mixed use business development property located outside our market area in Cook County, Illinois. At September 30, 2009, we also had one land loan totaling $450,000 representing 0.40% of our total loan portfolio. This loan was to a developer on a commercial property in our market area.

We also make loans to builders and developers for the development of one- to four-family lots in our market area. These loans have terms of five years or less. Land loans are generally made in amounts up to a maximum loan-to-value ratio of 65% on raw land and up to 75% on developed building lots based upon an independent appraisal. We obtain personal guarantees for our land loans. At September 30, 2009, we had one land development loan of $1.1 million to a builder/developer representing 0.97% of our total loan portfolio on residential development properties. This loan is located in our market area.

Loans to individuals for the construction of their residences typically run for up to seven months and then convert to permanent loans. These construction loans have rates and terms comparable to one- to four-family residential loans offered by us. During the construction phase, the borrower pays interest

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only at a fixed rate. The maximum loan-to-value ratio of owner-occupied single-family construction loans is 80%. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential loans.

The following table sets forth the composition of our portfolio of construction, land and land development loans by loan type at the date indicated.

	At September 30, 2009
	Number of Loans	Loans in Process		Net Principal Balance		Non-Performing
	(Dollars in thousands)
One-to-four- family construction	2	$	—	$	361	$	—
Non-residential construction(1)	3		376		3,015		—
Residential land and land development	2		—		1,161		—
Non-residential land and land development	2		—		659		—
Total construction and land development loans	9	$	376	$	5,196	$	—

(1) At September 30, 2009, unfunded commitments totaled $386,000 on nonresidential construction loans.

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Construction and land lending generally affords us an opportunity to receive higher origination and other loan fees. In addition, such loans are generally made for relatively short terms. Nevertheless, construction and land lending to persons other than owner-occupants is generally considered to involve a higher level of credit risk than one- to four-family residential lending due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions (including the current recessionary economy and adverse real estate market) on construction projects, real estate developers and managers. In addition, the nature of these loans is such that they are more difficult to evaluate and monitor. Our risk of loss on a construction or land loan is dependent largely upon the accuracy of the initial estimate of the property’s value upon completion of the project and the estimated cost (including interest) of the project. If the estimate of value proves to be inaccurate, we may be confronted, at or prior to the maturity of the loan, with a project with a value which is insufficient to assure full repayment and/or the possibility of having to make substantial investments to complete and sell the project. Because defaults in repayment may not occur during the construction period, it may be difficult to identify problem loans at an early stage. When loan payments become due, the cash flow from the property may not be adequate to service the debt. In such cases, we may be required to modify the terms of the loan.

Our construction loan originations have decreased significantly in the last 18 months in light of adverse conditions in the local real estate market and of its impact on development activity.

Commercial and Industrial Lending. We originate commercial and industrial loans and lines of credit to small- and medium-sized companies in our primary market area. Our commercial and industrial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Our commercial and industrial loans generally carry a floating-rate indexed to the prime rate as published in The Wall Street Journal and a one-year term. We hope to increase our originations of commercial and industrial loans because of the interest rate sensitivity of such loans in comparison to one- to four-family loans. All of our commercial and industrial loans are secured.

As noted above, in December 2009, we hired a commercial loan officer with over 20 years of agricultural lending experience to increase our origination of agricultural operating lines of credit and intermediate-term loans. We expect our agricultural operating lines of credit generally will have terms of one year and will be secured by growing crops, livestock and equipment. We generally expect our intermediate-term loans will have terms of 2-7 years and will be secured by machinery and equipment.

The following table sets forth the composition of our commercial and industrial loan portfolio by loan type at September 30, 2009. The balance set forth below do not include $1.2 million committed but undrawn lines of credit on commercial and industrial loans.

Type of Loan	Number of Loans	Total Balance
		(In thousands)
Industrial secured, term loan	4	$	1,002
Industrial secured, line of credit	4		296
Retail secured, term loan	21		2,035
Retail secured, line of credit	6		1,357
Healthcare secured, term loan	6		844
Mixed use secured, term loan	5		88
Mixed use secured, line of credit	5		236
Total	51	$	5,858

When making commercial and industrial loans, we consider the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the

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principals of the borrower. Commercial and industrial loans are generally secured by accounts receivable, inventory, equipment and personal guarantees.

Commercial and industrial loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. We seek to minimize these risks through our underwriting standards and personal guarantees.

At September 30, 2009, our largest commercial and industrial loan relationship was a $1.0 million commercial line of credit to an automobile dealer in our market area. At September 30, 2009, this loan was performing in accordance with its terms.

Consumer Lending. We make secured and unsecured loans to consumers. However, during recent years, we have focused most of our consumer lending efforts on purchases of indirect automobile loans.

In an effort to expand and diversify our loan portfolio and increase the overall yield on our loan portfolio, since 1999 we have purchased indirect loans on new and used automobiles located primarily in Cook County, Illinois. Although we do not separately underwrite each purchased loan, we thoroughly reviewe the knowledge and experience of the originators’ management teams, their underwriting standards, and their historical loss rates. In 2008, we dramatically reduced new indirect automobile loan purchases based on the risk concentration in our portfolio, liquidity requirements, and current economic conditions. We may resume purchases in the future depending on our portfolio concentrations, other lending opportunities and the economic environment.

Under the loan purchase arrangement, on a monthly basis the seller aggregates indirect automobile loans into separate loan pools. The pools are then segregated into risk categories with each category having predefined limits as to the maximum amounts allowed. Generally, the pools are sold without recourse. We receive a listing of the individual loans in the pool, including loan and borrower information prior to funding the purchase but we are not generally permitted to substitute loans in a pool or purchase part of a pool.

The seller is responsible for dealer relationships and the monitoring of their performance. The seller performs all servicing functions including the collection of principal, interest, and fees as well as repossessions and recoveries. Thus, we are not involved in the sale of repossessed vehicles.

We perform ongoing semi-annual reviews of loan files and review operational procedures as part of our internal audit function. For the nine months ended September 30, 2009 and the fiscal year ended December 31, 2008, we purchased $0 and $5.5 million of such loans, respectively. At September 30, 2009, we had approximately $12.6 million of purchased indirect automobile loans outstanding, representing 11.27% of our gross loan portfolio. Included in the balance at September 30, 2009 was $3.5 million of automobile loans with no credit score or a credit score below 660 (which loans are considered by the FDIC to have certain features of subprime lending).

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Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances as well as the current slowing economy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. For the year ended December 31, 2008 and the nine months ended September 30, 2009, we had net charge-offs of $233,000 and $173,000, respectively, on consumer loans. At September 30, 2009 and December 31, 2008, we had nonperforming consumer loans of $74,000 and $47,000, respectively. At September 30, 2009, we had $36,000 of repossessed automobiles. In addition, on the same date, there were 29 purchased indirect automobile loans totaling $284,000 and other consumer loans totaling $43,000 that were delinquent 30 days or more.

Originations, Purchases and Sales of Loans

We originate real estate and other loans through marketing efforts, our customer base, walk-in customers and referrals from real estate brokers, builders and attorneys. All loans originated by us are underwritten pursuant to our policies and procedures.

We may sell certain of the loans we originate into the secondary market. We consider our own balance sheet as well as market conditions in making decisions as to whether to hold the mortgage loans we originate for investment or to sell such loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint. We generally do not make loan sale commitments until we receive a corresponding borrower commitment. To date, all of our loan sales have been on a servicing-retained basis. At September 30, 2009, we serviced $61.2 million of loans held by other institutions.

From time to time, to diversify our risk, we purchase interests in commercial loans. We underwrite our participation portion of the loan according to our own underwriting criteria and procedures. At September 30, 2009, we had $10.0 million in loan participation interests.

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The following table sets forth our loan origination, purchase, sale and principal repayment activity during the periods indicated.

	Nine Months Ended September 30,						Years Ended December 31,
	2009			2008			2008			2007
	(In thousands)
Total loans at beginning of period	$	121,917		$	120,170		$	120,170		$	111,608
Loans originated:
Real estate loans:
One- to four-family		27,518			19,713			23,879			14,163
Home equity line of credit and other 2nd mortgage		3,042			3,499			5,466			6,722
Multi-family		—			—			—			—
Commercial real estate		1,908			2,668			3,040			4,284
Construction and land development		86			783			2,258			3,769
Total real estate loans		32,554			26,663			34,643			28,938
Commercial and industrial loans		3,051			4,193			2,445			1,853
Consumer loans:
Indirect automobile		—			—			—			—
Other		60			400			460			779
Total loans originated		35,665			31,256			37,548			31,570
Loans purchased:
Real estate loans:
One- to four-family		—			—			—			—
Home equity line of credit and other 2nd mortgage		—			—			—			—
Multi-family		—			—			—			—
Commercial real estate		1,000			894			894			4,074
Construction and land development		—			—			—			—
Total real estate loans		1,000			894			894			4,074
Commercial and industrial loans		481			—			—			—
Consumer loans:
Indirect automobile		—			5,504			5,504			11,312
Other		—			—			—			—
Total loans purchased		1,481			6,398			6,398			15,386
Loans sold:
Real estate loans:
One- to four-family		24,224			6,354			7,838			4,992
Home equity line of credit and other 2nd mortgage		—			—			—			—
Multi-family		—			—			—			—
Commercial real estate		300			537			537			602
Construction and land development		—			—			—			—
Total real estate loans		24,524			6,891			8,375			5,594
Commercial and industrial loans		—			—			—			—
Consumer loans		—			—			—			—
Total loans sold		24,524			6,891			8,375			5,594
Deduct:
Principal repayments:
Real estate loans		13,173			14,450			20,071			20,682
Commercial and industrial		2,782			3,638			1,922			848
Other		5,663			8,261			10,654			11,133
Total principal repayments		21,618			26,349			32,647			32,663
Charge-offs		798			226			327			137
Transfers to foreclosed assets		134			747			850			—
Unpaid principal balances at end of year		111,989			123,611			121,917			120,170
Allowance for loan losses		(1,275	)		(714	)		(1,000	)		(675	)
Deferred loan origination costs (fees)		(30	)		(44	)		(45	)		(80	)
Loans in process, net		(458	)		(378	)		(123	)		(1,593	)
Net loans at end of period	$	110,226		$	122,475		$	120,749		$	117,822

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Delinquencies and Non-Performing Assets

Delinquency Procedures. When a borrower fails to make a required monthly loan payment by the last day of the month, a late notice is generated stating the payment and late charges due. Our policies provide that borrowers that become 60 days or more delinquent are contacted by phone or mail to determine the reason for nonpayment and to discuss future payments. If repayment is not possible or doubtful, the loan will be brought to the board of directors for possible foreclosure. Once the board of directors declares a loan due and payable, a certified letter is sent to the borrower explaining that the entire balance of the loan is due and payable. If the loan is reinstated, foreclosure proceedings will be discontinued and the borrower will be permitted to continue to make payments. If the borrower does not respond, we will initiate foreclosure proceedings.

When we acquire real estate as a result of foreclosure or by deed in lieu of foreclosure, the real estate is classified foreclosed real estate until it is sold. The real estate is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for loan losses. Estimated fair value is based on a new appraisal which is obtained as soon as practicable, typically after the foreclosure process has begun but no later than 30 days after acquisition. Subsequent decreases in the value of the property are charged to operations through the creation of a valuation allowance. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

While delinquencies and repossession of purchased indirect automobile loans are handled by the loan seller, we selectively audit this process to ensure that our interests are protected.

Troubled Debt Restructurings. We periodically modify loans to extend the term or make other concessions to help a borrower stay current on his or her loan and to avoid foreclosure. We generally do not forgive principal or interest on loans. We will temporarily modify the terms of loans, typically for one year or less, to lower interest rates (which may be at below market rates), and/or to provide for longer amortization schedules (up to 40 years), and/or provide for interest-only terms. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and that is in our best interests. At September 30, 2009, we had one loan for $794,000 that was classified as a troubled debt restructuring, which was secured by commercial real estate.

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Delinquent Loans. The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated.

	At September 30, 2009						At December 31,
							2008						2007
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
	(In thousands)
Real estate loans:
One- to four-family	$	921	$	1,182	$	1,740	$	1,231	$	944	$	863	$	1,147	$	375	$	584
Home equity line of credit and other 2nd mortgage		105		190		173		77		212		53		29		106		49
Multi-family		—		—		—		—		—		—		—		—		—
Commercial		1,618		—		245		—		—		—		—		—		495
Construction and land development		—		—		—		1,500		—		—		—		—		113
Total real estate loans		2,644		1,372		2,158		2,808		1,156		916		1,176		481		1,241
Commercial and industrial		61		—		5		—		—		—		—		—		—
Consumer loans:
Purchased indirect automobile		205		31		48		125		87		39		259		15		—
Other		8		9		26		23		15		8		24		1		7
Total consumer loans		213		40		74		148		102		47		283		16		7
Total	$	2,918	$	1,412	$	2,237	$	2,956	$	1,258	$	963	$	1,459	$	497	$	1,248

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Classified Assets. Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the Federal Deposit Insurance Corporation to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.

In connection with the filing of our periodic reports and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. Loans are listed on the “watch list” initially because of delinquency status, typically when a loan becomes 60 days past due and collection proceedings begin, or if a loan possesses weaknesses although currently performing. The watch list describes the action plan and nature and type of underlying collateral for each problem loan, as well as the date and amount of the most recent appraisal for real estate loans. Management reviews the status of each loan on our watch list on a monthly basis and then with the board of directors. If a loan deteriorates in asset quality, the classification is changed to “special mention,” “substandard,” “doubtful” or “loss” depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified substandard.

On the basis of this review of our assets, our classified and special mention assets at the dates indicated were as follows:

	At September 30, 2009		At December 31,
			2008		2007
	(Dollars in thousands)
Special mention assets	$	—	$	—	$	76
Substandard assets		3,974		3,824		1,789
Doubtful assets		—		—		—
Loss assets		—		—		—
Total classified assets	$	3,974	$	3,824	$	1,865

Non-Performing Assets. We generally cease accruing interest on our loans when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Interest

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received on nonaccrual loans generally is applied against principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. Restructured loans are restored to accrual status when the obligation is brought current, has performed in accordance with the revised contractual terms for a reasonable period of time (typically six months) and the ultimate collectibility of the total contractual principal and interest is reasonably assured.

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The following table sets forth information regarding our nonperforming assets and troubled debt restructurings at the dates indicated. Troubled debt restructurings include loans for which either a portion of interest or principal has been forgiven, or for loans modified at interest rates materially less than current market rates.

	At September 30,			At December 31,
	2009			2008			2007
	(Dollars in thousands)
Non-Accrual:
Real estate loans:
One- to four-family	$	2,153		$	1,663		$	584
Home equity lines of credit and other 2nd mortgage		173			53			49
Multi-family		—			—			—
Commercial		245			794			495
Construction and land development		—			196			113
Total real estate loans		2,571			2,706			1,241
Commercial and industrial		5			—			—
Consumer loans:
Purchased indirect automobile		14			16			—
Other		26			8			7
Total consumer loans		40			24			—
Total nonaccrual loans	$	2,616		$	2,730		$	1,248
Accruing loans past due 90 days or more:
Real estate loans:
One- to four-family	$	—		$	—		$	—
Home equity line of credit and other 2nd mortgage		—			—			—
Multi-family		—			—			—
Commercial		—			—			—
Construction and land development		—			—			—
Total real estate loans		—			—			—
Commercial and industrial		—			—			—
Consumer loans:
Purchased indirect automobile		34			23			—
Other		—			—			—
Total consumer loans		34			23			—
Total accruing loans past due 90 days or more	$	34		$	23		$	—
Total of non-accrual and 90 days or more past due loans	$	2,650		$	2,753		$	1,248
Other real estate owned:
One- to four-family	$	180		$	182		$	—
Commercial		—			400			—
Construction and land development		—			90			—
Total other real estate owned	$	180		$	672		$	—
Repossessed automobiles		36			46			40
Total non-performing assets	$	2,866		$	3,471		$	1,288
Troubled debt restructurings (not included in non-accrual loans above)(1)		794			—			—
Total non-performing assets and troubled debt restructurings	$	3,660		$	3,471		$	1,288
Total non-performing loans to total loans		2.37	%		2.26	%		1.04	%
Total non-performing assets to total assets		1.82	%		2.19	%		0.81	%
Total non-performing loans and troubled debt restructurings to total loans		3.08	%		2.26	%		1.04	%
Total non-performing assets and troubled debt restructurings to total assets		2.33	%		2.19	%		0.81	%

(1) Troubled debt restructurings included in nonaccrual loans totaled $0, $990 and $0 at September 30, 2009 and December 31, 2008 and 2007, respectively.

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Non-accrual one- to four-family real estate loans totaled $2.2 million at September 30, 2009 and consisted of seven non-owner-occupied properties that totaled $472,000 and ten owner-occupied single-family homes that totaled $1.7 million. Four of the seven non-owner-occupied properties have common ownership. All of the non-owner-occupied properties are located in Northern Illinois. New appraisals were obtained for six of the properties in 2009, all of which are in the process of foreclosure, that resulted in partial charge-offs of $165,000 in September 2009. We have established no allowance on the other nonperforming non-owner-occupied one- to four-family real estate loans.

All of the owner-occupied one- to four-family real estate loans are located in our market area. Eight of those ten properties totaling $1.3 million are in the process of collection, for which we have established allowances of $94,000 at September 30, 2009, based on their original appraisals adjusted for certain factors, including evidence of housing price depreciation in our local market. The other two owner-occupied one- to four-family loans totaling $310,000 are in the process of foreclosure. One of those loans has a balance of $168,000, net of a partial charge-off of $77,000 at September 30, 2009 based upon a new appraisal obtained in October 2009, and we have established an allowance of $20,000 on the other loan with a balance of $142,000, based on the original appraisal adjusted for certain factors, including evidence of housing price depreciation in our local market.

We had one nonperforming commercial real estate loan at September 30, 2009 with a balance of $245,000, on property located in McHenry County. The loan was paid off in full in November 2009.

Other nonperforming loans totaled $204,000 at September 30, 2009. We have established allowances of $14,000 on those loans.

Other real estate owned totaled $180,000 at September 30, 2009, which consisted of one single-family home in McHenry County that was foreclosed in 2008. No loss was recognized, based upon a new appraisal obtained in 2008, at the date of acquisition. The property sold in October 2009 for a net loss of $1,000. In addition, we had $36,000 of repossessed automobiles at September 30, 2009.

At September 30, 2009, we had one commercial real estate loan, which totaled $794,000, on a retail strip mall located in McHenry County, in which only 25% of the building is currently leased. Although the loan is classified as a troubled debt restructuring, the loan has remained current over the original terms and terms of all modifications, and has been returned to accrual status. We consider the loan an impaired loan and have established an impairment allowance of $195,000, based on the original 2005 appraisal of $1.1 million, adjusted for certain factors, including an updated cash flows analysis and a recommendation from our federal regulators.

At September 30, 2009, we had $284,000 of purchased indirect automobile loans that were past due 30 days or more, including $48,000 that were non-performing loans. We have established allowances of $71,000 on those loans at September 30, 2009.

There were no other loans at September 30, 2009 that are not already disclosed where there is information about possible credit problems of borrowers that caused us serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.

Interest income that would have been recorded for the nine months ended September 30, 2009 and the year ended December 31, 2008, had nonaccruing loans been current according to their original terms amounted to $32,000 and $66,000, respectively. Interest of $123,000 and $219,000 was recognized on these loans and is included in net income for the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively.

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Allowance for Loan Losses

Analysis and Determination of the Allowance for Loan Losses. Our allowance for loan losses is the amount considered necessary to reflect probable incurred losses in our loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for identified problem loans; and (2) a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans, and other loans about which management may have concerns about collectability. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan as well as the shortfall in collateral value would result in our charging off the loan or the portion of the loan that was impaired.

Among other factors, we consider current general economic conditions, including current housing price depreciation, in determining the appropriateness of the allowance for loan losses for our residential real estate portfolio. We use evidence obtained from our own loan portfolio as well as published housing data on our local markets from third party sources we believe to be reliable as a basis for assumptions about the impact of housing depreciation. We have increased general and specific allowances for our residential real estate loans over the past several quarters, in part, because the values of residential real estate in our local markets securing our portfolio have declined significantly and may continue to decline.

Substantially all of our loans are secured by collateral. At September 30, 2009, 83.00% of our loan portfolio was secured by real estate including 60.51% which was secured by residential real estate. Loans 90 days past due and other classified loans are evaluated for impairment and general or specific allowances are established. Typically for a nonperforming real estate loan in the process of collection, the value of the underlying collateral is estimated using the original independent appraisal, adjusted for current economic conditions and other factors, and related general or specific reserves are adjusted on a quarterly basis. If a nonperforming real estate loan is in the process of foreclosure and/or there are serious doubts about further collectability of principal or interest, and there is uncertainty about the value of the underlying collateral, we will order a new independent appraisal. Any shortfall would result in immediately charging off the portion of the loan that was impaired.

Specific Allowances for Identified Problem Loans. We establish a specific allowance when loans are determined to be impaired. Loss is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Factors in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency. In addition, for loans secured by real estate, we consider the extent of any past due and unpaid property taxes applicable to the property serving as collateral on the mortgage.

General Valuation Allowance on Certain Identified Problem Loans. Groups of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions, and other relevant factors that affect repayment of the loans. Accordingly, we

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generally do not separately identify individual residential and consumer loans for impairment measurements. Instead, we provide for general valuation allowances on certain homogeneous pools of residential and consumer loans classified as substandard.

General Valuation Allowance on the Remainder of the Loan Portfolio. We establish a general allowance for loans that are not classified as substandard to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages based on our historical loss experience, delinquency trends and management’s evaluation of the collectibility of the loan portfolio. The allowance may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary market area, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current real estate environment.

As an integral part of their examination process, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation will periodically review our allowance for loan losses. Such agencies may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the periods indicated.

	Nine Months Ended September 30,				Year Ended December 31,
	2009		2008		2008		2007
	(Dollars in thousands)
Allowance at beginning of period	$	1,000	$	675	$	675	$	681
Provision for loan losses		1,048		248		634		(180	)
Charge offs:
Real estate loans
One- to four-family		242		31		31		—
Home equity line of credit and other 2nd mortgage		—		—		—		—
Multi-family		—		—		—		—
Commercial		—		45		45		—
Construction and land		162		—		—		—
Total charge-offs, real estate loans		404		76		76		—
Commercial and industrial		196		—		—		—
Consumer loans:
Purchased indirect automobile		198		148		249		126
Other		—		2		2		11
Total charge-offs, consumer loans		198		150		251		137
Total charge-offs	$	798	$	226	$	327	$	137
Recoveries:
Real estate loans
One- to four-family	$	—	$	—	$	—	$	—
Home equity line of credit and other 2nd mortgage		—		—		—		—
Multi-family		—		—		—		—
Commercial		—		—		—		263
Construction and land		—		—		—		—
Total recoveries, real estate loans		—		—		—		263
Commercial and industrial		—		—		—		—
Consumer loans:
Purchased indirect automobile		21		17		18		48

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Other		4			—			—			—
Total recoveries, consumer loans		25			17			18			48
Total recoveries	$	25		$	17		$	18		$	311
Net (charge-offs) recoveries	$	(773	)	$	(209	)	$	(309	)	$	174
Allowance at end of period	$	1,275		$	714		$	1,000		$	675
Allowance for loan losses to total non-performing loans and troubled debt restructurings		37.02	%		38.26	%		36.32	%		54.09	%
Allowance to nonperforming loans		48.11	%		66.60	%		36.32	%		54.09	%
Allowance to total loans outstanding at the end of the period		1.14	%		0.58	%		0.82	%		0.56	%
Net charge-offs (recoveries) to average (annualized) loans outstanding during the period		0.89	%		0.23	%		0.25	%		(0.15	)%

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Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the percent of allowance in each loan category to the total allowance, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

							At December 31,
	At September 30, 2009						2008						2007
	Amount		% of Allowance to Total Allowance		% of Loans in Category to Total Loans		Amount		% of Allowance to Total Allowance		% of Loans in Category to Total Loans		Amount		% of Allowance to Total Allowance		% of Loans in Category to Total Loans
	(Dollars in thousands)
Real estate loans:
One- to four-family	$	384	30.14	%	49.93	%	$	249	24.90	%	51.52	%	$	158	23.41	%	48.85	%
Home equity line of credit and other 2nd mortgage		74	5.80		10.42			18	1.80		9.12			38	5.63		8.14
Multi-family		2	0.14		0.16			9	0.90		0.91			5	0.74		1.12
Commercial		402	31.50		17.51			355	35.50		13.40			105	15.56		13.67
Construction and land development		78	6.11		4.98			62	6.20		5.01			21	3.11		4.01
Total real estate loans		940	73.70		83.00			693	69.30		79.96			327	48.44		75.79
Commercial and industrial		96	7.53		5.23			66	6.60		4.36			36	5.33		3.98
Consumer loans:
Purchased indirect automobile		227	17.81		11.27			231	23.10		14.93			289	42.81		17.05
Other		12	0.96		0.50			10	1.00		0.75			23	3.41		3.18
Total consumer		239	18.77		11.77			241	24.10		15.68			312	46.22		20.23
Unallocated		—	—		—			—	—		—			—	—		—
Total allowance for loan losses	$	1,275	100.00	%	100.00	%	$	1,000	100.00	%	100.00	%	$	675	100.00	%	100.00	%

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At September 30, 2009, our allowance for loan losses represented 1.14% of total loans and 48.11% of nonperforming loans. The allowance for loan losses increased to $1.3 million at September 30, 2009 from $1.0 million at December 31, 2008, due to a provision for loan losses of $1.0 million, offset by net charge-offs of $773,000.

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with accounting principles generally accepted in the United States of America, regulators, in reviewing our loan portfolio, may request us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and increases may be necessary should the quality of any loan deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Investment Activities

General. The goals of our investment policy are to provide and maintain liquidity to meet deposit withdrawal and loan funding needs, to help mitigate our interest rate risk, and to generate a favorable return on idle funds within the context of our interest rate and credit risk objectives.

Our board of directors is responsible for adopting our investment policy. The investment policy is reviewed annually by management and any changes to the policy are recommended to and subject to the approval of the board of directors. Authority to make investments under the approved investment policy guidelines is delegated to our Chief Executive Officer and Chief Financial Officer All investment transactions are reviewed at regularly scheduled monthly meetings of the board of directors.

Our current investment policy permits, with certain limitations, investments in securities issued by the United States Government and its agencies or government sponsored enterprises, mortgage-backed securities and, to a lesser extent, corporate debt securities, commercial paper, certificates of deposits in other financial institutions, investments in bank-owned life insurance, collateralized mortgage obligations, asset-backed securities, real estate mortgage investment conduits, securities sold under agreements to repurchase, and debt securities of state and political subdivisions.

With the exception of obligations of the U.S. Treasury and other U.S. government agencies and corporations, we held one security, a collateralized mortgage obligation issued by Washington Mutual in 2003 with a book value and fair value of $1.4 million and $1.5 million, respectively, at September 30, 2009, that exceeded 10% of our total equity. At September 30, 2009, this security was performing as anticipated.

U.S. Government and Federal Agency Obligations. At September 30, 2009, our U.S. Government and federal agency securities portfolio totaled $1.6 million. While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and for prepayment protection.

Mortgage-Backed Securities. At September 30, 2009, our mortgage-backed securities portfolio totaled $1.5 million. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed

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through” to investors, net of certain costs, including servicing and guarantee fees. Mortgage-backed securities typically are collateralized by pools of one- to four-family or multifamily mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as Harvard Savings Bank. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. Mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our borrowings.

Ginnie Mae, a United States Government agency, and government sponsored enterprises, such as Fannie Mae and Freddie Mac, either guarantee the payments or guarantee the timely payment of principal and interest to investors. In September 2008, the Federal Housing Finance Agency placed Freddie Mac and Fannie Mae into conservatorship. The U.S. Treasury Department has established financing agreements to ensure that Freddie Mac and Fannie Mae meet their obligations to holders of mortgage-backed securities that they have issued or guaranteed. These actions have not affected the markets for mortgage-backed securities issued by Freddie Mac or Fannie Mae.

Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

Collateralized Mortgage Obligations. Collateralized Mortgage Obligations are backed by mortgages but differ from pass through mortgage-backed securities because the principal and interest payments of the underlying mortgages are financially engineered to be paid to the security holders of pre-determined classes or tranches of these securities at a faster or slower pace. The receipt of these principal and interest payments, which depends on the proposed average life for each class, is contingent on a prepayment speed assumption assigned to the underlying mortgages. Variances between the assumed payment speed and actual payments can significantly alter the average lives of such securities. To quantify and mitigate this risk, we undertake a high level of payment analysis before purchasing these securities. The collateralized mortgage obligations in our portfolio have been packaged by U.S. financial institutions. We invest only in seasoned AAA rated senior CMO classes or tranches in which the payments on the underlying mortgages are passed along at a pace fast enough to provide an average life of one to ten years with no change in market interest rates. At September 30, 2009, our CMO portfolio, which are all classified held-to-maturity and still rated AAA, had a book value and fair value of $3.5 million and $3.7 million, respectively, with a dollar weighted average life of approximately 2.9 years.

State and Political Subdivision Debt Securities. At September 30, 2009, our state and political subdivision securities portfolio totaled $683,000. We have purchased bank-qualified general obligation and revenue bonds of certain state and political subdivisions which provide interest income that is exempt from federal income taxation. Our investment policy permits purchases of these securities so long as they are rated in the top three investment grades, with maximum term to maturity and duration of 15 and ten years, respectively.

Mutual Funds and Other Equity Securities. New purchases of mutual funds and other equity securities are not permitted currently by our investment policy; however, such purchases were permitted prior to 2009. At September 30, 2009, our mutual fund portfolio totaled $419,000, all of which was classified as available-for-sale and all of which was invested in two Shay Asset Management mutual funds, the AMF Ultra Short Mortgage Fund and AMF Ultra Short Fund. Both funds invest primarily in mortgage-related securities. For the year ended December 31, 2008 and the nine-month period ended

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September 30, 2009, we recognized a loss for other-than-temporary impairment on our mutual funds of $456,000 and $29,000, respectively, due to a decline in the fair value of these funds below our cost.

At September 30, 2009, we held common stock of Fannie Mae and Freddie Mac and community banks with a total fair value of $96,000, all of which were classified as available-for-sale. For the year ended December 31, 2008 and the nine months ended September 30, 2009, we recognized a loss for other-than-temporary impairment on the equity securities of $792,000 and $16,000, respectively, due to a decline in fair value below our cost.

Federal Home Loan Bank Stock. We hold common stock of the Federal Home Loan Bank of Chicago in connection with our borrowing activities totaling $6.5 million at September 30, 2009. The common stock of such entity is carried at cost and classified as restricted equity securities.

On October 10, 2007, the Federal Home Loan Bank of Chicago entered into a consensual cease and desist order with the Federal Housing Finance Board, now known as the Federal Housing Finance Agency. Under the terms of the order, capital stock repurchases and redemptions, including redemptions upon membership withdrawal or other termination, are prohibited unless the Federal Home Loan Bank of Chicago receives the prior approval of the Director of the Office of Supervision of the Federal Housing Finance Agency. The order also provides that dividend declarations are subject to the prior written approval of such Director and required the Federal Home Loan Bank of Chicago to submit a Capital Structure Plan to the Federal Housing Finance Agency. The Federal Home Loan Bank of Chicago has not declared any dividends since the order was issued and it has not received approval of a Capital Structure Plan. In July of 2008, the Federal Housing Finance Agency amended the order to permit the Federal Home Loan Bank of Chicago to repurchase or redeem newly-issued capital stock to support new advances, subject to certain conditions set forth in the order. Our Federal Home Loan Bank of Chicago common stock is not newly-issued and is not affected by this amendment.

Recent published reports indicate that certain member banks of the Federal Home Loan Bank System could have materially lower regulatory capital levels due to the application of certain accounting rules and asset quality issues. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank of Chicago, could be substantially diminished or reduced to zero. Our FHLBC common stock is accounted for in accordance with the AICPS Statement of Position (“SOP”) No. 01-6, Accounting by Certain Entities that Lend to or Finance the Activities of Others. SOP 01-6 provides that, for impairment testing purposes, the value of long term investments such as our Federal Home Loan Bank of Chicago common stock is based on the “ultimate recoverability” of the par value of the security without regard to temporary declines in value. Management performed an analysis as of September 30, 2009, and deemed its investment in Federal Home Loan Bank stock was not other than temporarily impaired. However, if future events give rise to substantial doubt about the ultimate recoverability of the par value of our Federal Home Loan Bank of Chicago common stock, this investment could be deemed to be other-than-temporarily impaired, and the impairment loss that we would be required to record would cause our earnings to decrease by the after-tax amount of the impairment loss.

Bank-Owned Life Insurance. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us non-interest income that is non-taxable. At September 30, 2009, our balance in bank-owned life insurance totaled $4.0 million and was issued by four separate insurance companies.

Securities Purchased Under Agreements to Repurchase. At September 30, 2009, we held securities under agreements to repurchase totaling $12.3 million. These agreements represent a short-

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term cash investment alternative. These agreements are over-collateralized by 102.5% with collateral consisting of securities guaranteed by the “full faith and credit” of the United States Government.

Securities Portfolio Composition. The following table sets forth the amortized cost and fair value of our securities portfolio at the dates indicated. Securities available for sale are carried at fair value, while securities held to maturity are carried at amortized cost.

	At September 30, 2009				At December 31,
					2008				2007
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities available for sale:
U.S. Government and federal agency	$	1,017	$	1,058	$	1,214	$	1,243	$	2,575	$	2,562
Mortgage-backed (1)		1,447		1,482		2,020		2,016		2,574		2,594
State and political subdivisions		582		583		1,240		1,238		4,585		4,646
Total debt securities		3,046		3,123		4,474		4,497		9,734		9,802
Shay Asset Management mutual funds		419		428		931		931		2,387		2,387
Other equity securities (2)		54		96		70		70		971		1,501
Total equity securities		473		524		1,001		1,001		3,358		3,888
Total available for sale	$	3,519	$	3,647	$	5,475	$	5,498	$	13,092	$	13,690
Securities held to maturity:
U.S. Government and federal agency	$	500	$	544	$	500	$	566	$	849	$	811
Mortgage-backed (1)		46		46		52		53		70		70
Collateralized mortgage obligations, privately issued		3,518		3,694		944		963		—		—
State and political subdivisions		100		103		100		102		101		100
Total securities held to maturity	$	4,164	$	4,387	$	1,596	$	1,684	$	1,020	$	981
Total	$	7,683	$	8,034	$	7,071	$	7,182	$	14,112	$	14,671

(1) All mortgage-backed securities held were issued by government sponsored enterprises.

(2) Other equity securities include Freddie Mac and Fannie Mae common stock, and shares in other financial institutions.

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Securities Portfolio Maturities and Yields. The following table sets forth the stated maturities and weighted average yields of our securities at September 30, 2009. Securities held to maturity are carried at amortized cost, and securities available for sale are carried at fair value. Mortgage-backed securities, including collateralized mortgage obligations, are anticipated to be repaid in advance of their contractual maturities as a result of projected mortgage loan repayments. Certain securities have interest rates that are adjustable and will reprice annually within the various maturity ranges. These repricing schedules have not been reflected in the table below.

	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Equity Securities				Total
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
	(Dollars in thousands)
Securities available-for-sale:
U.S. Government and federal agency	$	—	—	%	$	1,017	5.47	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,017	5.47	%
Mortgage-backed (1)		714	5.15			—	—			165	4.50			568	4.24			—	—			1,447	4.72
State and political subdivisions		32	5.00			143	5.00			228	5.00			179	4.00			—	—			582	4.69
Total debt securities		746	5.14			1,160	5.41			393	4.79			747	4.18			—	—			3,046	4.96
Shay Asset Management mutual funds		—	—			—	—			—	—			—	—			419	5.38			419	5.38
Other equity securities (2)		—	—			—	—			—	—			—	—			54	0.74			54	0.74
Total equity securities		—	—			—	—			—	—			—	—			473	4.85			473	4.85
Total securities available for sale	$	746	5.14	%	$	1,160	5.41	%	$	393	4.79	%	$	747	4.18	%	$	473	4.85	%	$	3,519	4.95	%
Securities held to maturity:
U.S. Government and federal agency	$	—	—	%	$	500	4.00		$	—	—		$	—	—		$	—	—		$	500	4.00
Mortgage-backed (1)		—	—			—	—			29	3.89			17	4.40			—	—			46	4.07
Collateralized mortgage obligations, privately issued		—	—			—	—			3,010	5.15			508	6.90			—	—			3,518	5.42
State and political subdivisions		—	—			100	3.40			—	—			—	—			—	—			100	3.40
Total securities held to maturity		—	—			600	3.90			3,039	5.14			525	6.88			—	—			4,164	5.18
Total	$	746	5.14	%	$	1,760	4.89	%	$	3,432	5.10	%	$	1,272	5.30	%	$	473	4.85	%	$	7,683	5.08	%

(1) All mortgage-backed securities held were issued by government sponsored enterprises.

(2) Other equity securities include Freddie Mac and Fannie Mae common stock, and shares in other financial institutions.

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Sources of Funds

General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also use borrowings, primarily Federal Home Loan Bank of Chicago advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds. In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including demand accounts, NOW accounts, money market accounts, savings accounts and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. We occasionally utilize brokered deposits to fund our operations based on our analysis of available rates and maturities, alternative sources of funds and investment opportunities. At September 30, 2009, the Bank had $2.8 million of brokered deposits which mature between 2010 and 2012. The Bank anticipates that it can renew or replace those deposits at competitive rates.

Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. Personalized customer service, long-standing relationships with customers, and the favorable image of Harvard Savings Bank in the community are relied upon to attract and retain deposits.

The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. Our ability to gather deposits is impacted by the competitive market in which we operate which includes numerous financial institutions of varying sizes offering a wide range of products. We often use promotional rates to meet asset/liability and market segment goals.

The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on our experience, we believe that statement savings, demand, NOW and money market accounts may be somewhat more stable sources of deposits than certificates of deposits. Also, we believe that our deposits allow us a greater opportunity to connect with our customers and offer them other financial services and products. As a result, we have used marketing and other initiatives to increase such accounts. However, it can be difficult to attract and maintain such deposits at favorable interest rates under current market conditions.

The following table sets forth the distribution of total deposits by account type, at the dates indicated.

	At September 30, 2009						At December 31,
							2008						2007
	Balance		Percent		Weighted Average Rate		Balance		Percent		Weighted Average Rate		Balance		Percent		Weighted Average Rate
	(Dollars in thousands)
Demand deposit accounts	$	2,872	2.34	%	0.00	%	$	3,908	3.33	%	0.00	%	$	3,650	3.21	%	0.00	%
NOW accounts		13,008	10.61		0.61			13,913	11.86		1.35			12,705	11.17		2.19
Savings accounts		13,569	11.07		0.42			12,889	10.99		0.58			11,345	9.97		1.09
Money market accounts		22,171	18.09		1.15			15,475	13.19		2.17			14,025	12.33		3.05

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Certificates of deposit		68,141	55.59		3.01			67,289	57.37		3.72			68,225	59.95		4.02
Broker certificates of deposit		2,820	2.30		4.50			3,828	3.26		4.25			3,828	3.37		4.25
Total Deposits	$	122,581	100.00	%	2.10	%	$	117,302	100.00	%	2.78	%	$	113,778	100.00	%	3.70	%

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As of September 30, 2009, the aggregate amount of all our certificates of deposit in amounts greater than or equal to $100,000 was approximately $22.3 million. The following table sets forth the maturity of these certificates as of September 30, 2009.

	Certificates of Deposit
	(In thousands)
Three months or less	$	2,686
Over three through six months		1,587
Over six through twelve months		4,169
Over twelve months		13,879
Total	$	22,321

The following table sets forth all our certificates of deposit classified by interest rate as of the dates indicated.

	At September 30, 2009		At December 31,
			2008		2007
	(In thousands)
Less than 2%	$	14,610	$	—	$	—
2.00% - 2.99%		20,699		10,589		394
3.00% - 3.99%		17,938		36,676		5,317
4.00% - 4.99%		14,556		19,465		45,453
5.00% - 5.99%		3,158		4,387		20,889
Total	$	70,961	$	71,117	$	72,053

The following table sets forth the amount and maturities of all our certificates of deposit by interest rate at September 30, 2009.

	At September 30, 2009
	Period to Maturity
	Less Than One Year		Over One Year to Two Years		Over Two Years to Three Years		Over Three Years to Four Years		Over Four Years to Five Years		Over Five Years		Total		Percentage of Total Certificate Accounts
	(Dollars in thousands)
Less than 2%	$	12,693	$	1,893	$	24	$	—	$	—	$	—	$	14,610	20.59	%
2.00% - 2.99%		9,274		7,218		3,868		339		—		—		20,699	29.17
3.00% - 3.99%		3,645		6,671		2,153		7		37		5,425		17,938	25.28
4.00% - 4.99%		4,127		7,451		1,804		1,599		90		205		14,556	20.51
5.00% - 5.99%		416		2,107		635		—		—		—		3,158	4.45
Total	$	30,155	$	25,340	$	7,764	$	1,945	$	127	$	5,630	$	70,961	100.00	%

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Borrowings. We may obtain advances from the Federal Home Loan Bank of Chicago upon the security of our capital stock in the Federal Home Loan Bank of Chicago and certain of our mortgage loans. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms to repricing than our deposits, they can change our interest rate risk profile.

From time to time during recent years, we have utilized short-term borrowings to fund loan demand. To a limited extent, we have also used borrowings where market conditions permit to purchase securities of a similar duration in order to increase our net interest income by the amount of the spread between the asset yield and the borrowing cost. From time to time, we have obtained advances with terms of more than one year to extend the term of our liabilities.

The following table sets forth certain information regarding our borrowed funds at and for the periods indicated. Average balances are predominantly derived from daily balances, and to a lesser extent, from month end balances. Management does not believe that the limited use of month end balances rather than daily balances has caused any material differences in the information presented.

	At or for the Nine Months Ended September 30,						At or for the Year Ended December 31,
	2009			2008			2008			2007
	(Dollars in thousands)
Federal Home Loan Bank advances:
Balance at end of period	$	19,778		$	26,514		$	26,064		$	27,225
Average balances outstanding during the period		22,683			25,931			26,126			25,806
Maximum balance outstanding at any month end		24,814			28,858			28,858			28,557
Weighted average interest rate during the period		4.22	%		4.40	%		4.28	%		4.76	%
Weighted average interest rate at the end of period		4.07	%		4.08	%		4.19	%		4.56	%

The following table sets forth certain information regarding our borrowed funds that mature in one year or less. Average balances are predominantly derived from daily balances, and to a lesser extent, from month end balances. Management does not believe that the limited use of month end balances rather than daily balances has caused any material differences in the information presented.

	At or for the Nine Months Ended September 30,						At or for the Year Ended December 31,
	2009			2008			2008			2007
	(Dollars in thousands)
Balance at end of period	$	6,541		$	9,754		$	12,315		$	9,915
Average balances outstanding during the period		9,163			9,584			10,130			10,882
Maximum balance outstanding at any month end		10,564			10,964			12,315			12,234
Weighted average interest rate during the period		3.89	%		3.88	%		3.78	%		4.94	%
Maximum balance outstanding at any month end		4.10	%		3.54	%		3.47	%		4.59	%

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Properties

As of September 30, 2009, the net book value of our office properties was $3.43 million. The following table sets forth information regarding our offices.

Location	Leased or Owned	Year Acquired or Leased	Square Footage	Net Book Value of Real Property
				(In thousands)
Main Office:
58 North Ayer Street Harvard, Illinois 60033	Owned	1959	6,800	$	1,305
Other Properties:
1400 North Division Street Harvard, Illinois 60033	Owned	1998	2,500	$	884
211 East Jefferson Street Morris, Illinois 60450	Owned	2008	16,948	$	1,239
Total				$	3,428

We believe that our current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion.

Subsidiary and Other Activities

Harvard Savings Bank has no subsidiaries.

Legal Proceedings

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At September 30, 2009, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

Expense and Tax Allocation

Harvard Savings Bank will enter into an agreement with Harvard Illinois Bancorp, Inc. to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. In addition, Harvard Savings Bank and Harvard Illinois Bancorp, Inc. will enter into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

Personnel

As of September 30, 2009, we had 29 full-time equivalent employees. Our employees are not represented by any collective bargaining group. Management believes that we have good relations with our employees.

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SUPERVISION AND REGULATION

General

Harvard Savings Bank is examined and supervised by the Division of Banking of the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation. This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation’s deposit insurance fund and depositors. These regulators are not, however, generally charged with protecting the interests of shareholders of Harvard Illinois Bancorp, Inc. Under this system of state and federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. Harvard Savings Bank also is a member of and owns stock in the Federal Home Loan Bank of Chicago, which is one of the twelve regional banks in the Federal Home Loan Bank System. Harvard Savings Bank’s relationship with its depositors and borrowers also is regulated to a great extent by both federal and state laws, especially in matters concerning the ownership of deposit accounts and the form and content of Harvard Savings Bank’s mortgage documents.

The Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation have extensive enforcement authority over Illinois-chartered savings banks, such as Harvard Savings Bank. This enforcement authority includes, among other things, the ability to issue cease-and-desist or removal orders, to assess civil money penalties and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe and unsound banking practices.

The Illinois Department of Financial and Professional Regulation has established a schedule for the assessment of “supervisory fees” for all Illinois savings banks to fund the operations of the Illinois Department of Financial and Professional Regulation. These supervisory fees are computed on the basis of each savings bank’s total assets (including consolidated subsidiaries) and are payable at the end of each calendar quarter. A schedule of fees has also been established for certain filings made by Illinois savings banks with the Illinois Department of Financial and Professional Regulation. The Illinois Department of Financial and Professional Regulation also assesses fees for examinations conducted by the Illinois Department of Financial and Professional Regulation’s staff, based upon the number of hours spent by the staff performing the examination. During the year ended December 31, 2008, Harvard Savings Bank paid approximately $25,000 in supervisory fees and no examination fees. The Federal Deposit Insurance Corporation does not assess fees for its examination and supervisory activities.

Certain regulatory requirements applicable to Harvard Savings Bank and Harvard Illinois Bancorp, Inc. are referred to below or appear elsewhere in this Prospectus. The regulatory discussion, however, does not purport to be an exhaustive treatment of applicable laws and regulations and is qualified in its entirety be reference to the actual statutes and regulations. Any change in these laws or regulations, whether by the Federal Deposit Insurance Corporation, the Illinois Department of Financial and Professional Regulation, the Office of Thrift Supervision or Congress, could have a material adverse impact on Harvard Illinois Bancorp, Inc. and Harvard Savings Bank, and their operations.

Savings Bank Regulation

As an Illinois savings bank, Harvard Savings Bank is subject to federal regulation and supervision by the Federal Deposit Insurance Corporation and to state regulation and supervision by the Illinois Department of Financial and Professional Regulation. Harvard Savings Bank’s deposit accounts

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are insured by Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Harvard Savings Bank is not a member of the Federal Reserve System.

Both federal and Illinois law extensively regulate various aspects of the banking business such as reserve requirements, truth-in-lending and truth-in-savings disclosures, equal credit opportunity, fair credit reporting, trading in securities and other aspects of banking operations. Current federal law also requires savings banks, among other things, to make deposited funds available within specified time periods.

Under Federal Deposit Insurance Corporation regulations, an insured state chartered bank, such as Harvard Savings Bank, is prohibited from engaging as principal in activities that are not permitted for national banks, unless: (i) the Federal Deposit Insurance Corporation determines that the activity would pose no significant risk to the appropriate deposit insurance fund and (ii) the bank is, and continues to be, in compliance with all applicable capital standards.

Branching and Interstate Banking. The establishment of branches by Harvard Savings Bank is subject to approval of the Illinois Department of Financial and Professional Regulation and Federal Deposit Insurance Corporation and geographic limits established by state laws. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”) facilitates the interstate expansion and consolidation of banking organizations by permitting, among other things, (i) bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home state regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks, subject to the right of individual states to “opt out” of this authority, and (iii) banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state.

Transactions with Related Parties. A savings bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated by the Board of Governors of the Federal Reserve System. An affiliate is generally a company that controls, is controlled by, or is under common control with an insured depository institution such as Harvard Savings Bank. Harvard Illinois Bancorp, Inc. is an affiliate of Harvard Savings Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements. In addition, applicable regulations prohibit a savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. Applicable regulators require savings banks to maintain detailed records of all transactions with affiliates.

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Harvard Savings Bank’s authority to extend credit to its directors, executive officers and 10% or greater stockholders, as well as to entities controlled by such persons, is governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the Board of Governors of the Federal Reserve System. Among other things, these provisions require that extensions of credit to insiders:

(i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features, and

(ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Harvard Savings Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved in advance by Harvard Savings Bank’s Board of Directors.

Capital Requirements. Under Federal Deposit Insurance Corporation regulations, state chartered banks, such as Harvard Savings Bank, are required to maintain a minimum leverage capital requirement consisting of a ratio of Tier 1 capital to total assets of 3% if the Federal Deposit Insurance Corporation determines that the institution is not anticipating or experiencing significant growth and has well-diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings, and in general, a strong banking organization, rated composite 1 under the Uniform Financial Institutions Rating System (the CAMELS rating system) established by the Federal Financial Institutions Examination Council. For all but the most highly rated institutions meeting the conditions set forth above, the minimum leverage capital ratio is 4%. Tier 1 capital is the sum of common shareholders’ equity, noncumulative perpetual preferred stock (including any related surplus) and minority interests in consolidated subsidiaries, minus all intangible assets (other than certain mortgage servicing assets, purchased credit card relationships, credit-enhancing interest-only strips and certain deferred tax assets), identified losses, investments in certain financial subsidiaries and non-financial equity investments.

In addition to the leverage capital ratio (the ratio of Tier I capital to total assets), state chartered banks must maintain a minimum ratio of qualifying total capital to risk-weighted assets of at least 8%, of which at least half must be Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus Tier 2 capital (also referred to as supplementary capital) items. Tier 2 capital items include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and preferred stock with a maturity of over 20 years, certain other capital instruments and up to 45% of pre-tax net unrealized holding gains on equity securities. The includable amount of Tier 2 capital cannot exceed the institution’s Tier 1 capital. Qualifying total capital is further reduced by the amount of the bank’s investments in banking and finance subsidiaries that are not consolidated for regulatory capital purposes, reciprocal cross-holdings of capital securities issued by other banks, most intangible assets and certain other deductions. Under the Federal Deposit Insurance Corporation risk-weighted system, all of a bank’s balance sheet assets and the credit equivalent amounts of certain off-balance sheet items are assigned to one of four broad risk-weight categories from 0% to 100%, based on the risks inherent in the type of assets or item. The aggregate dollar amount of each category is multiplied by the risk weight assigned to that category. The sum of these weighted values equals the bank’s risk-weighted assets.

U.S. Treasury’s Troubled Asset Relief Program Capital Purchase Program. On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was enacted that provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to

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U.S. markets. One of the provisions resulting from the legislation is the Troubled Asset Relief Program Capital Purchase Program, which provides direct equity investment in perpetual preferred stock by the U.S. Treasury Department in qualified financial institutions. The program is voluntary and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. The Capital Purchase Program provides for a minimum investment of one percent of total risk-weighted assets and a maximum investment equal to the lesser of three percent of total risk-weighted assets or $25 billion. Participation in the program is not automatic and is subject to approval by the U.S. Treasury Department. We opted not to participate in the Capital Purchase Program.

Dividend Limitations. Harvard Illinois Bancorp, Inc. is a legal entity separate and distinct from Harvard Savings Bank. The primary source of Harvard Illinois Bancorp, Inc.’s cash flow, including cash flow to pay dividends on Harvard Illinois Bancorp, Inc.’s common stock, is the payment of dividends to Harvard Illinois Bancorp, Inc. by Harvard Savings Bank. Under Illinois law, Harvard Savings Bank may pay dividends of so much of its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by Harvard Savings Bank’s board. However, Harvard Savings Bank must obtain the approval of the Illinois Department of Financial and Professional Regulation for the payment of a dividend if the total of all dividends declared by Harvard Savings Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income” means net income as calculated for call report purposes, less all dividends declared for the applicable period. Also, the Federal Deposit Insurance Corporation has the supervisory authority to prohibit Harvard Savings Bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound banking practice in light of the financial condition of Harvard Savings Bank. In addition, since Harvard Savings Bank will be a subsidiary of a savings and loan holding company, Harvard Savings Bank must file a notice with the Office of Thrift Supervision at least 30 days before the board declares a dividend or approves a capital distribution.

Insurance of Deposit Accounts. Harvard Savings Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Deposit accounts at Harvard Savings Bank are insured by the Federal Deposit Insurance Corporation, generally up to a maximum of $100,000 for each separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. However, the Federal Deposit Insurance Corporation increased the deposit insurance available on all deposit accounts to $250,000, effective until December 31, 2013. In addition, certain noninterest-bearing transaction accounts maintained with financial institutions participating in the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program are fully insured regardless of the dollar amount until December 31, 2009. Harvard Savings Bank has opted to participate in the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program. See “—Temporary Liquidity Guarantee Program.”

The Federal Deposit Insurance Corporation imposes an assessment against all depository institutions for deposit insurance. This assessment is based on the risk category of the institution and, prior to 2009, ranged from five to 43 basis points of the institution’s deposits. As a result of decreases in the reserve ratio of the Deposit Insurance Fund, the Federal Deposit Insurance Corporation issued a rule establishing a Restoration Plan for the Deposit Insurance Fund. The rule, which became effective January 1, 2009, increased assessment rates uniformly by seven basis points for the first quarter 2009 assessment period. The rule also changes the way in which the Federal Deposit Insurance Corporation’s risk-based assessment system differentiates for risk and sets new deposit insurance assessment rates, effective April 1, 2009. Under the rule, the Federal Deposit Insurance Corporation first establishes an institution’s initial base assessment rate. This initial base assessment rate would range, depending on the risk category of the institution, from 12 to 45 basis points. The Federal Deposit Insurance Corporation would then adjust the

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initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustment to the initial base assessment rate would be based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate would range from seven to 77.5 basis points of the institution’s deposits.

The Federal Deposit Insurance Corporation is implementing a one-time special assessment of 5 basis points on all insured deposits regardless of the risk or size of the depository institution. This special assessment is payable by September 30, 2009 based on deposits as of June 30, 2009, and resulted in additional non-interest expense of $74,000. In addition, the Federal Deposit Insurance Corporation may assess additional special assessments in the future.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. We do not currently know of any practice, condition or violation that might lead to termination of our deposit insurance.

In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended September 30, 2009, the annualized FICO assessment was equal to 1.02 basis points for each $100 in domestic deposits maintained at an institution.

Temporary Liquidity Guarantee Program. On October 14, 2008, the Federal Deposit Insurance Corporation announced a new program – the Temporary Liquidity Guarantee Program. This program has two components. One guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and June 30, 2009. The Federal Deposit Insurance Corporation will pay the unpaid principal and interest on a Federal Deposit Insurance Corporation-guaranteed debt instrument upon the uncured failure of the participating entity to make a timely payment of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until no later than December 31, 2012. In return for the Federal Deposit Insurance Corporation’s guarantee, participating institutions will pay the Federal Deposit Insurance Corporation a fee based on the amount and maturity of the debt. We opted to participate in this component of the Temporary Liquidity Guarantee Program.

The other component of the program provides full federal deposit insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2009. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. We opted to participate in this component of the Temporary Liquidity Guarantee Program.

Federal Home Loan Bank System. Harvard Savings Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Chicago, Harvard Savings Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of September 30, 2009, Harvard Savings Bank was in compliance with this requirement.

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Community Reinvestment Act. Under the Community Reinvestment Act (“CRA”), Harvard Savings Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the Federal Deposit Insurance Corporation in connection with its examination of Harvard Savings Bank, to assess its record of meeting the credit needs of its community and to take that record into account in its evaluation of certain applications by Harvard Savings Bank. For example, the regulations specify that a bank’s CRA performance will be considered in its expansion (e.g., branching) proposals and may be the basis for approving, denying or conditioning the approval of an application. As of the date of its most recent regulatory examination, Harvard Savings Bank was rated “satisfactory” with respect to its CRA compliance.

Prompt Corrective Regulatory Action. The Federal Deposit Insurance Corporation Improvement Act requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

The Federal Deposit Insurance Corporation may order savings banks which have insufficient capital to take corrective actions. For example, a savings bank which is categorized as “undercapitalized” would be subject to growth limitations and would be required to submit a capital restoration plan, and a holding company that controls such a savings bank would be required to guarantee that the savings bank complies with the restoration plan. A “significantly undercapitalized” savings bank would be subject to additional restrictions. Savings banks deemed by the Federal Deposit Insurance Corporation to be “critically undercapitalized” would be subject to the appointment of a receiver or conservator.

Harvard Savings Bank is “well capitalized” under the prompt corrective action rules.

Other Regulations

Interest and other charges collected or contracted for by Harvard Savings Bank are subject to state usury laws and federal laws concerning interest rates. Harvard Savings Bank’s operations are also subject to federal and state laws applicable to credit transactions, such as the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

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• Truth in Savings Act;

• Illinois High Risk Home Loan Act, which protects borrowers who enter into high risk home loans;

• Illinois Predatory Lending Database Program, which helps provide counseling for homebuyers in connection with certain loans; and

• rules and regulations of the various federal and state agencies charged with the responsibility of implementing such laws.

The operations of Harvard Savings Bank also are subject to the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

• Check Clearing for the 21^st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

• The USA PATRIOT Act, which requires savings banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

General. Upon completion of the conversion, Harvard Illinois Bancorp, Inc. will be a non-diversified unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act. As such, Harvard Illinois Bancorp, Inc. will be registered with the Office of Thrift Supervision and subject to Office of Thrift Supervision regulations, examinations, supervision and reporting requirements. In addition, the Office of Thrift Supervision will have enforcement authority over Harvard Illinois Bancorp, Inc. and its subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Unlike bank holding companies, federal savings and loan holding companies are not subject to any regulatory capital requirements or to supervision by the Federal Reserve Board.

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Permissible Activities. Under present law, the business activities of Harvard Illinois Bancorp, Inc. will be generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations.

Federal law prohibits a savings and loan holding company, including Harvard Illinois Bancorp, Inc., directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a nonsubsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

(i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and

(ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Federal Securities Laws

We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the shares of common stock to be issued pursuant to the stock offering. Upon completion of the stock offering, our common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. We will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

The registration under the Securities Act of 1933 of shares of common stock to be issued in the stock offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not our affiliates may be resold without registration. Shares purchased by our affiliates will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If we meet the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of ours that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares, or

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the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, we may permit affiliates to have their shares registered for sale under the Securities Act of 1933.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. We will be subject to further reporting and audit requirements beginning with the fiscal year ending June 30, 2011 under the requirements of the Sarbanes-Oxley Act. We will prepare policies, procedures and systems designed to ensure compliance with these regulations.

TAXATION

Federal Taxation

General. Harvard Illinois Bancorp, Inc. and Harvard Savings Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to Harvard Illinois Bancorp, Inc. and Harvard Savings Bank.

Method of Accounting. For federal income tax purposes, Harvard Savings Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31st for filing its consolidated federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995.

Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent alternative minimum taxable income is in excess of an exemption amount. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. At December 31, 2008, Harvard Savings Bank had no minimum tax credit carryforward.

Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding five taxable years, with certain limits in the fifth year, and forward to the succeeding 20 taxable years. At September 30, 2009, Harvard Savings Bank had net operating loss carryforwards for federal income tax purposes totaling $2.3 million which expire in varying amounts between 2024 and 2028.

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General Business Tax Credit Carryover. Harvard Savings Bank has a general business tax credit carryover of $100,000 related to $1 million of qualifying expenditures from the rehabilitation of its home office in 2008. The general business tax credit carryover may be used to offset regular tax liabilities in future years, and has no expiration date.

Corporate Dividends. We may exclude from our income 100% of dividends received from Harvard Savings Bank as a member of the same affiliated group of corporations.

Audit of Tax Returns. Harvard Savings Bank’s federal income tax returns have not been audited in the most recent five-year period.

State Taxation

Illinois State Taxation. Harvard Illinois Bancorp, Inc., and Harvard Savings Bank will be required to file Illinois income tax returns and pay tax at a stated tax rate of 7.30% of Illinois taxable income. For these purposes, Illinois taxable income generally means federal taxable income subject to certain modifications, primarily the exclusion of interest income on United States obligations. As of September 30, 2009, we have net operating losses of approximately $4.7 million which are being carried forward and available to reduce future taxable income. These carryforwards expire beginning 2015 through 2020. Management has not recorded a deferred tax asset for the State portion of its net operating loss carryforwards.

MANAGEMENT OF HARVARD ILLINOIS BANCORP, INC.

Shared Management Structure

The directors of Harvard Illinois Bancorp, Inc. will be those same persons who are the directors of Harvard Savings Bank. In addition, each executive officer of Harvard Illinois Bancorp, Inc. will also be an executive officer of Harvard Savings Bank. Although there are no present plans to do so, both Harvard Illinois Bancorp, Inc. and Harvard Savings Bank may choose to appoint additional or different persons as directors and executive officers in the future. We expect that Harvard Illinois Bancorp, Inc. and Harvard Savings Bank will continue to have common executive officers until there is a business reason to establish separate management structures. To date, directors and executive officers have been compensated for their services to Harvard Savings Bank. These individuals may receive additional compensation for their services to Harvard Illinois Bancorp, Inc.

Directors of Harvard Illinois Bancorp, Inc.

The board of directors of Harvard Illinois Bancorp, Inc. will initially consist of seven members. Directors will serve three-year staggered terms so that approximately one-third of the directors will be elected at each annual meeting of stockholders. The class of directors whose term of office expires at the first annual meeting of stockholders following completion of the reorganization and offering will consist of Directors Seeley, Schack and Feeney. The class of directors whose term expires at the second annual meeting of stockholders following completion of the reorganization and offering will consist of Directors Rebhorn and Claussen. The class of directors whose term of office expires at the third annual meeting of stockholders following the completion of the reorganization and offering will consist of Directors Seyller and Walker. We intend that a majority, but never less than two, of our directors will be considered independent. Under the NASDAQ corporate governance listing standards, Directors Feeney, Seeley, Schack, Rebhorn and Walker would be considered independent.

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Executive Officers of Harvard Illinois Bancorp, Inc.

The following individuals will be the executive officers of Harvard Illinois Bancorp, Inc. and will hold the offices set forth below opposite their names.

Name	Age(1)	Position
Duffield J. Seyller, III (2)	60	President and Chief Executive Officer
Donn L. Claussen	51	Executive Vice President and Chief Financial Officer
Richard J. Lipinsky	46	Secretary and Treasurer
Michael T. Neese (2)	62	Vice President and Loan Officer
Dennis Lee	51	Vice President and Commercial Loan Officer

(1) As of September 30, 2009.

(2) Mr. Seyller is the brother-in-law of Mr. Neese.

The executive officers of Harvard Illinois Bancorp, Inc. will be elected annually and will hold office until their respective successors have been elected or until death, resignation, retirement or removal by the board of directors.

Directors of Harvard Savings Bank

Composition of our Board. We currently have seven directors. Directors serve three-year staggered terms so that approximately one-third of the directors are elected at each annual meeting of stockholders. One class of directors of Harvard Savings Bank will be elected annually by Harvard Illinois Bancorp, Inc. as its sole stockholder.

The following table states our directors’ names, their ages as of September 30, 2009, and the calendar years when they began serving as directors:

Directors	Age	Position	Director Since	Term Expires
Michael P. Feeney	41	Director	2008	2010
William D. Schack	60	Director	1989	2010
Ronald M. Seeley	72	Chairman of The Board	1977	2010
Donn L. Claussen	51	Chief Financial Officer and Director	2008	2011
John W. Rebhorn	66	Director	1996	2011
Duffield J. Seyller, III	60	President, Chief Executive Officer and Director	1988	2012
Richard L. Walker	66	Director	2008	2012

The Business Background of Our Directors and Executive Officers. The business experience for the past five years of each of our directors and executive officers is set forth below. Unless otherwise indicated, directors and executive officers have held their positions for the past five years.

Directors

Donn L. Claussen. Mr. Claussen is the Executive Vice President and Chief Financial Officer of Harvard Savings Bank and oversees the accounting and investment areas. He has been with Harvard Savings Bank since 2007. Previously, Mr. Claussen was a partner with the accounting firm of Lindgren, Callihan, Van Osdol & Co., Ltd., Rockford, Illinois, specializing in financial institution matters.

Michael P. Feeney. Mr. Feeney is the owner and manager of Feeney Package Liquor in Morris, Illinois. Previously, he was the operations manager of a Wal-Mart distribution center in Spring Valley,

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Illinois. Prior to joining the Harvard Savings Bank board of directors in April, 2008, Mr. Feeney was a director of Morris Building & Loan, S.B.

John W. Rebhorn. Mr. Rebhorn was the owner of Harvard Implement for 22 years and is currently the owner of Harvard All-Store, a storage facility. Mr. Rebhorn has been a director for 15 years.

William D. Schack. Mr. Schack is currently the owner of the Harvard Retirement Home and Harvard Ranch. Mr. Schack has worked in the retirement field for 25 years.

Ronald M. Seeley. Mr. Seeley is currently the Chairman of the Board of Harvard Savings Bank. Mr. Seeley is a retired Pharmacist and was the owner of Seeley Snyder Drugstore from 1966 to 2008.

Duffield J. Seyller, III. Mr. Seyller is currently the President and Chief Executive Officer of Harvard Savings Bank. He has been employed in the banking industry since 1976 in various positions. He has been employed with Harvard Savings Bank since 1985.

Richard L. Walker. Mr. Walker is presently retired. He was previously the owner and manager of a John Deere dealership for over 30 years. Mr. Walker was also on the board of directors of Morris Building & Loan, S.B. and joined the Harvard Savings Bank board of directors in April 2008.

Executive Officers Who Are Not Directors

Richard J. Lipinsky. Mr. Lipinsky is the Secretary and Treasurer of Harvard Savings Bank. He oversees the operations and information technology areas of Harvard Savings Bank. Mr. Lipinsky has been with Harvard Savings Bank since 1986.

Michael T. Neese. Mr. Neese is Vice President of Harvard Savings Bank. Mr. Neese is an attorney and oversees Harvard Savings Bank’s lending area. Mr. Neese has been with Harvard Savings Bank since 1993. Mr. Neese is the brother-in-law of Mr. Seyller.

Dennis Lee. Dennis Lee is Vice President and Commercial Loan Officer of Harvard Savings Bank and has been with Harvard Savings Bank since 2007. Mr. Lee has been in the financial services industry for 23 years with 19 years in a management capacity.

Meetings of the Board of Directors and Committees

Our board of directors meets on a monthly basis and may hold additional special meetings. During the year ended December 31, 2008, the board of directors of Harvard Savings Bank held 12 regular meetings and no special meetings.

Committees of Harvard Illinois Bancorp, Inc.

The Board of Directors of Harvard Illinois Bancorp, Inc. will have standing Audit, Nominating and Compensation Committees.

The Audit Committee will be responsible for supervising Harvard Illinois Bancorp, Inc.’s accounting, financial reporting and financial control processes. Generally, the Audit Committee will oversee management’s efforts with respect to the quality and integrity of our financial information and reporting functions and the adequacy and effectiveness of our system of internal accounting and financial controls. The Audit Committee will also review the independent audit process and the qualifications of the independent registered public accounting firm. We intend that each member of the Audit Committee

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will be deemed “independent” as defined in the Nasdaq corporate governance listing standards. The Audit Committee will be comprised of Directors Michael P. Feeney, William D. Schack and Richard L. Walker, each of whom would be considered independent. Beginning in 2009, the Audit Committee will have sole responsibility for engaging our registered public accounting firm. Based on its review of the criteria of an “audit committee financial expert” under the rules adopted by the Securities and Exchange Commission, the board of directors does not believe that any member of the Audit Committee qualifies as an audit committee financial expert. While the board of directors will consider adding a person who qualifies as an audit committee financial expert should future vacancies arise on the board of directors, it has chosen not to expand the board of directors for the sole purpose of adding an audit committee financial expert because of the significant financial expertise of our current board members. Specifically, we believe that Directors Michael P. Feeney, William D. Schack and Richard L. Walker have an understanding of, and the ability to analyze and evaluate, Harvard Savings Bank’s financial statements, as well as an understanding of an audit committee’s functions. Additionally, each of Messrs. Feeney, Schack and Walker have overseen and assessed the finances of their personal businesses.

The Nominating Committee will meet annually in order to nominate candidates for membership on the board of directors. The Nominating Committee will be comprised of Directors Walker, Rebhorn and Seeley. This committee is expected to be comprised of the board members who are not standing for election.

The Compensation Committee will establish Harvard Illinois Bancorp, Inc.’s compensation policies and will review compensation matters. The Compensation Committee will be comprised of Directors Ronald M. Seeley, William D. Schack and Michael P. Feeney. It is expected that the Compensation Committee will consist only of non-employee directors.

Corporate Governance Policies and Procedures

In addition to establishing committees of the board of directors, Harvard Illinois Bancorp, Inc. will adopt several policies to govern the activities of both Harvard Illinois Bancorp, Inc. and Harvard Savings Bank, including corporate governance policies and a code of business conduct and ethics. The corporate governance policies are expected to involve such matters as the following:

• the composition, responsibilities and operation of the board of directors;

• the establishment and operation of board committees, including audit, nominating and compensation committees;

• convening executive sessions of independent directors; and

• the board of directors’ interaction with management and third parties.

The code of business conduct and ethics, which is expected to apply to all employees and directors, will address conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. In addition, the code of business conduct and ethics will be designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations.

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Director Compensation

The following table sets forth the compensation paid to our directors other than Messrs. Seyller and Claussen during the year ended December 31, 2008. Information with respect to director fees and other director compensation paid to Messrs. Seyller and Claussen is included below in “Executive Officer Compensation – Summary Compensation Table.”

Director Compensation
Name	Fees earned or paid in cash ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
David E. Albright(1)	$	3,600	$	—	$	—	$	3,600
Michael P. Feeney(2)	$	7,200	$	—	$	—	$	7,200
Anthony J. Koss(5)	$	10,800	$	1,389	$	—	$	12,189
William D. Schack	$	10,800	$	1,382	$	—	$	12,182
Ronald M. Seeley	$	9,900	$	1,353	$	—	$	11,253
Carl V. Radebaugh(3)	$	1,800	$	1,009	$	11,799	$	14,608
John W. Rebhorn	$	10,800	$	1,150	$	—	$	11,950
Richard L. Walker(4)	$	7,200	$	—	$	—	$	7,200

(1) David E. Albright retired from the board in May 2008.

(2) Michael P. Feeney, formerly a director of Morris Building & Loan, s.b., was appointed as a director of Harvard Savings Bank in April 2008 following the acquisition of Morris Building & Loan, s.b. by Harvard Savings Bank and Harvard Savings, MHC.

(3) Carl V. Radebaugh retired from the board in March 2008. The amount listed in the “All Other Compensation” column for Mr. Radebaugh equals the payments that he received under his Director Deferred Fee Agreement in 2008 following retirement from the board.

(4) Richard L. Walker, formerly a director of Morris Building & Loan, s.b., was appointed as a director of Harvard Savings Bank in April 2008 following the acquisition of Morris Building & Loan, s.b. by Harvard Savings Bank and Harvard Savings, MHC.

(5) Anthony J. Koss retired from the board in March 2009.

Fees. In 2008, Harvard Savings Bank paid each director a fee of $900 for each board meeting attended, provided that a director could miss one board meeting per year and receive fees for such meeting. No separate fees are paid for committee meetings attended or for service as committee chairmen. Harvard Illinois Bancorp, Inc. does not pay any meeting or committee fees. For 2009, Harvard Savings Bank board meeting fees remain at $900 per meeting.

Director Deferred Fee Agreements. In 1995, Harvard Savings Bank entered into deferred fee agreements with Directors Koss, Schack and Seeley. In 1996, 1997 and 1998, Harvard Savings Bank entered into deferred fee agreements with Directors Radebaugh, Rebhorn and Seyller, respectively. The agreements allow the directors to defer the payment of a percentage of their board fees to a deferral account established by Harvard Savings Bank. Compensation deferred under the plan and interest

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thereon (equal to the rate on high grade long-term corporate bonds) are payable upon the director’s termination of service, disability, or upon a change in control of Harvard Savings Bank followed by termination of service. Payment will be made either in a lump sum or in monthly installments, as elected by the director at the time of entry into the agreement. In the event of a director’s death while the director is employed, the director’s beneficiary will receive a death benefit payable in 120 monthly installments. If the director dies during the distribution of benefits, his beneficiary will receive a continuation of such benefits, payable at the same time and in the same amount as if the benefits were paid to the director. Harvard Savings Bank has acquired bank-owned life insurance to informally fund its benefit obligations under these agreements.

In 2009, Harvard Savings Bank also entered into similar deferred fee agreements with Directors Claussen, Feeney and Walker, however, bank-owned life insurance was not purchased to informally fund the benefits under these agreements.

Executive Officer Compensation

Summary Compensation Table. The following table sets forth the total compensation paid to or earned by our President and Chief Executive Officer Duffield J. Seyller, III, our Executive Vice President and Chief Financial Officer Donn L. Claussen and our Vice President and Loan Officer Michael T. Neese for the fiscal year ended December 31, 2008. We refer to these individuals as “Named Executive Officers.”

Summary Compensation Table
Name and principal position	Year	Salary(1) ($)		Bonus ($)		Non-qualified deferred compensation earnings ($)		All other compensation(2) ($)		Total ($)
Duffield J. Seyller, III, President and Chief Executive Officer	2008	$	140,220	$	15,500	$	538	$	26,929	$	183,187
Donn L. Claussen, Chief Financial Officer	2008	$	132,080	$	15,000	$	—	$	22,668	$	171,964
Michael T. Neese, Vice President and Loan Officer	2008	$	116,125	$	9,000	$	—	$	3,754	$	128,879

(1) Mr. Seyller deferred $9,343 from his base salary to the Pentegra Deferred Contribution Plan for Financial Instructions (“401(k) Plan”) and $2,400 to the banks cafeteria plan. Mr. Claussen deferred $3,542 from his base salary to the 401(k) Plan and $480 to the cafeteria plan. Mr. Neese deferred $11,862 from his base salary to the 401(k) Plan.

(2) The amount listed in this column for Mr. Seyller consists of $10,800 in board fees, $4,672 in matching contributions under Harvard Savings Banks 401(k) Plan, $10,704 in employer-paid health benefits and $752 in life insurance costs. The amount listed for Mr. Claussen consists of $9,000 in board fees, $1,770 in matching contributions under the 401(k) Plan, $10,704 in employer-paid health benefits and $1,194 in life insurance costs. The amount listed for Mr. Neese represents $3,754 in matching contributions under the 401(k) Plan. The executives listed in this table also participate in certain medical coverage plans not disclosed in the Summary Compensation Table, that are generally available to salaried employees and do not discriminate in scope, terms and operation. With respect to employer-paid health benefits, we have listed only the portion that is in excess of that portion that we pay for all employees.

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Benefit Plans

Employment Agreements. Harvard Savings Bank entered into an employment agreement with Donn L. Claussen, effective January 1, 2008. The agreement has an initial term of three years. Unless notice of non-renewal is provided, the agreement renews annually so that the remaining term reverts to three years. The agreement provides for payment of base salary, which will be reviewed at least annually, and which may be increased, but not decreased (except for a decrease not in excess of any decrease that is applicable generally to all employees). In addition to base salary, Mr. Claussen is entitled to participate in the bonus plans and other employee benefit and fringe benefit plans applicable to senior executive officers, and will be reimbursed for business expenses incurred, including continuing education necessary to improve skills of a senior bank executive. Harvard Savings Bank will provide Mr. Claussen with four weeks of paid vacation and term life insurance with a death benefit equal to $350,000. In addition, the employment agreement states that the Bank will provide Mr. Claussen with a Salary Continuation Agreement that will provide him with an annual benefit of $52,000 for a term of 15 years following his retirement.

Mr. Claussen is entitled to severance payments and benefits in the event of termination of employment under specified circumstances, including his termination of employment for reasons other than cause, disability, death or retirement, or in the event Mr. Claussen resigns during the term of the agreement for good reason (as defined in the employment agreement). If Mr. Claussen’s employment was terminated under these circumstances, based on his level of compensation as of September 30, 2009, Mr. Claussen would be entitled to severance payments of approximately $307,584 under the employment agreement.

In connection with the conversion and offering, Harvard Savings Bank intends to enter into an employment agreement with Duffield Seyller and to update and replace its employment agreement with Mr. Claussen with new three year employment agreements. The new employment agreements contain the same terms as set forth above except that Mr. Seyller’s employment agreement provides for term life insurance with a death benefit of $250,000 and states that Harvard Savings Bank will enter into a Salary Continuation Agreement with him that provides an annual benefit of $40,800 for a term of 15 years following his retirement. Under the new employment agreements, the executives will receive base salary of $145,128, with respect to Mr. Seyller, and $136,703, with respect to Mr. Claussen. The executive’s will be entitled to severance benefits in the event of an involuntary termination of employment (other than due to death or disability) or in the event of the executive’s resignation for “good reason,” which would include:

(1) failure to appoint or reappoint the executive to his executive position;

(2) failure to appoint or reappoint the executive to the board of Harvard Savings Bank and Harvard Illinois Financial Corporation, provided that a failure of the Harvard Illinois Financial Corporation shareholders to elect executive to the Harvard Illinois Financial Corporation board will not constitute good reason;

(3) a material change in the executive’s functions, duties or responsibilities, which change would cause the executive’s position to become one of lesser responsibility, importance or scope;

(4) a relocation of the executive’s principal place of employment by more than 15 miles from its location as of the date of the agreement;

(5) material reduction in the benefits and perquisites provided to The executive as of the effective date of the agreement;

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(6) a liquidation or dissolution of Harvard Savings Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of the executive; or

(7) a material breach of the agreement by Harvard Savings Bank.

Under any of these circumstances, the executive will be entitled to a lump sum severance payment equal the base salary due to the executive for the remaining unexpired term of the agreement (or $326,538 in the case or Mr. Seyller and $307,584 in the case of Mr. Claussen, if employment was terminated on September 30, 2009). Any such payments would be made from the general funds of Harvard Savings Bank. If the executive’s employment is involuntarily terminated or if the executive resigns for good reason (as defined above) following the occurrence of a change in control of Harvard Savings Bank or Harvard Illinois Financial Corporation, the executive will be entitled to a lump sum severance payment equal to the greater of: (i) three times the sum of: (A) his highest annual rate of base salary paid at anytime under the agreement, plus (B) the greater of: (x) his average annual cash bonus paid to him with respect to the three completed fiscal years prior to his termination or (y) the cash bonus paid in the fiscal year prior to his termination; or (ii) 299% of his “base amount” as defined in Section 280G of the Code (or $482,000 in the case or Mr. Seyller and $455,000 in the case of Mr. Claussen, if employment was terminated on September 30, 2009). The executive’s severance payment will be made within 30 days following his termination date, provided, however, if the executive is a “specified employee,” as defined in Section 409A of the Internal Revenue Code, then the payment will commence on the first day of the seventh month following his date of termination. Any such payments would be made from the general funds of Harvard Savings Bank (or its acquiror) if termination occurs following a change in control. In addition, Harvard Savings Bank will continue to provide continued life insurance coverage and non-taxable medical and dental coverage substantially comparable to the coverage maintained for the executive prior to his termination date for the remaining unexpired term of the agreement or, in the event of a change in control, for 36 months.

If the executive becomes disabled, he is entitled to all disability benefits under any disability plan of Harvard Savings Bank. Upon termination of employment due to retirement (as defined therein), the executive would only be entitled to his benefits under any retirement plan of Harvard Savings Bank and other plans to which he is a party. In the event that the executive’s employment is terminated for cause, the executive would have no right to receive compensation or other benefits for any period after his termination.

Upon a termination of employment for which the executive receives a severance payment under the employment agreement, other than in connection with a change in control, the executive agrees not to compete with Harvard Savings Bank for one year following termination within 15 miles of the locations in which Harvard Savings Bank has business operations.

Change in Control Agreement. Following the conversion, Harvard Savings Bank intends to enter into a change in control agreement with Richard J. Lipinsky, Secretary and Treasurer of Harvard Savings Bank. The term of the agreement is for two years, renewable for an additional year on each anniversary date of the agreement, such that the remaining term of the agreement will always be for two years, unless the board determines not to renew the change in control agreement after a comprehensive review of executive’s performance, which will be conducted annually.

In the event of a change in control of Harvard Illinois Bancorp, Inc. or Harvard Savings Bank followed by the executive’s voluntary termination for “good reason” or involuntary termination, other than for cause, the executive will be entitled to a severance payment. “Good reason” is defined as follows:

(1) failure to appoint or reappoint executive to his executive position;

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(2) a material change in the executive’s functions, duties or responsibilities, which change would cause the executive’s position to become one of lesser responsibility, importance or scope;

(3) a liquidation or dissolution of Harvard Savings Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of the executive;

(4) a material reduction in base salary, benefits or perquisites from those being provided at the effective date of the agreement;

(5) a relocation of executive’s principal place of employment by more than 15 miles from its location as of the date of the agreement; or

(6) a material breach of the change in control agreement by Harvard Savings Bank.

In the event of a change in control followed by the executive’s involuntary termination, including a termination for good reason, but not including a termination for cause, the executive will be entitled to a severance payment equal to two times the sum of (i) executive’s base salary in effect as of the termination date, plus (ii) the highest level of incentive cash compensation earned by the executive during either the calendar year in which the termination occurs or the two calendar years immediately preceding the year in which the termination occurs (or $173,000 if employment was terminated on September 30, 2009). Such payment will be made from the general funds of Harvard Savings Bank. In addition, the executive will be entitled to life insurance coverage and non-taxable medical and dental coverage for two years following termination. Any cash severance payment will be made in a lump sum within 30 days following the executive’s termination date. The agreement provides that in the event the severance payments would include an “excess parachute payment” under Section 280G of the Internal Revenue Code, such benefits will be reduced by the minimum amount necessary to avoid penalties.

Salary Continuation Agreements. Harvard Savings Bank entered into salary continuation agreements with Mr. Seyller and Mr. Neese on December 28, 2006, and with Mr. Claussen on January 1, 2008, in order to provide the executives with supplemental retirement benefits. Under the salary continuation agreement, the executive is entitled to a normal retirement benefit upon termination of employment on or after attaining age 65. The normal retirement benefit is an annual benefit equal to $52,000 for Mr. Claussen, $40,800 for Mr. Seyller, and $25,000 for Mr. Neese, payable in 12 equal monthly installments for 15 years. In the event the executive terminates employment prior to normal retirement age, other than due to disability or death, the executive will be entitled to an early termination benefit. If the executive’s termination is due to his involuntary termination, the executive’s early termination benefit will be an amount equal to his accrued benefit determined as of the end of the month preceding his termination, annuitized and paid for 15 years, on a monthly basis, commencing in the month following his separation from service. In such event, the annual benefit, if involuntary termination occurred at September 30, 2009, would be $14,353 for Mr. Seyller, $3,677            for Mr. Claussen and $12,707 for Mr. Neese. If the executive’s termination is due to his voluntary resignation, the executive’s early termination benefit will be an amount equal to his vested accrued benefit as of the end of the month preceding his termination, where the early termination benefit will vest at a rate of 10% per year, beginning January 1, 2009 for Mr. Claussen and the first day of the plan year for Messrs. Seyller and Neese following the execution of their agreements. The early termination benefit is payable in 180 monthly installments, commencing on the first day of the month following termination of employment.

In the event of a change in control with respect to Mr. Claussen, or in the event of a change in control followed by the executive’s termination of employment within 24 months thereafter with respect to Messrs. Seyller and Neese, or in the event of the executive’s termination due to disability, the executive

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will be entitled to the normal retirement benefit, payable in 12 equal monthly installments for 15 years commencing on the date on which the executive attains age 65, provided, however, that in the event of a change in control, such benefit would be reduced to avoid an excess parachute payment. The benefits payable following an executive’s termination of employment without cause or following a change in control, would be paid from the general funds of Harvard Savings Bank.

In the event of the executive’s death while employed, the executive’s beneficiary will receive an annual benefit equal to the executive’s normal retirement benefit, payable in 12 equal monthly installments for 15 years commencing immediately following the executive’s death. If the executive dies during the distribution of benefits, the beneficiary will receive a continuation of such benefits at the same time and in the same amount as if the benefits were paid to the executive.

In the event the executive is a “specified employee,” as defined in Section 409A of the Internal Revenue Code, then the portion of the normal retirement benefit or the early termination benefit that is to be paid during the six month period following termination, other than due to death or disability, will be accumulated and paid to the executive in a lump sum on the first day of the seventh month following termination.

Split Dollar Life Insurance Agreement. Harvard Savings Bank has entered into a split dollar life insurance agreement with Mr. Claussen. The agreement is intended to be a non-equity endorsement split dollar agreement with respect to certain insurance policies purchased and owned by Harvard Savings Bank. Pursuant to the agreement, Harvard Savings Bank will pay the premium payments that are due on the insurance policies and Harvard Savings Bank and Mr. Claussen’s beneficiaries will share in the death benefit at his death.

In the event of Mr. Claussen’s death while employed with Harvard Savings Bank, Mr. Claussen’s beneficiary will be paid $350,000 and the bank will be paid $650,000. However, Mr. Claussen’s beneficiary will have no rights or interests under the agreement if Mr. Claussen’s employment terminates for any reason other than due to his death.

Tax Qualified Plans

401(k) Plan. Harvard Savings Bank participates in the Pentegra Defined Contribution Plan for Financial Institutions, a multiple employer tax-qualified 401(k) plan, for the benefit of employees of Harvard Savings Bank who have satisfied the 401(k) plan’s eligibility requirements. All eligible employees can begin participation in the 401(k) plan on the earliest date that coincides with or next follows the date the employee completes one year of employment and attains age 21. A participant may contribute up to 50% of his or her salary, which includes basic salary, plus overtime and bonus, to the 401(k) plan on a pre-tax basis, subject to the limitations imposed by the Internal Revenue Code. For 2009, the salary deferral contribution limit is $16,500, provided, however, that a participant over age 50 may contribute an additional $5,500 to the 401(k) plan as a “catch-up” contribution. A participant is always 100% vested in his or her salary deferral and catch-up contributions. In addition, the 401(k) plan provides that Harvard Savings Bank will make matching contributions to the account of a participant in an amount equal to 50% of the participant’s contributions on the first six percent of the participant’s compensation for the year. A participant will become fully vested in his or her matching contributions upon completion of the participant’s third year of credited service. A participant also becomes 100% vested in his or her matching contributions upon the participant’s death, disability or attainment of age 65 while employed with Harvard Savings Bank. Failure to complete three years of employment will result in a forfeiture of the participant’s matching contributions and earnings thereon credited to the participant’s account. Unless elected otherwise by the participant, the benefits under the 401(k) plan are generally distributed in the form of a lump sum payment following the participant’s termination of employment.

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Each participant has an individual account under the 401(k) plan and may direct the investment of his or her account among a variety of investment options available under the plan. In connection with the conversion, Harvard Saving Bank will transfer the assets attributable to Harvard Savings Bank’s employees from the Pentegra multiple employer plan to a single employer plan and will add the Harvard Illinois Financial Corporation Stock Fund as an investment alternative. This change will permit Harvard Savings Bank 401(k) Plan participants to invest their account balances in the Harvard Illinois Financial Corporation Stock Fund, both in the offering and afterwards. An independent trustee will purchase the common stock in the offering on behalf of plan participants, to the extent that shares are available. A participant will have the right to direct the trustee regarding the voting of shares purchased for his or her plan account.

Defined Benefit Plan. Harvard Savings Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions, a multiple employer plan. Employees who were hired prior to January 1, 2008 by Harvard Savings Bank and who completed one year of employment and have attained age 21 were eligible to participate in the plan. No employees hired after January 1, 2008 are eligible to participate in the plan. A participant becomes vested in his or her retirement benefit upon completion of five years of employment, provided that a participant who has reached age 65 becomes 100% vested, regardless of the number of completed years of employment.

Upon termination of employment at or after age 65, a participant will be entitled to an annual normal retirement benefit equal to 1.5% of the participant’s average annual salary for the five highest paid consecutive years of benefit service multiplied by the number of years of benefit service. A participant who terminates employment prior to age 65 will be entitled to an annual early retirement benefit. The early retirement benefit is equal to the vested amount of the normal retirement benefit accrued at the participant’s termination date. Payment of the early retirement benefit can begin as early as 55, in which case the accrued benefit will be reduced by applying an early retirement factor based on the participant’s age when payments begin. Normal and early retirement benefits are generally payable over the longer of the lifetime of the participant or 120 monthly installments, unless one of the optional forms of distribution has been selected. The optional forms of distribution under the plan include various annuities or a lump sum payment option. In the event a participant dies while in active service, the participant’s beneficiary will be entitled to a lump sum death benefit equal to 100% of the participant’s last 12 months’ salary, plus an additional 10% of such salary for each year of benefit service until a maximum of 300% of such salary is reached for 20 or more years. Messrs. Seyller, Claussen and Neese have approximately 20, 0 and 15 years, respectively, of credited service under the plan.

Stock-Based Benefit Plans

Employee Stock Ownership Plan. In connection with the conversion and offering, Harvard Savings Bank plans to adopt an employee stock ownership plan for eligible employees. An employee stock ownership plan is a tax-qualified retirement plan that primarily invests in the common stock of Harvard Illinois Financial Corporation. Eligible employees who have attained age 21 and who are employed for one year will begin participation in the employee stock ownership plan on the later of the effective date of the employee stock ownership plan or upon the first entry date commencing on or after the eligible employee’s completion of 1,000 hours of service during a continuous 12-month period.

The employee stock ownership plan trustee is expected to purchase, on behalf of the employee stock ownership plan, 8% of the total number of shares of Harvard Illinois Financial Corporation common stock issued in the offering. We anticipate that the employee stock ownership plan will fund its stock purchase with a loan from Harvard Illinois Financial Corporation equal to the aggregate purchase price of the common stock. The loan will be repaid principally through Harvard Saving Bank’s contribution to the employee stock ownership plan and dividends payable on common stock held by the

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employee stock ownership plan over the anticipated 15-year term of the loan. The interest rate for the employee stock ownership plan loan is expected to be an adjustable rate equal to the prime rate, as published in The Wall Street Journal, on the closing date of the offering. Thereafter the interest rate will adjust annually and will be the prime rate on the first business day of the calendar year, retroactive to January 1 of such year. See “Pro Forma Data.”

The trustee will hold the shares purchased by the employee stock ownership plan in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as Harvard Savings Bank repays the loan. The trustee will allocate the shares released among participants on the basis of each participant’s proportional share of compensation relative to all participants. A participant becomes vested in his or her retirement benefit only after three years of service in accordance with a three-year cliff vesting schedule. Participants who were employed by Harvard Savings Bank immediately prior to the offering will receive credit for vesting purposes for years of service prior to adoption of the employee stock ownership plan. Participants also will become fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the employee stock ownership plan. Generally, participants will receive distributions from the employee stock ownership plan upon separation from service. The employee stock ownership plan reallocates any unvested shares forfeited upon termination of employment among the remaining participants.

The employee stock ownership plan permits participants to direct the trustee as to how to vote the shares of common stock allocated to their accounts. The trustee votes unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as those shares for which participants provide instructions, subject to fulfillment of the trustee’s fiduciary responsibilities.

Under applicable accounting requirements, Harvard Savings Bank will record a compensation expense for the employee stock ownership plan at the fair market value of the shares as they are committed to be released from the unallocated suspense account to participants’ accounts. The compensation expense resulting from the release of the common stock from the suspense account and allocation to plan participants will result in a corresponding reduction in Harvard Illinois Financial Corporation’s earnings.

Benefits to be Considered Following Completion of the Stock Offering

Following the stock offering, Harvard Illinois Bancorp, Inc. intends to adopt a new stock-based incentive plan that will provide for grants of stock options and restricted common stock awards. In accordance with applicable regulations, we anticipate that the plan will authorize a number of stock options and a number of shares of restricted stock, not to exceed 10% and 4%, respectively, of the shares issued in the offering. These limitations will not apply if the plan is implemented more than one year after the conversion.

The stock-based incentive plan will not be established sooner than six months after the stock offering and, if adopted within one year after the stock offering, would require the approval by stockholders owning a majority of the outstanding shares of Harvard Illinois Bancorp, Inc. common stock eligible to be cast. If the stock-based incentive plan is established after one year after the stock offering, it would require the approval of our stockholders by a majority of votes cast.

The following additional restrictions would apply to our stock-based incentive plan only if the plan is adopted within one year after the stock offering:

• non-employee directors in the aggregate may not receive more than 30% of the options and restricted stock awards authorized under the plan;

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• any non-employee director may not receive more than 5% of the options and restricted stock awards authorized under the plan;

• any officer or employee may not receive more than 25% of the options and restricted stock awards authorized under the plan;

• the options and restricted stock awards may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plan; and

• accelerated vesting is not permitted except for death, disability or upon a change in control of Harvard Savings Bank or Harvard Illinois Bancorp, Inc.

These restrictions do not apply to plans adopted after one year following the completion of the stock offering.

We have not yet determined whether we will present the stock-based incentive plan for stockholder approval within one year following the completion of the conversion or whether we will present this plan for stockholder approval more than one year after the completion of the conversion. In the event of changes in applicable regulations or policies regarding stock-based incentive plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

Transactions with Certain Related Persons

Federal regulations require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk or repayment or present other unfavorable features. Harvard Savings Bank is therefore prohibited from making any loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public, except for loans made under a program generally available to all other employees and that does not give preference to any executive officer or director over any other employee. Additionally, all future material affiliated transactions and loans, and any forgiveness of loans, must be approved by a majority of our independent directors who do not have an interest in the transactions and who had access, at our expense, to legal counsel.

Harvard Savings Bank has adopted a lending program that provides eligible employees, officers and directors of the bank the opportunity to obtain one mortgage loan (primary residence only) at an interest rate below what is offered to customers in the normal course of business. The interest rate is 1% below the Fannie Mae rate on the date of entering the program or the date the loan is scheduled to re-price. Prior to February 2009, the interest rate was based upon the “Applicable Federal Rate” as published monthly in the Federal Register. Employees who have been employed full-time for three months or have accumulated 1,000 hours of employment are eligible to participate in the program. The outstanding balance of such loans totaled approximately $2.4 million, $1.9 million and $1.4 million at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively. Approximately $872,000, $566,000 and $753,000, respectively, were loans to executive officers or directors. Effective April 2008, directors are no longer eligible to obtain new loans through the program.

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Set forth below is certain information as to loans made by Harvard Savings Bank to certain of its directors and executive officers, or their affiliates, whose aggregate indebtedness to Harvard Savings Bank under the above-referenced Employee Loan Program exceeded $120,000 at any time since January 1, 2008. All of the loans in the following table are first mortgage loans secured by the borrower’s principal place of residence. All of such loans were being repaid in accordance with their contractual terms as of September 30, 2009.

Name of Individual	Highest Balance Since January 1, 2008		Balance on September 30, 2009		Amount of Principal Paid Since January 1, 2008		Amount of Interest Paid Since January 1, 2008		Interest Rate On September 30, 2009
William D. Schack	$	155,000	$	126,678	$	31,498	$	8,879	2.83	%
Carl V. Radebaugh		125,419		—		125,419		6,573	n/a
Michael T. Neese		191,208		177,701		13,508		5,821	1.62	%

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Other than as described above, all loans the principal balances of which exceeded $120,000 at any time during the period beginning January 1, 2009, made by Harvard Savings Bank to executive officers, directors, immediate family members of executive officers and directors, or organizations with which executive officers and directors are affiliated, were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to Harvard Savings Bank.

The aggregate amount of our loans to our officers and directors and their related entities was $1.3 million at September 30, 2009. These loans were performing according to their original terms at September 30, 2009.

Additionally, neither Harvard Illinois Bancorp, Inc. nor Harvard Savings Bank have made loans to, or have engaged in material transactions with, promoters. Harvard Illinois Bancorp, Inc. has no intention of engaging in any material transactions with promoters in the future.

SUBSCRIPTIONS BY DIRECTORS, OFFICERS AND ADVISORY DIRECTORS

The following table sets forth information regarding intended common stock subscriptions by each of the directors, officers and advisory directors of Harvard Savings Bank and their associates, and by all directors, officers and advisory directors as a group. However, there can be no assurance that any such person or group will purchase any specific number of shares of our common stock. In the event the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. Directors, officers and advisory directors will purchase shares of common stock at the same $10.00 purchase price per share and on the same terms as other purchasers in the offering. This table excludes shares of common stock to be purchased by the employee stock ownership plan, as well as any stock awards or stock option grants that may be made no earlier than six months after the completion of the offering. The directors, officers and advisory directors have indicated their intention to subscribe in the offering for an aggregate of 54,100 shares of common stock, equal to 6.70% of the number of shares of common stock to be sold in the offering at the minimum of the offering range, assuming shares are available. Purchases by directors, officers, advisory directors and their associates will be included in determining whether the required minimum number of shares has been subscribed for in the offering. The shares being acquired by the directors, executive officers, advisory directors and their associates are being acquired for investment purposes, and not with a view towards resale.

Name and Title	Number of Shares	Aggregate Purchase Price		Percent at Minimum of Offering Range
Duffield J. Seyller, III, President, Chief Executive Officer and Director	10,000	$	100,000	1.3	%
Ronald M. Seeley, Chairman of the Board	1,000		10,000	*
Donn L. Claussen, Executive Vice President, Chief Financial Officer and Director	10,000		100,000	1.3
William D. Schack, Director	2,500		25,000	*
Richard L. Walker, Director	5,000		50,000	*
John W. Rebhorn, Director	9,500		95,000	1.2
Michael P. Feeney, Director	500		5,000	*
Richard J. Lipinsky, Secretary and Treasurer	7,500		75,000	*
Michael T. Neese, Vice President and Loan Officer	2,500		25,000	*
Cindy Rowe, Marketing Officer	1,500		15,000	*
Dennis Lee, Vice President and Commercial Loan Officer	500		5,000	*
All directors and officers as a group (11 persons)	50,500	$	505,000	6.6	%
Morris Advisory Directors as a group (3 persons)	3,600	$	36,000	*
Total	54,100	$	541,000	7.1	%

* Less than 1%.

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THE CONVERSION; PLAN OF DISTRIBUTION

The Board of Directors of Harvard Savings, MHC has approved the plan of conversion and reorganization. The plan of conversion and reorganization must also be approved by Harvard Savings, MHC’s members. A special meeting of members has been called for this purpose. The Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation have conditionally issued the required approvals with respect to the plan of conversion and reorganization; however, such approvals do not constitute a recommendation or endorsement of the plan of conversion and reorganization by such agencies.

General

The Board of Directors of Harvard Savings, MHC adopted the plan of conversion and reorganization on July 23, 2009. Pursuant to the plan of conversion and reorganization, Harvard Savings, MHC will convert from the mutual form of organization to the fully stock form and we will sell shares of common stock to the public in our offering. In the conversion, we will organize a new Maryland stock holding company named Harvard Illinois Bancorp, Inc. When the conversion is completed, all of the capital stock of Harvard Savings Bank will be owned by Harvard Illinois Bancorp, Inc., and all of the common stock of Harvard Illinois Bancorp, Inc. will be owned by public stockholders.

We intend to retain between $6.8 million and $9.5 million of the net proceeds of the offering, or $11.0 million if the offering range is increased by 15%, and to contribute the balance of the net proceeds plus such additional amounts as may be necessary so that, upon completion of the offering, Harvard Savings Bank will have a tangible capital to assets ratio of at least 10%. The conversion will be consummated only upon the issuance of at least 765,000 shares of our common stock offered pursuant to the plan of conversion and reorganization.

The plan of conversion and reorganization provides that we will offer shares of common stock for sale in the subscription offering to eligible account holders, our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, supplemental eligible account holders and other members. If all shares are not subscribed for in the subscription offering, we may, in our discretion, offer common stock for sale in a community offering to members of the general public, with a preference given to natural persons residing in the Illinois counties of McHenry and Grundy.

We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. The community offering, if any, may begin at the same time as, during, or after the subscription offering, and must be completed within 45 days after the completion of the subscription offering unless otherwise extended by us with the approval, to the extent such approvals are required, of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation. See “—Community Offering.”

We determined the number of shares of common stock to be offered in the offering based upon an independent valuation of the estimated consolidated pro forma market value of Harvard Illinois Bancorp, Inc. All shares of common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be charged a commission to purchase shares of common stock. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See “—Determination of Share Price and Number of Shares to be Issued” for more information as to the determination of the estimated pro forma market value of the common stock.

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The following is a brief summary of the conversion. We recommend reading the plan of conversion and reorganization in its entirety for more information. A copy of the plan of conversion and reorganization is available for inspection at each branch office of Harvard Savings Bank and at the Central Regional Office and the Washington, D.C. Office of the Office of Thrift Supervision. The plan of conversion and reorganization is also filed as an exhibit to Harvard Savings, MHC’s application to convert from mutual to stock form of which this prospectus is a part, copies of which may be obtained from the Office of Thrift Supervision. The application filed with the Federal Deposit and Insurance Corporation may be inspected, without charge, at the Chicago Regional Office and the application filed with the Illinois Department of Financial and Professional Regulation may be inspected without charge, at the Illinois Department of Financial and Professional Regulation at the Chicago office. See “Where You Can Find Additional Information.”

Reasons for the Conversion

Our primary reasons for converting and raising additional capital through the offering are to: (1) compete more effectively in the financial services marketplace; (2) offer our depositors, employees, management and directors an equity ownership interest in Harvard Savings Bank and thereby obtain an economic interest in its future success; (3) increase our capital to support future growth and profitability; and (4) increase our flexibility to structure and finance expansion of our operations, including the potential acquisition of other financial institutions.

The reorganization and the capital raised in the offering are expected to:

• increase our lending capacity by providing us with additional capital to support new loans and higher lending limits; and

• support the growth of our banking franchise, including the modernization and, if practicable, expansion of our branch network.

In the stock holding company structure, we will have greater flexibility in structuring mergers and acquisitions. Our current mutual structure prevents us from offering shares of our common stock as consideration for a merger or acquisition. Potential sellers often want stock for at least part of the acquisition consideration. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination thereof, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise.

We have no current arrangements or agreements to acquire other banks, thrifts, credit unions, financial service companies or branch offices. However, we have had, and intend to continue to have, discussions with local financial institutions to determine whether they would be interested in exploring the possibility of our acquiring them after the offering is completed, and we have sufficient capital resources to fund an acquisition. In addition, we have participated in, and intend to continue to participate in, sales processes initiated on behalf of local financial institutions that have made a decision to explore the possibility of a sale. We have also explored, and intend to continue to explore, the possibility of acquiring financial service companies. There can be no assurance that we will be able to consummate any acquisitions or establish any new branches.

We believe that the additional capital raised in the offering may enable us to take advantage of business opportunities that may not otherwise be available to us. We are not subject to a directive or a recommendation from the any regulatory agency to raise capital.

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Approvals Required

The affirmative vote of a majority of the total eligible votes of members of Harvard Savings, MHC at the special meeting of members is required to approve the plan of conversion and reorganization. The reorganization also must be approved by the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, which agencies have given their conditional approvals to the plan of conversion and reorganization.

A special meeting of members to consider and vote upon the plan of conversion and reorganization has been set for [meeting date].

Effects of Conversion on Depositors, Borrowers and Members

Continuity. While the conversion is being accomplished, our normal business of accepting deposits and making loans will continue without interruption. We will continue to be an Illinois chartered savings bank and will continue to be regulated by the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation. After the conversion, we will continue to offer existing services to depositors, borrowers and other customers. The directors serving Harvard Savings Bank at the time of the conversion will be the directors of Harvard Savings Bank and of Harvard Illinois Bancorp, Inc., a Maryland corporation, after the conversion.

Effect on Deposit Accounts. Pursuant to the plan of conversion and reorganization, each depositor of Harvard Savings Bank at the time of the conversion will automatically continue as a depositor after the conversion, and the deposit balance, interest rate and other terms of such deposit accounts will not change as a result of the conversion. Each such account will be insured by the Federal Deposit Insurance Corporation to the same extent as before the conversion. Depositors will continue to hold their existing certificates, passbooks and other evidences of their accounts.

Effect on Loans. No loan outstanding from Harvard Savings Bank will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as it was contractually fixed prior to the conversion.

Effect on Voting Rights of Members. At present, all of our depositors and certain of our borrowers have voting rights in, Harvard Savings, MHC as to all matters requiring membership action. Upon completion of the conversion, depositors and borrowers will cease to be members of Harvard Savings, MHC and will no longer have voting rights. Upon completion of the conversion, all voting rights in Harvard Savings Bank will be vested in Harvard Illinois Bancorp, Inc. as the sole stockholder of Harvard Savings Bank. The stockholders of Harvard Illinois Bancorp, Inc. will possess exclusive voting rights with respect to Harvard Illinois Bancorp, Inc. common stock.

Tax Effects. We will receive an opinion of counsel or tax advisor with regard to federal and state income tax consequences of the conversion to the effect that the conversion will not be taxable for federal or state income tax purposes to Harvard Savings Bank or its members. See “—Material Income Tax Consequences.”

Effect on Liquidation Rights. Each depositor in Harvard Savings Bank has both a deposit account in Harvard Savings Bank and a pro rata ownership interest in the net worth of Harvard Savings Bank based upon the deposit balance in his or her account. This ownership interest is tied to the depositor’s account and has no tangible market value separate from the deposit account. This interest may only be realized in the event of a complete liquidation of Harvard Savings Bank. Any depositor who

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opens a deposit account obtains a pro rata ownership interest in Harvard Savings Bank without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all, respectively, of the balance in the deposit account but nothing for his or her ownership interest in the net worth of Harvard Savings Bank, which is lost to the extent that the balance in the account is reduced or closed.

Consequently, depositors in a mutual savings bank normally have no way of realizing the value of their ownership interest, which has realizable value only in the unlikely event that the association is completely liquidated. If this occurs, the depositors of record at that time, as owners, would share pro rata in any residual surplus and reserves of Harvard Savings Bank after other claims, including claims of depositors to the amounts of their deposits, are paid.

In the unlikely event that Harvard Savings Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, also would be paid first, followed by distribution of the “liquidation account” to depositors as of June 30, 2008 and [supplemental date] who continue to maintain their deposit accounts as of the date of liquidation, with any assets remaining thereafter distributed to Harvard Illinois Bancorp, Inc. as the holder of Harvard Savings Bank’s capital stock. Pursuant to applicable rules and regulations, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation and, in such a transaction, the liquidation account would be assumed by the surviving institution. See “—Liquidation Rights.”

Determination of Share Price and Number of Shares to be Issued

The plan of conversion and reorganization and federal regulations require that the aggregate purchase price of the common stock sold in the offering be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. We have retained RP Financial, LC to prepare an independent valuation appraisal. For its services in preparing the initial valuation, RP Financial, LC will receive a fee of $35,000, and will be reimbursed for its expenses. RP Financial, LC will receive an additional fee of $5,000 for each update to the valuation appraisal. We have agreed to indemnify RP Financial, LC and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from its negligence or bad faith.

RP Financial, LC has estimated that, as of November 27, 2009, this market value ranged from $7.7 million to $10.4 million, with a midpoint of $9.0 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 765,000 shares to 1,035,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

Consistent with applicable appraisal guidelines, the appraisal applied three primary methodologies: the pro forma price-to-book value approach applied to both reported book value and tangible book value; the pro forma price-to-earnings approach applied to reported and core earnings; and the pro forma price-to-assets approach.

RP Financial, LC also considered the following factors, among others:

• our present and projected results and financial condition;

• the economic and demographic conditions in our existing market area;

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• certain historical, financial and other information relating to us;

• a comparative evaluation of our operating and financial characteristics with those of other similarly situated publicly traded savings institutions;

• the aggregate size of the offering of common stock;

• the impact of the conversion and the offering on our equity and earnings potential;

• our potential to pay cash dividends; and

• the trading market for securities of comparable institutions and general conditions in the market for such securities.

The appraisal is based in part on an analysis of a peer group of ten publicly traded savings bank and thrift holding companies that RP Financial, LC considered comparable to us. The peer group consists of the following ten thrifts or thrift holding companies with assets between $192 million and $547 million as of September 30, 2009:

Company Name and Ticker Symbol	Exchange	Headquarters	Total Assets
			(in thousands)
Citizens Community Bancorp, Inc. - CZWI	NASDAQ	Eau Claire, WI	$	547	(1)
Elmira Savings Bank - ESBK	NASDAQ	Elmira, NY	$	506
FFD Financial Corp - FFDF	NASDAQ	Dover, OH	$	192
First Capital, Inc. – FCAP	NASDAQ	Corydon, IN	$	457
LSB Financial Corp. – LSBI	NASDAQ	Lafayette, IN	$	364
Liberty Bancorp, Inc. – LBCP	NASDAQ	Liberty, MO	$	384	(1)
River Valley Bancorp – RIVR	NASDAQ	Madison, IN	$	385
Rome Bancorp, Inc. – ROME	NASDAQ	Rome, NY	$	338
WVS Financial Corp. – WVFC	NASDAQ	Pittsburgh, PA	$	370
Wayne Savings Bancshares, Inc. – WAYN	NASDAQ	Wooster, OH	$	400

(1) Assets as of June 30, 2009

The following are various averages for the peer group companies:

• average assets of $394 million;

• average non-performing assets of 1.4% of total assets;

• average loans of 69.7% of total assets;

• average equity of 10.3% of total assets; and

• average net income of 0.42% of average assets.

The following table presents a summary of selected pricing ratios for Harvard Illinois Bancorp, Inc. and the peer group companies identified by RP Financial, LC. Ratios are based on earnings for the

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twelve months ended September 30, 2009 and book value as of September 30, 2009. Tangible book value is total equity, less intangible assets. Compared to the median pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a discount of 37.1% on a price-to-book value basis and a discount of 38.0% on a price-to-tangible book value basis. The pricing ratios resulted from our generally having higher levels of equity but lower core earnings than the companies in the peer group on a pro forma basis. The pricing ratios also took into account that on a pro forma basis compared to the peer group, we have a lower rate of asset growth, a lower capacity to pay dividends and a lower pro forma market value and shares outstanding. Additionally, RP Financial, LC took into account the less favorable economic conditions and demographic characteristics of our market area compared to the market area of the peer group companies, and the after-market pricing characteristics of recently converting savings institutions. The pricing ratios also reflected recent volatile market conditions, particularly for stock of financial institution holding companies, and the effect of such conditions on the trading market for recent mutual-to-stock conversions. Our Board of Directors, in reviewing and approving the valuation, considered the pro forma earnings and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other.

	Price-to- earnings multiple		Price-to-book value ratio		Price-to-tangible book value ratio
Harvard Illinois Bancorp, Inc. (pro forma)
Maximum, as adjusted	NM	*	54.64	%	54.64	%
Maximum	NM	*	50.68	%	50.68	%
Minimum	NM	*	42.41	%	42.41	%
Valuation of peer group companies using stock prices as of November 27, 2009
Averages	15.74x		72.57	%	79.77	%
Medians	14.19x		80.59	%	81.73	%

* Not Meaningful

Pro forma earnings multiples were not meaningful (“NM”) for Harvard Illinois Bancorp, Inc. due to its negative pro forma earnings per share.

RP Financial, LC advised the Board of Directors that the appraisal was prepared in conformance with the regulatory appraisal methodology. That methodology requires a valuation based on an analysis of the trading prices of comparable public companies whose stocks have traded for at least one year prior to the valuation date, and as a result of this analysis, RP Financial, LC determined that our pro forma price-to-book and price-to-tangible book ratios were lower than the peer group companies. See “—How We Determined the Offering Range.”

Our Board of Directors carefully reviewed the information provided to it by RP Financial, LC through the appraisal process, but did not make any determination regarding whether prior standard mutual-to-stock conversions have been undervalued, nor did the board draw any conclusions regarding how the historical data reflected above may affect Harvard Illinois Bancorp, Inc.’s appraisal. Instead, we engaged RP Financial, LC to help us understand the regulatory process as it applies to the appraisal and to advise the Board of Directors as to how much capital Harvard Illinois Bancorp, Inc. would be required to raise under the regulatory appraisal guidelines.

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The independent appraisal does not indicate per share market value. Do not assume or expect that the valuation of Harvard Illinois Bancorp, Inc. as indicated above means that, after the conversion and the offering, the shares of common stock will trade at or above the $10.00 offering price. Furthermore, the pricing ratios presented above were utilized by RP Financial, LC to estimate our market value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of our common stock. RP Financial, LC did not independently verify our consolidated financial statements and other information that we provided to them, nor did RP Financial, LC independently value our assets or liabilities. The independent valuation considers Harvard Savings Bank as a going concern and should not be considered as an indication of the liquidation value of Harvard Savings Bank. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10.00 offering price per share.

Following commencement of the subscription offering, the maximum of the valuation range may be increased by up to 15%, or up to $11.9 million, without resoliciting subscribers, which would result in a corresponding increase of up to 15% in the maximum of the offering range to up to 1,190,250 shares, to reflect changes in the market and financial conditions or demand for the shares. We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The subscription price of $10.00 per share will remain fixed. See “—Limitations on Common Stock Purchases” as to the method of distribution and allocation of additional shares that may be issued in the event of an increase in the offering range to fill unfilled orders in the offering.

If the update to the independent valuation at the conclusion of the offering results in an increase in the maximum of the valuation range to more than $11.9 million and a corresponding increase in the offering range to more than 1,190,250 shares, or a decrease in the minimum of the valuation range to less than $7.7 million and a corresponding decrease in the offering range to fewer than 765,000 shares, then we may promptly return with interest at our current passbook savings rate of interest all funds previously delivered to us to purchase shares of common stock and cancel deposit account withdrawal authorizations, and, after consulting with the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, we may terminate the plan of conversion and reorganization. Alternatively, we may hold a new offering, establish a new offering range, extend the offering period and commence a resolicitation of subscribers or take other actions as permitted, to the extent that permission is required, by the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation in order to complete the conversion and the offering. In the event that a resolicitation is commenced, we will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. If a person does not respond, we will cancel his or her stock order and return his or her subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. Any resolicitation following the conclusion of the subscription and community offerings would not exceed 45 days unless further extended with the approval, to the extent approval is required, of the Office of Thrift Supervision, Federal Deposit Insurance

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Corporation and the Illinois Department of Financial and Professional Regulation for periods of up to 90 days.

An increase in the number of shares to be issued in the offering would decrease both a subscriber’s ownership interest and our pro forma earnings and stockholders’ equity on a per share basis while increasing pro forma earnings and stockholders’ equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber’s ownership interest and our pro forma earnings and stockholders’ equity on a per share basis, while decreasing pro forma earnings and stockholders’ equity on an aggregate basis. For a presentation of the effects of these changes, see “Pro Forma Data.”

Copies of the independent valuation appraisal report of RP Financial, LC and the detailed memorandum setting forth the method and assumptions used in the appraisal report are available for inspection at our main office and as specified under “Where You Can Find Additional Information.”

After-Market Stock Price Performance Provided by Independent Appraiser

The following table presents stock price appreciation information for all standard mutual-to-stock conversions completed between January 1, 2008 and November 27, 2009. These companies did not constitute the group of ten comparable public companies utilized in RP Financial, LC’s valuation analysis.

Mutual-to-Stock Conversion Offerings with Closing Dates between January 1, 2008 and November 27, 2009

	Conversion Date	Exchange	Percentage Price Appreciation (Depreciation) From Initial Trading Date
Company Name and Ticker Symbol			One Day		One Week		One Month		Through November 27, 2009
Territorial Bancorp, Inc. (TBNK)	07/13/2009	NASDAQ	49.9	%	47.5	%	48.7	%	67.7	%
St. Joseph Bancorp, Inc. (SJBA)	02/02/2009	OTC	0.0	%	0.0	%	0.0	%	0.0	%
Hibernia Homestead Bancorp, Inc. (HIBE)	1/28/2009	OTC	5.0	%	5.0	%	5.0	%	37.5	%
First Savings Financial Group, Inc. (FSFG)	10/7/2008	NASDAQ	(1.0	)%	(0.1	)%	(7.8	)%	4.8	%
Home Bancorp, Inc. (HBCP)	10/3/2008	NASDAQ	14.9	%	2.5	%	3.5	%	22.3	%
Cape Bancorp, Inc. (CBNJ)	2/1/2008	NASDAQ	0.5	%	(1.0	)%	(2.0	)%	(36.1	)%
Danvers Bancorp, Inc. (DNBK)	1/10/2008	NASDAQ	(2.6	)%	(3.1	)%	2.6	%	33.5	%
Average			9.5	%	7.3	%	7.1	%	18.5	%
Median			0.5	%	0.0	%	2.6	%	22.3	%

Stock price appreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s market area. The companies listed in the table above may not be similar to Harvard Illinois Bancorp, Inc., the pricing ratios for their stock offerings were in some cases different from the pricing ratios for Harvard Illinois Bancorp, Inc.’s common stock and the market conditions in which these offerings were completed were, in some cases, different from current market conditions. Any or all of these differences may cause our stock to perform differently from these other offerings.

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Subscription Offering and Subscription Rights

In accordance with the plan of conversion and reorganization, rights to subscribe for shares of common stock in the subscription offering have been granted in the following descending order of priority. The filling of all subscriptions that we receive will depend on the availability of common stock after satisfaction of all subscriptions of all persons having prior rights in the subscription offering and to the maximum, minimum and overall purchase limitations set forth in the plan of conversion and reorganization and as described below under “—Limitations on Common Stock Purchases.”

Priority 1: Eligible Account Holders. Each depositor with aggregate deposit account balances of $50.00 or more (a “Qualifying Deposit”) on June 30, 2008 (an “Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase, subject to the overall purchase limitations, up to the greater of 20,000 shares of our common stock, 0.10% of the total number of shares of common stock issued in the offering, or 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Eligible Account Holders, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will first be allocated so as to permit each Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated.

To ensure proper allocation of shares of our common stock, each Eligible Account Holder must list on his or her stock order and certification form all deposit accounts in which he or she has an ownership interest on June 30, 2008. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. In the event of an oversubscription, the subscription rights of Eligible Account Holders who are also our directors or executive officers or their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to increased deposits during the year preceding June 30, 2008.

Priority 2: Tax-Qualified Plans. Our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering.

Priority 3: Supplemental Eligible Account Holders. To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders and our tax-qualified employee benefit plans, each depositor with a Qualifying Deposit on [supplemental date] who is not an Eligible Account Holder (“Supplemental Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase up to the greater of 20,000 shares of common stock, 0.10% of the total number of shares of common stock issued in the offering, or 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Supplemental Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Supplemental Eligible Account Holders, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not

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sufficient shares available to satisfy all subscriptions, shares will be allocated so as to permit each Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Supplemental Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Supplemental Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated.

To ensure proper allocation of common stock, each Supplemental Eligible Account Holder must list on the stock order and certification form all deposit accounts in which he or she has an ownership interest at [supplemental date]. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed.

Priority 4: Other Members. To the extent that there are shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders, our tax-qualified employee benefit plans and Supplemental Eligible Account Holders, each depositor on the voting record date of [other member date] who is not an Eligible Account Holder or Supplemental Eligible Account Holder, and each former borrower of Morris Building & Loan, s.b. as of April 18, 2008 whose borrowings remain outstanding as of [other member date] who is not an Eligible Account Holder or Supplemental Eligible Account Holder (“Other Members”) will receive, without payment therefor, nontransferable subscription rights to purchase up to the greater of 20,000 shares of common stock or 0.10% of the total number of shares of common stock issued in the offering, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, available shares will be allocated so as to permit each Other Member to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Other Member whose subscription remains unfilled in the proportion that the amount of his or her subscription bears to the total amount of subscriptions of all Other Members whose subscriptions remain unfilled.

Expiration Date. The Subscription Offering will expire at 12:00 noon, Central Time, on [expiration date], unless extended by us for up to 45 days or such additional periods with the approval of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and Illinois Department of Financial and Professional Regulation, if necessary. Subscription rights will expire whether or not each eligible depositor or borrower can be located. We may decide to extend the expiration date of the subscription offering for any reason, whether or not subscriptions have been received for shares at the minimum, midpoint or maximum of the offering range. Subscription rights that have not been exercised prior to the expiration date will become void.

We will not execute orders until we have received orders to purchase at least the minimum number of shares of common stock. If we have not received orders to purchase at least 765,000 shares within 45 days after the expiration date and the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation have not consented, to the extent such consent is required, to an extension, all funds delivered to us to purchase shares of common stock in the offering will be returned promptly to the subscribers with interest at our current passbook savings rate and all deposit account withdrawal authorizations will be canceled. If an extension beyond [extension date] is granted by the required regulatory agencies, we will resolicit subscribers,

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giving them an opportunity to change or cancel their orders. We will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. If a subscriber does not respond, we will cancel his or her stock order and return his or her subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. Extensions may not go beyond [final date], which is two years after the special meeting of our members to vote on the conversion.

Community Offering

To the extent that shares of common stock remain available for purchase after satisfaction of all subscriptions of the Eligible Account Holders, our tax-qualified employee benefit plans, Supplemental Eligible Account Holders and Other Members, we may offer shares pursuant to the plan of conversion and reorganization to members of the general public in a community offering. Shares may be offered with a preference to natural persons residing in the Illinois counties of McHenry and Grundy.

Subscribers in the community offering may purchase up to 20,000 shares of common stock, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” The opportunity to purchase shares of common stock in the community offering category is subject to our right, in our sole discretion, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the expiration date of the offering.

If we do not have sufficient shares of common stock available to fill the orders of natural persons residing in the Illinois counties of McHenry and Grundy, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among natural persons residing in the Illinois counties of McHenry and Grundy, whose orders remain unsatisfied on an equal number of shares basis per order. If, after the allocation of shares to natural persons residing in the Illinois counties of McHenry and Grundy, we do not have sufficient shares of common stock available to fill the orders of other members of the general public, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among members of the general public whose orders remain unsatisfied on an equal number of shares basis per order.

The term “residing” or “resident” as used in this prospectus means any person who occupies a dwelling within the Illinois counties of McHenry and Grundy, has a present intent to remain within the community for a period of time and manifests the genuineness of that intent by establishing an ongoing physical presence within the community, together with an indication that this presence within the community is something other than merely transitory in nature. We may utilize deposit or loan records or other evidence provided to us to decide whether a person is a resident. In all cases, however, the determination shall be in our sole discretion.

Expiration Date. The community offering may begin at the same time as, during or after the subscription offering. It is currently expected to terminate at the same time as the subscription offering, although it must terminate no more than 45 days following the subscription offering. We may decide to extend the community offering for any reason and are not required to give purchasers notice of any such extension unless such period extends beyond [extension date]. If an extension beyond [extension date] is granted by the required regulatory agencies, we will resolicit persons whose orders we accept in the community offering, giving them an opportunity to change or cancel their orders. If a person does not respond, we will cancel his or her stock order and return purchase funds, with interest, and cancel any

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authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. These extensions may not go beyond [final date], which is two years after the special meeting of our members to vote on the conversion.

Syndicated Community Offering

The plan of conversion and reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Keefe, Bruyette & Woods, Inc., acting as our agent. In such capacity, Keefe, Bruyette & Woods, Inc. may form a syndicate of other broker-dealers. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, Keefe, Bruyette & Woods, Inc. has agreed to use its best efforts in the sale of shares in any syndicated community offering. The syndicated community offering would terminate no later than [extension date], unless extended by us, with any required approvals of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation. See “—Community Offering” above for a discussion of rights of persons who place orders in the syndicated community offering in the event an extension is granted.

The opportunity to order shares of common stock in the syndicated community offering is subject to our right to reject orders, in whole or in part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

Purchasers in the syndicated community offering are eligible to purchase up to 20,000 shares of common stock, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” We may begin the syndicated community offering at any time following the commencement of the subscription offering.

If we are unable to find purchasers from the general public for all unsubscribed shares, we will make other purchase arrangements, if feasible. Other purchase arrangements must receive any required approvals of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation and may provide for purchases by directors, officers, their associates and other persons in excess of the limitations provided in the plan of conversion and reorganization and in excess of the proposed director purchases discussed earlier, although no purchases are currently intended. If other purchase arrangements cannot be made, we may do any of the following: terminate the offering and promptly return all funds; set a new offering range, notify all subscribers and give them the opportunity to confirm, cancel or change their orders; or take such other actions as may be permitted by the appropriate regulatory agencies.

Limitations on Common Stock Purchases

The plan of conversion and reorganization includes the following limitations on the number of shares of common stock that may be purchased in the offering:

• No person or entity together with any associate or group of persons acting in concert may purchase more than 40,000 shares of common stock in the offering, except that our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, may purchase in the aggregate up to 10% of the shares of common stock

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issued in the offering (including shares issued in the event of an increase in the offering range of up to 15%);

• The maximum number of shares of common stock that may be purchased in all categories of the offering by our executive officers and directors and their associates, in the aggregate, may not exceed 32% of the shares issued in the offering; and

• The minimum purchase by each person purchasing shares in the offering is 25 shares, to the extent those shares are available.

Depending upon market or financial conditions, our Board of Directors, with any required approvals of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation and without further approval of our members, may decrease or increase the purchase limitations. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit. The effect of this type of resolicitation would be an increase in the number of shares of common stock owned by subscribers who choose to increase their subscriptions.

In the event of an increase in the offering range of up to 15% of the total number of shares of common stock offered in the offering, shares will be allocated in the following order of priority in accordance with the plan of conversion and reorganization:

(1) to fill our tax-qualified employee benefit plans’ subscriptions for up to 10% of the total number of shares of common stock issued in the offering;

(2) in the event that there is an oversubscription at the Eligible Account Holder, Supplemental Eligible Account Holder or Other Member levels, to fill unfulfilled subscriptions of these subscribers according to their respective priorities; and

(3) to fill unfulfilled subscriptions in the community offering, with preference given first to natural persons residing in the Illinois counties of McHenry and Grundy.

The term “associate” of a person means:

(1) any corporation or organization, other than Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank, Harvard Illinois Bancorp, Inc. or a majority-owned subsidiary of these entities, of which the person is a senior officer, partner or 10% beneficial stockholder;

(2) any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a fiduciary capacity, excluding any employee stock benefit plan in which the person has a substantial beneficial interest or serves as trustee or in a fiduciary capacity; and

(3) any blood or marriage relative of the person, who either lives in the same home as the person or who is a director or officer of Harvard Savings Bank or Harvard Illinois Bancorp, Inc.

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The term “acting in concert” means:

(1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or

(2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

A person or company that acts in concert with another person or company (“other party”) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee stock benefit plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether common stock held by the trustee and common stock held by the employee stock benefit plan will be aggregated.

Our directors are not treated as associates of each other solely because of their membership on the Board of Directors. We have the right to determine whether prospective purchasers are associates or acting in concert. Shares of common stock purchased in the offering will be freely transferable except for shares purchased by our executive officers and directors and except as described below. Any purchases made by any associate of Harvard Savings Bank or Harvard Illinois Bancorp, Inc. for the explicit purpose of meeting the minimum number of shares of common stock required to be sold in order to complete the offering shall be made for investment purposes only and not with a view toward redistribution. In addition, under the guidelines of the Financial Industry Regulatory Authority, members of the Financial Industry Regulatory Authority and their associates are subject to certain restrictions on transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of these securities. For a further discussion of limitations on purchases of shares of our common stock at the time of conversion and thereafter, see “—Certain Restrictions on Purchase or Transfer of Our Shares After Conversion” and “Restrictions on Acquisition of Harvard Illinois Bancorp, Inc.”

Marketing and Distribution; Compensation

Offering materials have been initially distributed to certain persons by mail, with additional copies made available through our Stock Information Center.

We have engaged Keefe, Bruyette & Woods, Inc., a broker-dealer registered with the Financial Industry Regulatory Authority, as a financial advisor in connection with the offering of our common stock. In its role as financial advisor, Keefe, Bruyette & Woods, Inc., will:

• provide advice on the financial and securities market implications of the plan of conversion and reorganization and related corporate documents, including our business plan;

• assist in structuring our stock offering, including developing and assisting in implementing a market strategy for the stock offering;

• review all offering documents, including this prospectus, stock order forms and related offering materials (we are responsible for the preparation and filing of such documents);

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• assist us in preparing for and scheduling meetings with potential investors and broker-dealers, as necessary;

• assist us in analyzing proposals from outside vendors retained in connection with the stock offering, including printers, transfer agents and appraisal firms;

• assist us in the drafting and distribution of press releases as required or appropriate in connection with the stock offering

• meet with the board of directors and management to discuss any of these services; and

• provide such other financial advisory and investment banking services in connection with the stock offering as may be agreed upon by Keefe, Bruyette & Woods, Inc. and us.

For these services, Keefe, Bruyette & Woods, Inc. will receive a management fee of $30,000 and a success fee of $140,000 for shares of common stock sold in the subscription offering. In addition, Keefe, Bruyette & Woods, Inc. will receive a success fee equal to 2.5% of the dollar amount of the shares of common stock sold in the community offering, with the total success fee capped at $180,000. The success fee will be reduced by the management fee. If there is a syndicated offering, Keefe, Bruyette & Woods, Inc. will receive a fee in an amount competitive with gross underwriting discounts charged at such time for underwritings of comparable amounts of common stock sold at a comparable price per share in a similar market environment. However, the total fees payable to Keefe, Bruyette & Woods, Inc. and other FINRA member firms in the syndicated offering shall not exceed 7.0% of the aggregate dollar amount of the common stock sold in the syndicated community offering.

The plan of conversion and reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Keefe, Bruyette & Woods, Inc. In such capacity, Keefe, Bruyette & Woods, Inc. may form a syndicate of other broker-dealers. Neither Keefe, Bruyette & Woods, Inc. nor any registered broker-dealer will have any obligation to take or purchase any shares of common stock in the syndicated community offering; however, Keefe, Bruyette & Woods, Inc. has agreed to use its best efforts in the sale of shares in any syndicated community offering. This fee will be in addition to the success fees earned by Keefe, Bruyette & Woods, Inc. in connection with the subscription and community offerings set forth above. Of this amount, Keefe, Bruyette & Woods, Inc. will pass on to selected broker-dealers, who assist in the syndicated community offering, an amount competitive with gross underwriting discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment. In compliance with guidelines of the Financial Industry Regulatory Authority, or FINRA, the maximum consideration or discount to be received by any FINRA member or independent broker dealer may not exceed 8% of the aggregate amount of the securities offered pursuant to this prospectus and any applicable prospectus supplement.

We also will reimburse Keefe, Bruyette & Woods, Inc. for its reasonable out-of-pocket expenses associated with its marketing effort up, up to $7,500. In addition, we will reimburse Keefe, Bruyette & Woods, Inc. for fees and expenses of its counsel not to exceed $37,500. If the plan of conversion and reorganization is terminated or if Keefe, Bruyette & Woods, Inc.’s engagement is terminated in accordance with the provisions of the agreement, Keefe, Bruyette & Woods, Inc. will only receive reimbursement of its reasonable out-of-pocket expenses and the portion of the management fee payable and will return any amounts paid or advanced by us in excess of these amounts. We will indemnify Keefe, Bruyette & Woods, Inc. against liabilities and expenses (including legal fees) related to or arising out of

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Keefe, Bruyette & Woods, Inc.’s engagement as our financial advisor and performance of services as our financial advisor.

We have also engaged Keefe, Bruyette & Woods, Inc. to act as our conversion agent in connection with the stock offering. In its role as conversion agent, Keefe, Bruyette & Woods, Inc. will, among other things:

• consolidate accounts and develop a central file;

• prepare proxy forms and proxy materials;

• tabulate proxies and ballots;

• act as inspector of election at the special meeting of members;

• assist us in establishing and managing the Stock Information Center;

• assist our financial printer with labeling of stock offering materials;

• process stock order forms and certification forms and produce daily reports and analysis;

• assist our transfer agent with the generation and mailing of stock certificates;

• advise us on interest and refund calculations; and

• create tax forms for interest reporting.

For these services, Keefe, Bruyette & Woods, Inc. will receive a fee of $15,000, and we have made an advance payment of $15,000 to Keefe, Bruyette & Woods, Inc. with respect to this fee. We also will reimburse Keefe, Bruyette & Woods, Inc. for its reasonable out-of-pocket expenses associated with its acting as conversion agent. If the plan of conversion and reorganization is terminated or if Keefe, Bruyette & Woods, Inc.’s engagement is terminated in accordance with the provisions of the agreement, Keefe, Bruyette & Woods, Inc. will be entitled to the advance payment and also receive reimbursement of its reasonable out-of-pocket expenses. We will indemnify Keefe, Bruyette & Woods, Inc. against liabilities and expenses (including legal fees) related to or arising out of Keefe, Bruyette & Woods, Inc.’s engagement as our conversion agent and performance of services as our conversion agent.

Our directors and executive officers may participate in the solicitation of offers to purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with the solicitation. Other trained employees of Harvard Savings Bank or its affiliates may assist in the offering in ministerial capacities, providing clerical work in effecting a sales transaction or answering questions of a ministerial nature. No offers or sales may be made by tellers or at the teller counters. All sales activity will be conducted in a segregated or separately identifiable area of our main office facility apart from the area accessible to the general public. Other questions of prospective purchasers will be directed to executive officers or registered representatives of Keefe, Bruyette & Woods, Inc. Our other employees have been instructed not to solicit offers to purchase shares of common stock or provide advice regarding the purchase of common stock. We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, as amended, and sales of common stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate in the sale of

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common stock. None of our officers, directors or employees will be compensated in connection with their participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the shares of common stock.

The offering will comply with the requirements of Rule 10b-9 under the Securities Exchange Act of 1934.

Procedure for Purchasing Shares

Expiration Date. The offering will expire at 12:00 noon, Central Time, on [expiration date], unless we extend it for up to 45 days. This extension may be approved by us, in our sole discretion, without further approval or additional notice to purchasers in the offering. Any extension of the subscription and/or community offering beyond [extension date] would require the Office of Thrift Supervision’s, Federal Deposit Insurance Corporation’s and the Illinois Department of Financial and Professional Regulation’s approval. If an extension beyond [extension date] is granted by the appropriate regulatory agencies, we will resolicit subscribers/persons who place orders, giving them an opportunity to change or cancel their orders. We will notify these persons of the extension of time and of the rights to place a new stock order for a specified period of time. If a person does not respond, we will cancel his or her stock order and return his or her subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. If we have not received orders to purchase the minimum number of shares offered in the offering by the expiration date or any extension thereof, we may terminate the offering and promptly refund all funds received for shares of common stock. If the number of shares offered is reduced below the minimum of the offering range, or increased above the adjusted maximum of the offering range, subscribers may be resolicited with any required approvals of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation.

To ensure that each purchaser receives a prospectus at least 48 hours before [expiration date], the expiration date of the offering, in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days prior to the expiration date or hand delivered any later than two days prior to the expiration date. Execution of an order form will confirm receipt of delivery in accordance with Rule 15c2-8. Order forms will be distributed only with a prospectus. Subscription funds will be maintained in a segregated account at Harvard Savings Bank or at another insured depository institution and will earn interest at our current passbook savings rate from the date of receipt.

We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal orders and promptly return all funds delivered to us, with interest at our current passbook savings rate from the date of receipt.

We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion and reorganization.

Use of Order Forms. In order to purchase shares of common stock in the subscription offering and community offering, you must complete an order form and remit full payment. We will not be required to accept incomplete order forms, unsigned order forms, orders submitted on photocopied or facsimiled order forms. We must receive all order forms prior to 12:00 noon, Central Time, on [expiration date]. We are not required to accept order forms that are not received by that time, are executed

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defectively or are received without full payment or without appropriate withdrawal instructions. A postmark prior to [expiration date] will not entitle you to purchase shares of common stock unless we receive the envelope by [expiration date]. We are not required to notify subscribers of incomplete or improperly executed order forms. We have the right to permit the correction of incomplete or improperly executed order forms or waive immaterial irregularities. We do not represent, however, that we will do so and we have no affirmative duty to notify any prospective subscriber of any such defects. You may submit your order form and payment by mail using the return envelope provided, by bringing your order form to our Stock Information Center or to any branch office or by overnight delivery to the indicated address on the order form. Once tendered, an order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering. If you are ordering shares, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. Our interpretation of the terms and conditions of the plan of conversion and reorganization and of the acceptability of the order forms will be final, subject to any required approvals of the Office of Thrift Supervision, Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation.

By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by Harvard Savings Bank or the federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Payment for Shares. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares may be made by:

(1) personal check, bank check or money order, payable to Harvard Illinois Bancorp, Inc.; or

(2) authorization of withdrawal from Harvard Savings Bank deposit accounts designated on the order form.

Appropriate means for designating withdrawals from deposit accounts at Harvard Savings Bank are provided in the order forms. The funds designated must be available in the account(s) at the time the order form is received. A hold will be placed on these funds, making them unavailable to the depositor. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the offering is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be canceled at the time of withdrawal without penalty and the remaining balance will be transferred to a savings account and earn interest at our current passbook savings rate subsequent to the withdrawal. In the case of payments made by check or money order, these funds must be available in the account(s) and will be immediately cashed and placed in a segregated account at Harvard Savings Bank and/or another insured depository institution and will earn interest at our current passbook savings rate from the date payment is received until the offering is completed or terminated.

You may not use a check drawn on an Harvard Savings Bank line of credit, and we will not accept third-party checks (a check written by someone other than you) payable to you and endorsed over to Harvard Illinois Bancorp, Inc. If you request that we place a hold on your checking account for the

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subscription amount, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account. Once we receive your executed order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time.

If you are interested in using your individual retirement account funds to purchase shares of common stock, you must do so through a self-directed individual retirement account such as a brokerage firm individual retirement account. By regulation, Harvard Savings Bank’s individual retirement accounts are not self-directed, so they cannot be invested in shares of our common stock. Therefore, if you wish to use your funds that are currently in an Harvard Savings Bank individual retirement account, you may not designate on the order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will have to be transferred to a brokerage account. It may take several weeks to transfer your Harvard Savings Bank individual retirement account to an independent trustee, so please allow yourself sufficient time to take this action. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. Depositors interested in using funds in an individual retirement account or any other retirement account to purchase shares of common stock should contact our Stock Information Center as soon as possible, preferably at least two weeks prior to the end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

We will have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe in the syndicated community offering at any time prior to the completion of the offering. This payment may be made by wire transfer.

Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until consummation of the offering, provided there is a loan commitment from an unrelated financial institution or Harvard Illinois Bancorp, Inc. to lend to the employee stock ownership plan the necessary amount to fund the purchase.

Regulations prohibit Harvard Savings Bank from knowingly lending funds or extending credit to any persons to purchase shares of common stock in the offering.

Delivery of Stock Certificates. Certificates representing shares of common stock issued in the offering and Harvard Savings Bank checks representing any applicable refund and/or interest paid on subscriptions made by check or money order will be mailed to the persons entitled thereto at the certificate registration address noted on the order form, as soon as practicable following consummation of the offering and receipt of all necessary regulatory approvals. Any certificates returned as undeliverable will be held by the transfer agent until claimed by persons legally entitled thereto or otherwise disposed of in accordance with applicable law. Until certificates for the shares of common stock are available and delivered to purchasers, purchasers may not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading.

Other Restrictions. Notwithstanding any other provision of the plan of conversion and reorganization, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state “blue sky” regulations, or

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would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country.

Restrictions on Transfer of Subscription Rights and Shares

Applicable regulations prohibit any person with subscription rights, including the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion and reorganization or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering.

We intend to pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

Stock Information Center

If you have any questions regarding the offering, please call or visit our Stock Information Center, toll free, at [stock info #], Monday through Friday between 9:00 a.m. and 4:00 p.m., Central Time, or visit the Stock Information Center located at 58 North Ayer Street, Harvard, Illinois. The Stock Information Center will be closed weekends and bank holidays.

Liquidation Rights

In the unlikely event of a complete liquidation of Harvard Savings Bank prior to the conversion, all claims of creditors of Harvard Savings Bank, including those of depositors of Harvard Savings Bank (to the extent of their deposit balances), would be paid first. Then, if there were any assets of Harvard Savings Bank remaining, members of Harvard Savings Bank would receive those remaining assets, pro rata, based upon the deposit balances in their deposit account in Harvard Savings Bank immediately prior to liquidation. In the unlikely event that Harvard Savings Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by distribution of the “liquidation account” to certain depositors, with any assets remaining thereafter distributed to Harvard Illinois Bancorp, Inc. as the holder of Harvard Savings Bank capital stock. Pursuant to the rules and regulations of the Office of Thrift Supervision, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation and, in these types of transactions, the liquidation account would be assumed by the surviving institution.

The plan of conversion and reorganization provides for the establishment, upon the completion of the conversion, of a special “liquidation account” for the benefit of Eligible Account Holders and

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Supplemental Eligible Account Holders in an amount equal to the total equity of Harvard Savings, MHC as of the date of its latest balance sheet contained in this prospectus.

The purpose of the liquidation account is to provide Eligible Account Holders and Supplemental Eligible Account Holders who maintain their deposit accounts with Harvard Savings Bank after the conversion with a liquidation interest in the unlikely event of the complete liquidation of Harvard Savings Bank after the conversion. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at Harvard Savings Bank, would be entitled, on a complete liquidation of Harvard Savings Bank after the conversion, to an interest in the liquidation account prior to any payment to the stockholders of Harvard Illinois Bancorp, Inc. Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial interest in the liquidation account for each deposit account, including savings accounts, transaction accounts such as negotiable order of withdrawal accounts, money market deposit accounts, and certificates of deposit, with a balance of $50 or more held in Harvard Savings Bank on June 30, 2008 and [supplemental date], respectively. Each Eligible Account Holder and Supplemental Eligible Account Holder would have a pro rata interest in the total liquidation account for each such deposit account, based on the proportion that the balance of each such deposit account on June 30, 2008 and [supplemental date], respectively, bears to the balance of all deposit accounts in Harvard Savings Bank on such dates.

If, however, on any December 31 annual closing date commencing on or after the effective date of the conversion, the amount in any such deposit account is less than the amount in the deposit account on June 30, 2008 and [supplemental date], as applicable, or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Payment pursuant to liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders would be separate and apart from the payment of any insured deposit accounts to such depositor. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be distributed to Harvard Illinois Bancorp, Inc., as the sole stockholder of Harvard Savings Bank.

Material Income Tax Consequences

Consummation of the conversion is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal and state income taxation that the conversion will not be a taxable transaction to Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank, Harvard Illinois Bancorp, Inc., Eligible Account Holders, Supplemental Eligible Account Holders and Other Members. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank or Harvard Illinois Bancorp, Inc. would prevail in a judicial proceeding.

Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank and Harvard Illinois Bancorp, Inc. have received an opinion of counsel, Luse Gorman Pomerenk & Schick, P.C., regarding all of the material federal income tax consequences of the conversion, which includes the following:

1. The conversion of Harvard Illinois Financial Corporation to a federally chartered interim stock savings bank will qualify as a tax-free reorganization within the meaning of Section

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368(a)(1)(F) of the Internal Revenue Code, and the merger of Harvard Illinois Financial Corporation with and into Harvard Savings Bank qualifies as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code.

2. Neither Harvard Illinois Financial Corporation, Harvard Savings Bank, nor Harvard Savings, MHC will recognize any gain or loss upon the transfer of assets of Harvard Illinois Financial Corporation to Harvard Savings Bank in exchange for shares of common stock of Harvard Savings Bank, which will be constructively received by Harvard Savings, MHC. (Sections 361 and 1032(a) of the Internal Revenue Code).

3. The basis of the assets of Harvard Illinois Financial Corporation and the holding period of such assets to be received by Harvard Savings Bank will be the same as the basis and holding period in such assets in the hands of Harvard Illinois Bancorp, Inc. immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code).

4. The conversion of Harvard Savings, MHC to a federally chartered interim stock savings bank will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code and the merger of Harvard Savings, MHC with and into Harvard Savings Bank qualifies as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code.

5. The exchange of Eligible Account Holders’ and Supplemental Account Holders’ interests in Harvard Savings, MHC for interests in a liquidation account established in Harvard Savings Bank will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.

6. None of Harvard Savings, MHC, Harvard Savings Bank, nor Eligible Account Holders, Supplemental Eligible Account Holders or Other Members, will recognize any gain or loss on the transfer of the assets of Harvard Savings, MHC to Harvard Savings Bank in exchange for an interest in a liquidation account established in Harvard Savings Bank for the benefit of Eligible Account Holders and Supplemental Eligible Account holders who remain depositors of Harvard Savings Bank and nontransferable subscription rights to purchase shares of Harvard Illinois Bancorp, Inc. common stock.

7. It is more likely than not that the nontransferable subscription rights have no value, based on the fact that these rights are acquired by the recipients without cost, are nontransferable and of short duration, and afford the recipients the right only to purchase the common stock at a price equal to its estimated fair market value, which will be the same price as the subscription price for the shares of common stock in the offering. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or Other Members upon distribution to them of nontransferable subscription rights to purchase shares of Harvard Illinois Bancorp, Inc. common stock, provided that the amount to be paid for Harvard Illinois Bancorp, Inc. common stock is equal to the fair market value of Harvard Illinois Bancorp, Inc. common stock.

8. The basis of the shares of Harvard Illinois Bancorp, Inc. common stock purchased in the offering will be the purchase price. The holding period of the Harvard Illinois Bancorp, Inc. common stock purchased pursuant to the exercise of nontransferable subscription rights will commence on the date on which the right to acquire such stock was exercised.

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9. No gain or loss will be recognized by Harvard Illinois Bancorp, Inc. on the receipt of money in exchange for shares of Harvard Illinois Bancorp, Inc. common stock sold in the offering.

In the view of RP Financial, LC (which is acting as independent appraiser of the value of the shares of Harvard Illinois Bancorp, Inc. common stock in connection with the conversion), which view is not binding on the Internal Revenue Service, the subscription rights do not have any value for the reasons set forth above. If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise the subscription rights in an amount equal to their value, and Harvard Illinois Bancorp, Inc. could recognize gain on a distribution. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

The Internal Revenue Service has announced that it will not issue private letter rulings with respect to the issue of whether nontransferable rights have value. Unlike private letter rulings, an opinion of counsel or the view of an independent appraiser is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached therein. Depending on the conclusion or conclusions with which the Internal Revenue Service disagrees, the Internal Revenue Service may take the position that the transaction is taxable to any one or more of Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank, the members of Harvard Savings, MHC, Harvard Illinois Bancorp, Inc. and the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise their subscription rights. In the event of a disagreement, there can be no assurance that Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Illinois Bancorp, Inc. or Harvard Savings Bank would prevail in a judicial or administrative proceeding.

The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to Harvard Illinois Bancorp, Inc.’s registration statement. Advice regarding the Illinois state income tax consequences consistent with the federal tax opinion has been issued by Lindgren, Callihan, Van Osdol & Co., Ltd., tax advisors to Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank and Harvard Illinois Bancorp, Inc.

Restrictions on Purchase or Transfer of Our Shares after Conversion

The shares being acquired by the directors, executive officers and their associates are being acquired for investment purposes, and not with a view towards resale. All shares of common stock purchased in the offering by a director or an officer of Harvard Savings Bank generally may not be sold for a period of one year following the closing of the conversion, except in the event of the death of the director or officer. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or record ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split or otherwise with respect to the restricted stock will be similarly restricted. The directors and executive officers of Harvard Illinois Bancorp, Inc. also will be restricted by the insider trading rules promulgated pursuant to the Securities Exchange Act of 1934.

Purchases of shares of our common stock by any of our directors, officers and their associates, during the three-year period following the closing of the conversion may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval

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of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock, to purchases of our common stock to fund stock options by one or more stock-based benefit plans or to any of our tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any stock-based benefit plans.

Applicable regulations prohibit Harvard Illinois Bancorp, Inc. from repurchasing its shares of common stock during the first year following conversion unless compelling business reasons exist for such repurchases. After one year, applicable regulations do not impose any repurchase restrictions.

RESTRICTIONS ON ACQUISITION OF HARVARD ILLINOIS BANCORP, INC.

Although the Board of Directors of Harvard Illinois Bancorp, Inc. is not aware of any effort that might be made to obtain control of Harvard Illinois Bancorp, Inc. after the conversion, the Board of Directors believes that it is appropriate to include certain provisions as part of Harvard Illinois Bancorp, Inc.’s articles of incorporation to protect the interests of Harvard Illinois Bancorp, Inc. and its stockholders from takeovers which our Board of Directors might conclude are not in the best interests of Harvard Savings Bank, Harvard Illinois Bancorp, Inc. or Harvard Illinois Bancorp, Inc.’s stockholders.

The following discussion is a general summary of the material provisions of Harvard Illinois Bancorp, Inc.’s articles of incorporation and bylaws, Harvard Savings Bank’s articles of incorporation and bylaws, Maryland corporate law and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The following description of certain of these provisions is necessarily general and, with respect to provisions contained in Harvard Illinois Bancorp, Inc.’s articles of incorporation and bylaws and Harvard Savings Bank’s articles of incorporation and bylaws, reference should be made in each case to the document in question, each of which is part of Harvard Savings Bank’s applications with the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation and Harvard Illinois Bancorp, Inc.’s registration statement filed with the Securities and Exchange Commission. See “Where You Can Find Additional Information.”

Harvard Illinois Bancorp, Inc.’s Articles of Incorporation and Bylaws

Harvard Illinois Bancorp, Inc.’s articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of stockholders that might discourage future takeover attempts. As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the Board of Directors or management of Harvard Illinois Bancorp, Inc. more difficult.

Directors. The Board of Directors will be divided into three classes. The members of each class will be elected for a term of three years and only one class of directors will be elected annually. Thus, it would take at least two annual elections to replace a majority of our directors. The bylaws establish qualifications for board members, including restrictions on affiliations with competitors of Harvard Savings Bank and prior legal or regulatory violations. Further, the bylaws impose notice and information requirements in connection with the nomination by stockholders of candidates for election to the Board of Directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders. Such notice and information requirements are applicable to all stockholder business proposals and nominations, and are in addition to any requirements under the federal securities laws.

Evaluation of Offers. The articles of incorporation of Harvard Illinois Bancorp, Inc. provide that its Board of Directors, when evaluating a transaction that would or may involve a change in control of Harvard Illinois Bancorp, Inc. (whether by purchases of its securities, merger, consolidation, share

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exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of Harvard Illinois Bancorp, Inc. and its stockholders and in making any recommendation to the stockholders, give due consideration to all relevant factors, including, but not limited to:

• the economic effect, both immediate and long-term, upon Harvard Illinois Bancorp, Inc.’s stockholders, including stockholders, if any, who do not participate in the transaction;

• the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Harvard Illinois Bancorp, Inc. and its subsidiaries and on the communities in which Harvard Illinois Bancorp, Inc. and its subsidiaries operate or are located;

• whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of Harvard Illinois Bancorp, Inc.;

• whether a more favorable price could be obtained for Harvard Illinois Bancorp, Inc.’s stock or other securities in the future;

• the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Harvard Illinois Bancorp, Inc. and its subsidiaries;

• the future value of the stock or any other securities of Harvard Illinois Bancorp, Inc. or the other entity to be involved in the proposed transaction;

• any antitrust or other legal and regulatory issues that are raised by the proposal;

• the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and

• the ability of Harvard Illinois Bancorp, Inc. to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations.

If the Board of Directors determines that any proposed transaction should be rejected, it may take any lawful action to defeat such transaction.

Restrictions on Call of Special Meetings. The bylaws provide that, unless approved by unaffiliated directors, special meetings of stockholders can be called by only the President, a majority of the total number of directors that Harvard Illinois Bancorp, Inc. would have if there were no vacancies on the Board of Directors (the “whole board”), or the Secretary upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.

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Prohibition of Cumulative Voting. The articles of incorporation prohibit cumulative voting for the election of directors.

Limitation of Voting Rights. The articles of incorporation provide that in no event will any person who beneficially owns more than 10% of the then-outstanding shares of common stock, be entitled or permitted to vote any of the shares of common stock held in excess of the 10% limit; provided that such 10% limit shall not apply if a majority of the unaffiliated directors approve the acquisition of shares in excess of the 10% limit prior to such acquisition.

Restrictions on Removing Directors from Office. The articles of incorporation provide that directors may be removed only for cause, and only by the affirmative vote of the holders of at least 80% of the voting power of all of our then-outstanding capital stock entitled to vote generally in the election of directors (after giving effect to the limitation on voting rights discussed above in “—Limitation of Voting Rights”), voting together as a single class.

Authorized but Unissued Shares. After the conversion, Harvard Illinois Bancorp, Inc. will have authorized but unissued shares of common and preferred stock. See “Description of Capital Stock.” The articles of incorporation authorize 1,000,000 shares of serial preferred stock. Harvard Illinois Bancorp, Inc. is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of such shares. In addition, the articles of incorporation provide that a majority of the whole board may, without action by the stockholders, amend the articles of incorporation to increase or decrease the aggregate number of shares of stock of any class or series that Harvard Illinois Bancorp, Inc. has the authority to issue. In the event of a proposed merger, tender offer or other attempt to gain control of Harvard Illinois Bancorp, Inc. that the board of directors does not approve, it would be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of Harvard Illinois Bancorp, Inc. The board of directors has no present plan or understanding to issue any preferred stock.

Amendments to Articles of Incorporation and Bylaws. Except as provided under “— Authorized but Unissued Shares,” above, regarding the amendment of the articles of incorporation by the Board of Directors to increase or decrease the number of shares authorized for issuance, or as otherwise allowed by law, any amendment to the articles of incorporation must be approved by our Board of Directors and also by a majority of the outstanding shares of our voting stock; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend the following provisions:

(i) The limitation on voting rights of persons who directly or indirectly beneficially own more than 10% of the outstanding shares of common stock;

(ii) The division of the board of directors into three staggered classes;

(iii) The ability of the board of directors to fill vacancies on the board;

(iv) The requirement that at least 80% of stockholders must vote to remove directors, and can only remove directors for cause;

(v) The ability of the board of directors to amend and repeal the bylaws;

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(vi) The ability of the board of directors to evaluate a variety of factors in evaluating offers to purchase or otherwise acquire Harvard Illinois Bancorp, Inc.;

(vii) The authority of the board of directors to provide for the issuance of preferred stock;

(viii) The validity and effectiveness of any action lawfully authorized by the affirmative vote of the holders of a majority of the total number of outstanding shares of common stock;

(ix) The number of stockholders constituting a quorum or required for stockholder consent;

(x) The indemnification of current and former directors and officers, as well as employees and other agents, by Harvard Illinois Bancorp, Inc.; and

(xi) The limitation of liability of officers and directors to Harvard Illinois Bancorp, Inc. for money damages.

(xii) The provision of the articles of incorporation requiring approval of at least 80% of the outstanding voting stock to amend the provisions of the articles of incorporation provided in (i) through (xi) of this list.

The articles of incorporation also provide that the bylaws may be amended by the affirmative vote of a majority of our directors or by the stockholders by the affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders. Any amendment of this supermajority requirement for amendment of the bylaws would also require the approval of 80% of the outstanding voting stock.

Maryland Corporate Law

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and transfers, liquidation plans and reclassifications involving interested stockholders and their affiliates or issuance or reclassification of equity securities. Maryland law defines an interested stockholder as: (i) any person who beneficially owns 10% or more of the voting power of a corporation's voting stock after the date on which the corporation had 100 or more beneficial owners of its stock; or (ii) an affiliate or associate of the corporation at any time after the date on which the corporation had 100 or more beneficial owners of its stock who, within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (ii) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom

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or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if the corporation's common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

Conversion Regulations

Illinois Department of Financial and Professional Regulation regulations prohibit any person from making an offer, announcing an intent to make an offer or participating in any other arrangement to purchase stock or acquiring stock or subscription rights in a converting institution or its holding company from another person prior to completion of its conversion. Further, without the prior written approval of the Illinois Department of Financial and Professional Regulation, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10% of the outstanding stock of the institution or its holding company. The Illinois Department of Financial and Professional Regulation has defined “person” to include any individual, group acting in concert, corporation, partnership, association, joint stock company, trust, unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution. However, offers made exclusively to a bank or its holding company, or an underwriter or member of a selling group acting on the converting institution’s or its holding company’s behalf for resale to the general public are excepted. The regulation also provides civil penalties for willful violation or assistance in any such violation of the regulation by any person connected with the management of the converting institution or its holding company or who controls more than 10% of the outstanding shares or voting rights of a converted institution or its holding company.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company unless the Office of Thrift Supervision has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition. In addition, Office of Thrift Supervision regulations provide that no company may acquire control of a savings and loan holding company without the prior approval of the Office of Thrift Supervision.

Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the Office of Thrift Supervision that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock, if the acquirer is also subject to any one of eight “control factors,” constitutes a rebuttable determination of control under the regulations. Such control factors include the acquirer being one of the two largest stockholders. The determination of control may be rebutted by submission to the Office of Thrift Supervision, prior to the acquisition of stock or the occurrence of any other circumstances giving rise to such determination, of a statement setting forth facts and circumstances which would support a finding that no control relationship will exist and containing certain undertakings. The regulations provide that persons or companies that acquire beneficial ownership exceeding 10% or more of any class of a savings and loan holding company’s stock who do not intend to participate in or seek to exercise control over a savings and loan holding company’s management or policies may qualify for a safe harbor by filing with the Office of Thrift Supervision a certification form that states, among

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other things, that the holder is not in control of such institution, is not subject to a rebuttable determination of control and will take no action which would result in a determination or rebuttable determination of control without prior notice to or approval of the Office of Thrift Supervision, as applicable. There are also rebuttable presumptions in the regulations concerning whether a group “acting in concert” exists, including presumed action in concert among members of an “immediate family.”

The Office of Thrift Supervision may prohibit an acquisition of control if it finds, among other things, that:

• the acquisition would result in a monopoly or substantially lessen competition;

• the financial condition of the acquiring person might jeopardize the financial stability of the institution;

• the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person; or

• the acquisition would have an adverse effect on the Deposit Insurance Fund.

DESCRIPTION OF CAPITAL STOCK

General

At the effective date, Harvard Illinois Bancorp, Inc. will be authorized to issue 30,000,000 shares of common stock, par value of $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share. Harvard Illinois Bancorp, Inc. currently expects to issue in the offering up to 1,190,250 shares of common stock. Harvard Illinois Bancorp, Inc. will not issue shares of preferred stock in the conversion. Each share of Harvard Illinois Bancorp, Inc. common stock will have the same relative rights as, and will be identical in all respects to, each other share of common stock. Upon payment of the subscription price for the common stock, in accordance with the plan of conversion and reorganization, all of the shares of common stock will be duly authorized, fully paid and nonassessable.

The shares of common stock of Harvard Illinois Bancorp, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency.

Common Stock

Dividends. Harvard Illinois Bancorp, Inc. can pay dividends on its common stock if, after giving effect to the distribution, it would be able to pay its indebtedness as the indebtedness comes due in the usual course of business and its total assets exceed the sum of its liabilities and the amount needed, if Harvard Illinois Bancorp, Inc. were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any holders of capital stock who have a preference in the event of dissolution. The holders of common stock of Harvard Illinois Bancorp, Inc. will be entitled to receive and share equally in dividends as may be declared by our Board of Directors out of funds legally available therefor. If Harvard Illinois Bancorp, Inc. issues shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights. Upon consummation of the conversion, the holders of common stock of Harvard Illinois Bancorp, Inc. will have exclusive voting rights in Harvard Illinois Bancorp, Inc. They will elect

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Harvard Illinois Bancorp, Inc.’s Board of Directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the Board of Directors. Generally, each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of the then-outstanding shares of Harvard Illinois Bancorp, Inc.’s common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If Harvard Illinois Bancorp, Inc. issues shares of preferred stock, holders of the preferred stock may also possess voting rights. Certain matters require an 80% stockholder vote.

As a stock savings bank, corporate powers and control of Harvard Savings Bank are vested in its Board of Directors, who elect the officers of Harvard Savings Bank and who fill any vacancies on the Board of Directors. Voting rights of Harvard Savings Bank are vested exclusively in the owners of the shares of capital stock of Harvard Savings Bank, which will be Harvard Illinois Bancorp, Inc., and voted at the direction of Harvard Illinois Bancorp, Inc.’s Board of Directors. Consequently, the holders of the common stock of Harvard Illinois Bancorp, Inc. will not have direct control of Harvard Savings Bank.

Liquidation. In the event of any liquidation, dissolution or winding up of Harvard Savings Bank, Harvard Illinois Bancorp, Inc., as the holder of 100% of Harvard Savings Bank’s capital stock, would be entitled to receive all assets of Harvard Savings Bank available for distribution, after payment or provision for payment of all debts and liabilities of Harvard Savings Bank, including all deposit accounts and accrued interest thereon, and after distribution of the balance in the liquidation account to Eligible Account Holders and Supplemental Eligible Account Holders. In the event of liquidation, dissolution or winding up of Harvard Illinois Bancorp, Inc., the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of Harvard Illinois Bancorp, Inc. available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

Preemptive Rights. Holders of the common stock of Harvard Illinois Bancorp, Inc. will not be entitled to preemptive rights with respect to any shares that may be issued, unless such preemptive rights are approved by the Board of Directors. The common stock is not subject to redemption.

Preferred Stock

None of the shares of Harvard Illinois Bancorp, Inc.’s authorized preferred stock will be issued as part of the offering or the conversion. Preferred stock may be issued with preferences and designations as our Board of Directors may from time to time determine. Our Board of Directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

TRANSFER AGENT

The transfer agent and registrar for Harvard Illinois Bancorp, Inc.’s common stock is Registrar and Transfer Company, Cranford, New Jersey.

EXPERTS

The consolidated financial statements of Harvard Savings, MHC and subsidiaries as of September 30, 2009 and 2008, and for each of the years in the two-year period ended December 31, 2008, have been included herein and in the registration statement in reliance upon the report of BKD,

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LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

RP Financial, LC has consented to the publication herein of the summary of its report to Harvard Illinois Bancorp, Inc. setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and offering and its letter with respect to subscription rights.

LEGAL AND TAX MATTERS

Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to Harvard Illinois Bancorp, Inc. and Harvard Savings Bank, will issue to Harvard Illinois Bancorp, Inc. its opinions regarding the legality of the common stock and the federal income tax consequences of the conversion. Luse Gorman Pomerenk & Schick, P.C. has consented to the references in this prospectus to its opinions. Lindgren, Callihan, Van Osdol & Co., Ltd. will issue to Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Illinois Bancorp, Inc. and Harvard Savings Bank its opinion regarding the Illinois income tax consequences of the conversion. Lindgren, Callihan, Van Osdol & Co., Ltd., Rockford, Illinois has consented to the reference in this prospectus to its opinion. Certain legal matters will be passed upon for Keefe, Bruyette and Woods, Inc. by Vedder Price P.C., Chicago, Illinois.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Harvard Illinois Bancorp, Inc. has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 with respect to the shares of common stock offered hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus does not contain all the information set forth in the registration statement. Such information, including the appraisal report which is an exhibit to the registration statement, can be examined without charge at the public reference facilities of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549, and copies of such material can be obtained from the Securities and Exchange Commission at prescribed rates. The Securities and Exchange Commission telephone number is 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission, including Harvard Illinois Bancorp, Inc. The statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are, of necessity, brief descriptions of the material terms of, and should be read in conjunction with, such contract or document.

Harvard Savings Bank has filed with the Office of Thrift Supervision an Application on Form AC with respect to the conversion. This prospectus omits certain information contained in the application. The application may be examined at the principal office of the Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and at the Central Regional Office of the Office of Thrift Supervision, located at One South Wacker Drive, Suite 200, Chicago, Illinois 60606. The application filed with the Federal Deposit and Insurance Corporation may be inspected, without charge, at the Chicago Regional Office, 500 West Monroe Street, Suite 3300, Chicago, Illinois 60661. The application filed with the Illinois Department of Financial and Professional Regulation may be inspected without charge, at the Illinois Department of Financial and Professional Regulation, 122 South Michigan Avenue, Suite 1900 Chicago, Illinois 60603. Our Plan of conversion and reorganization is available, upon request, at each of our branch offices.

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In connection with the offering, Harvard Illinois Bancorp, Inc. will register its common stock under Section 12(g) of the Securities Exchange Act of 1934 and, upon such registration, Harvard Illinois Bancorp, Inc. and the holders of its common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on common stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting and certain other requirements of the Securities Exchange Act of 1934. Under the plan of conversion and reorganization, Harvard Illinois Bancorp, Inc. has undertaken that it will not terminate such registration for a period of at least three years following the offering.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF

HARVARD SAVINGS, MHC

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at September 30, 2009 (Unaudited); December 31, 2008 and 2007	F-3
Consolidated Statements of Income for the nine months ended September 30, 2009 and 2008 (Unaudited) and the years ended and December 31, 2008 and 2007	F-5
Consolidated Statements of Equity	F-7
Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (Unaudited) and the years ended and December 31, 2008 and 2007	F-8
Notes to Consolidated Financial Statements Nine months ended September 30, 2009 and 2008 (Unaudited) and the years ended December 31, 2008 and 2007	F-10

***

Separate financial statements for Harvard Illinois Bancorp Inc. have not been included in this prospectus because Harvard Illinois Bancorp Inc. has not engaged in any significant activities, has no significant assets, and has no contingent liabilities, revenue or expenses.

All financial statement schedules have been omitted as the required information either is not applicable or is included in the financial statements or related notes.

All financial information as of and for the nine months ended September 30, 2009 and 2008 is unaudited.

Pursuant to Securities and Exchange Commission regulations, Harvard Illinois Bancorp, Inc. is a smaller reporting company as it will have a public float of less than $75 million.

F-1

Report of Independent Registered Public Accounting Firm

Audit Committee and Board of Directors

Harvard Savings, MHC

Harvard, Illinois

We have audited the accompanying consolidated balance sheets of Harvard Savings, MHC (Company) as of December 31, 2008 and 2007, and the related consolidated statements of income, equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedure that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harvard Savings, MHC as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 18, during 2008 Morris Building & Loan, s.b. (Bank) merged with and into the Company in a transaction accounted for in a manner similar to a pooling of interest method with the Company being the surviving entity. The Company’s financial statements have been restated as though the Company and Bank had been combined for all periods presented.

As discussed in Note 15, in 2008 the Company changed its method of accounting for fair value measurements in accordance with Statement of Financial Accounting Standards No. 157.

Decatur, Illinois

May 26, 2009, except for Notes 20, 21 and 22 as to which the date is December 23, 2009

F-2

Harvard Savings, MHC

Consolidated Balance Sheets

(in thousands)

Assets

	September 30, 2009 (Unaudited)		December 31,
			2008		2007 (See Note 18)
Cash and due from banks	$	1,016	$	996	$	1,236
Interest-bearing demand deposits		1,743		3,473		2,458
Securities purchased under agreements to resell		12,250		9,550		7,300
Cash and cash equivalents		15,009		14,019		10,994
Interest-bearing deposits with other financial institutions		7,216		—		—
Available-for-sale securities		3,647		5,498		13,690
Held-to-maturity securities, at amortized cost (estimated fair value of $4,387 at September 30, 2009 (unaudited), and $1,684 and $981 at December 31, 2008 and 2007, respectively)		4,164		1,596		1,020
Loans, net of allowance for loan losses of $1,275 at September 30, 2009 (unaudited), and $1,000 and $675 at December 31, 2008 and 2007, respectively		110,226		120,749		117,822
Premises and equipment, net		3,663		3,684		3,229
Federal Home Loan Bank stock, at cost		6,549		6,549		6,549
Foreclosed assets held for sale		216		718		40
Accrued interest receivable		472		491		584
Deferred income taxes		1,280		1,092		—
Bank-owned life insurance		3,957		3,892		3,752
Mortgage servicing rights		380		301		329
Other		417		64		326
Total assets	$	157,196	$	158,653	$	158,335

See Notes to Consolidated Financial Statements

F-3

Harvard Savings, MHC

Consolidated Balance Sheets

(in thousands)

Liabilities and Equity

	September 30, 2009 (Unaudited)		December 31,
			2008		2007 (See Note 18)
Liabilities
Deposits
Demand	$	2,872	$	3,908	$	3,650
Savings, NOW and money market		48,748		42,277		38,075
Certificates of deposit		68,141		67,289		68,225
Brokered certificates of deposit		2,820		3,828		3,828
Total deposits		122,581		117,302		113,778
Federal Home Loan Bank advances		19,778		26,064		27,225
Advances from borrowers for taxes and insurance		180		453		427
Deferred compensation		2,071		1,913		1,514
Deferred income taxes		—		—		168
Accrued interest payable		93		139		154
Other		313		255		975
Total liabilities		145,016		146,126		144,241
Commitments and Contingencies
Equity
Retained earnings		12,096		12,512		13,703
Accumulated other comprehensive income, net of tax		84		15		391
Total equity		12,180		12,527		14,094
Total liabilities and equity	$	157,196	$	158,653	$	158,335

See Notes to Consolidated Financial Statements

F-4

Harvard Savings, MHC

Consolidated Statements of Income

(in thousands)

	Nine Months Ended September 30,						Years Ended December 31,
	2009			2008						2007
	(Unaudited)			(Unaudited)			2008			(See Note 18)
Interest and Dividend Income
Interest and fees on loans	$	5,379		$	5,944		$	7,837		$	7,477
Securities
Taxable		268			290			348			507
Tax-exempt		26			94			108			180
Dividends on Federal Home Loan Bank stock		—			—			—			218
Securities purchased under agreements to resell		185			164			204			415
Other		121			33			54			179
Total interest and dividend income		5,979			6,525			8,551			8,976
Interest Expense
Deposits		2,270			2,950			3,813			4,195
Federal Home Loan Bank advances and other borrowings		718			855			1,119			1,229
Total interest expense		2,988			3,805			4,932			5,424
Net Interest Income		2,991			2,720			3,619			3,552
Provision for (Credit to) Loan Losses		1,048			248			634			(180	)
Net Interest Income After Provision for (Credit to) Loan Losses		1,943			2,472			2,985			3,732
Noninterest Income (Loss)
Customer service fees		179			182			125			152
Brokerage commission income		51			76			113			75
Net realized gains on loan sales		265			45			16			56
Net realized gains (losses) on sales of available-for-sale securities		(7	)		(67	)		(66	)		11
Losses on other than temporary impairment of equity securities		(45	)		(1,074	)		(1,248	)		(167	)
Loan servicing fees, net		124			112			152			82
Bank-owned life insurance income, net		122			107			135			134
Other		10			9			115			110
Total noninterest income (loss)		699			(610	)		(658	)		453

See Notes to Consolidated Financial Statements

F-5

Harvard Savings, MHC

Consolidated Statements of Income

(in thousands)

	Nine Months Ended September 30,						Years Ended December 31,
	2009 (Unaudited)			2008 (Unaudited)			2008			2007 (See Note 18)
Noninterest Expense
Compensation and benefits	$	1,683		$	1,746		$	2,396		$	2,297
Office occupancy		395			438			627			599
Data processing		389			495			555			451
Professional fees		54			82			115			238
Marketing expense		91			78			109			110
Office supplies		41			58			90			51
Federal deposit insurance		227			46			48			10
Indirect automobile servicing fee		164			208			276			277
Losses on foreclosed assets, net		113			61			172			6
Bank merger expenses		—			55			55			618
Other		125			203			140			198
Total noninterest expense		3,282			3,470			4,583			4,855
Loss Before Income Taxes		(640	)		(1,608	)		(2,256	)		(670	)
Provision (Benefit) for Income Taxes		(224	)		(865	)		(1,065	)		4
Net Loss	$	(416	)	$	(743	)	$	(1,191	)	$	(674	)

See Notes to Consolidated Financial Statements

F-6

Harvard Savings, MHC

Consolidated Statements of Equity

(in thousands)

	Retained Earnings			Accumulated Other Comprehensive Income, net of tax			Total Equity
Balance, January 1, 2007 (See Note 18)	$	14,377		$	1,051		$	15,428
Comprehensive loss
Net loss		(674	)		—			(674	)
Change in unrealized appreciation on available-for-sale securities, net of tax benefit of $(381)		—			(660	)		(660	)
Total comprehensive loss								(1,334	)
Balance, December 31, 2007		13,703			391			14,094
Comprehensive loss
Net loss		(1,191	)		—			(1,191	)
Change in unrealized appreciation on available-for-sale securities, net of tax benefit of ($199)		—			(376	)		(376	)
Total comprehensive loss								(1,567	)
Balance, December 31, 2008		12,512			15			12,527
Comprehensive loss (unaudited)
Net Loss (unaudited)		(416	)		—			(416	)
Change in unrealized appreciation on available-for-sale securities, net of tax expense of $36 (unaudited)		—			69			69
Total comprehensive loss (unaudited)								(347	)
Balance, September 30, 2009 (unaudited)	$	12,096		$	84		$	12,180

See Notes to Consolidated Financial Statements

F-7

Harvard Saving, MHC

Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,						Years Ended December 31,
	2009 (Unaudited)			2008 (Unaudited)			2008			2007 (See Note 18)
Operating Activities
Net loss	$	(416	)	$	(743	)	$	(1,191	)	$	(674	)
Items not requiring (providing) cash
Depreciation		161			169			180			240
Provision for (credit to) loan losses		1,048			248			634			(180	)
Amortization of premiums and discounts on securities		(10	)		(9	)		44			8
Deferred income taxes		(224	)		(855	)		(1,061	)		(3	)
Net realized gains on loan sales		(186	)		(23	)		(34	)		(8	)
Net realized (gains) losses on sales of available-for-sale securities		7			67			66			(11	)
Loss on other than temporary impairment of equity securities		45			1,074			1,248			167
Loss on foreclosed assets held for sale		66			12			75			—
Bank-owned life insurance income, net		(65	)		(106	)		(140	)		(134	)
Originations of loans held for sale		(24,224	)		(6,354	)		(7,838	)		(4,992	)
Proceeds from sales of loans held for sale		24,410			6,377			7,872			5,000
Changes in
Accrued interest receivable		19			33			93			29
Other assets		(432	)		226			289			716
Accrued interest payable		(46	)		2			(15	)		(14	)
Other liabilities		216			(208	)		(325	)		489
Net cash provided by (used in) operating activities		369			(90	)		(103	)		633
Investing Activities
Net change in interest-bearing deposits		(7,216	)		—			—			—
Purchases of available-for-sale securities		(17	)		(156	)		(170	)		(3,330	)
Proceeds from the sales of available-for-sale securities		495			4,496			4,140			1,724
Proceeds from maturities and pay-downs of available-for-sale securities		1,427			1,818			2,336			4,479
Purchases of held-to-maturity securities		(4,460	)		(1,004	)		(1,048	)		—
Proceeds from maturities and pay-downs of held-to-maturity securities		1,901			150			430			141
Net change in loans		9,319			(5,768	)		(4,323	)		(6,715	)
Purchase of premises and equipment		(140	)		(660	)		(645	)		(846	)
Proceeds from sale of premises and equipment		—			8			10			—
Proceeds from sale of foreclosed assets		592			18			9			—
Purchase of bank-owned life insurance		—			—			—			(877	)
Net cash provided by (used in) investing activities		1,901			(1,098	)		739			(5,424	)

See Notes to Consolidated Financial Statements

F-8

Harvard Saving, MHC

Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,						Years Ended December 31,
	2009 (Unaudited)			2008 (Unaudited)			2008			2007 (See Note 18)
Financing Activities
Net increase (decrease) in demand deposits, money market, NOW and savings accounts	$	5,435		$	3,204		$	4,460		$	(1,336	)
Net increase (decrease) in certificates of deposit		(156	)		1,070			(936	)		3,501
Net increase (decrease) in advances from borrowers for taxes and insurance		(273	)		(95	)		26			13
Proceeds from Federal Home Loan Bank advances		4,928			12,393			8,972			12,460
Repayments of Federal Home Loan Bank advances		(11,214	)		(13,104	)		(10,133	)		(12,820	)
Net cash provided by (used in) financing activities		(1,280	)		3,468			2,389			1,818
Net Increase (Decrease) in Cash and Cash Equivalents		990			2,280			3,025			(2,973	)
Cash and Cash Equivalents, Beginning of Period		14,019			10,994			10,994			13,967
Cash and Cash Equivalents, End of Period	$	15,009		$	13,274		$	14,019		$	10,994
Supplemental Cash Flows Information
Interest paid	$	3,034		$	3,803		$	4,947		$	5,348
Income taxes paid (net of refunds)		—			—			—			—
Foreclosed assets acquired in settlement of loans		156			867			850			—

See Notes to Consolidated Financial Statements

F-9

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Harvard Savings, MHC (Company) owns 100% of the outstanding shares of common stock of Harvard Illinois Financial Corporation, a federal corporation, which in turn owns 100% of the outstanding shares of common stock of Harvard Savings Bank (Bank). The Company is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers in McHenry and Grundy Counties. The Company also provides other services, such as accounting and brokerage services. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

The financial information included herein as of September 30, 2009 and for the interim periods ended September 30, 2009 and 2008 is unaudited; however, in the opinion of management the information reflects all adjustments (consisting solely of normal recurring adjustments) that are necessary for a fair presentation. The results shown for nine months ended September 30, 2009 are not necessarily indicative of the results to be obtained for a full year.

Principles of Consolidation

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

Operating Segment

The Company provides community banking services, including such products and services as loans, certificates of deposits, savings accounts, mortgage originations and brokerage services. These activities are reported as a single operating segment.

The Company does not derive revenues from, or have assets located in, foreign countries, nor does it derive revenues from any single customer that represents 10% or more of the Company’s total revenues.

Use of Estimates

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

F-10

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of foreclosed assets held for sale, review for other-than-temporary impairment of securities, Federal Home Loan Bank stock impairment, and income tax accruals and deferrals. In connection with the determination of the allowance for loan losses and valuation of foreclosed assets held for sale, management obtains independent appraisals for significant properties. In connection with the determination of other-than-temporary impairment of securities and Federal Home Loan Bank stock impairment, management performed an analysis based on the present value of the cash flows of securities and the Federal Home Loan Bank’s current activities. The Company performed an analysis to determine that deferred tax assets are realizable based upon the historical level of taxable income and estimates of future taxable income.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2009 (unaudited), and December 31, 2008 and 2007, cash equivalents consisted primarily of interest-bearing demand deposits and securities purchased under agreements to resell.

The financial institutions holding the Company’s cash accounts are participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. On May 20, 2009, the increased coverage levels were extended to December 31, 2013.

Effective October 3, 2008, the FDIC’s insurance limits increased to $250,000. The increase in federally insured limits is currently set to expire December 31, 2009. At September 30, 2009 (unaudited), and December 31, 2008, none of the Company’s interest-bearing cash accounts exceeded federally insured limits.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on amortized cost of the specific security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income (loss).

Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts.

Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

F-11

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Generally, loans are placed on non-accrual status at ninety days past due and interest is considered a loss, unless the loan is well-secured and in the process of collection. When interest accrual is discontinued, all unpaid accrued interest is reversed against interest income. The interest on these loans is generally accounted for on a cost recovery basis, meaning interest is not recognized until the full past due balance has been collected. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

F-12

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Groups of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for premises and equipment are: Buildings and improvements 5 – 50 years; Furniture and equipment 5 – 10 years, including software of 3 years.

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula.

The Company owned $6,549 of Federal Home Loan Bank stock as of September 30, 2009 (unaudited), and December 31, 2008 and 2007. During the third quarter of 2007, the Federal Home Loan Bank of Chicago (FHLB) received a Cease and Desist Order from their regulator, the Federal Housing Finance Board. The order prohibits capital stock repurchases and redemptions until a time to be determined by the Federal Housing Finance Board. The FHLB will continue to provide liquidity and funding through advances. With regard to dividends, the FHLB will continue to assess their dividend capacity each quarter and make appropriate request for approval. The FHLB did not pay a dividend during 2008 or through September 30, 2009 (unaudited). Management performed an analysis as of September 30, 2009 (unaudited), and as of December 31, 2008 and 2007 and deemed the investment in FHLB stock was not other than temporarily impaired.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

Banks-owned Life Insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.

F-13

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Fee Income

Loan origination fees, net of direct origination costs, are recognized as income using the level-yield method over the term of the loans. Brokerage commissions represents fees earned on brokerage activities and are recognized when earned.

Mortgage Servicing Rights

Mortgage servicing rights on originated loans that have been sold are recorded at fair value with changes in fair value included in earnings in the period the change occurs.

Income Taxes

Deferred tax assets and liabilities are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. The Company files consolidated income tax returns with its subsidiaries. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

Reclassifications

Certain reclassifications have been made to the 2007 financial statements to conform to the 2008 financial statement presentation. Certain reclassifications have been made to the 2008 financial statements to conform to the 2009 (unaudited) financial statement presentation. These reclassifications had no effect on net income or equity.

Recent and Future Accounting Requirements

On January 1, 2008, Harvard Savings, MHC adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a comprehensive framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. Specifically, SFAS No. 157 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The adoption and application of SFAS No. 157 did not have a material impact on the Company’s 2008 consolidated financial statements.

F-14

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment to FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in Statement 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. The FASB’s stated objective in issuing this standard is as follows: “to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.”

The fair value option established by Statement 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. Statement 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Harvard Savings, MHC did not elect to apply the provisions of FASB Statement No. 159.

In December 2007, the FASB issued Statement No. 141R (revised 2007), Business Combinations, which replaced Statement No. 141. Statement No. 141R retains the fundamental requirements of Statement No. 141, but revises certain principles, including the definition of a business combination, the recognition, and measurement of assets acquired and liabilities assumed in a business combination, the accounting for goodwill, and financial statement disclosure. This statement is effective for annual periods beginning after December 15, 2008. The Company is evaluating the impact, if any, the adoption of FASB Statement No. 141R did not have an effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting No. 160 (“FAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” The Statement requires that a noncontrolling interest in a subsidiary be reported separately within equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in deconsolidation. FAS 160 is effective for fiscal years beginning after December 15, 2008. Subsequent to year end, the Company adopted FAS 160, which did not have a material impact on the Company’s consolidated financial statements.

F-15

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

In March 2008, the FASB issued Statement of Financial Accounting No. 161 (“FAS 161”), “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” This Statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. FAS 161 is effective for fiscal years beginning after November 15, 2008. The implementation of FAS 161 did not have a material impact on the Company’s consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting No. 162 (“FAS 162”), “The Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement became effective on November 15, 2008. The application of FAS 162 did not have a material impact on the Company’s consolidated financial statements.

In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment and Interest Income Measurement Guidance of EITF Issue 99-20,” to amend the impairment guidance in EITF Issue No. 99-20 in order to achieve more consistent determination of whether an other-than-temporary impairment (‘OTTI”) has occurred. Prior to this FSP, the impairment model in EITF 99-20 was different from FASB Statement No. 115 (“FAS 115”), “Accounting for Certain Investments in Debt and Equity Securities.” This FSP amended EITF 99-20 to more closely align the OTTI guidance therein to the guidance in FAS 115. Retrospective application to a prior interim or annual period is prohibited. The implementation of this FSP did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued three amendments to the fair value measurement, disclosure and other-than-temporary impairment standards:

• FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are Not Orderly.”

• FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.”

• FAS 107 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.”

FASB Statement of Financial Accounting No. 157 (“FAS 157”), “Fair value Measurements,” defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FAS 157-4 provided additional guidance on identifying circumstances when a transaction may not be considered orderly.

F-16

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with FAS 157.

FAS 157-4 clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of evidence to determine whether the transaction is orderly. It also provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

FAS 115-2 and FAS 124-2 clarifies the interaction of the factors that should be considered when determining whether a debt security is other–than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for anticipated recovery in fair value to avoid recognizing an other-than-temporary impairment. This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FAS 115-2 and FAS 124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

FAS 107-1 and APB 28-1 amends FASB Statement No. 107 (“FAS 107”), “ Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FAS 107-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods.

F-17

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

All three FASB Staff Positions discussed herein include substantial additional disclosure requirements. The effective date for these new standards is the same: interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. However, early adoption is allowed only if certain FASB Staff Positions are early adopted together. The Company adopted the new standards as of June 30, 2009, and the adoption did not have a material impact on the Company’s consolidated financial statements.

Note 2: Securities

The amortized cost and approximate fair values of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
Available-for-sale Securities:
September 30, 2009 (Unaudited):
U.S. government agencies	$	1,017	$	41	$	—		$	1,058
Mortgage-backed securities		1,447		35		—			1,482
State and political subdivisions		582		1		—			583
Equity securities		473		51		—			524
	$	3,519	$	128	$	—		$	3,647
December 31, 2008:
U.S. government agencies	$	1,214	$	29	$	—		$	1,243
Mortgage-backed securities		2,020		14		(18	)		2,016
State and political subdivisions		1,240		16		(18	)		1,238
Equity securities		1,001		—		—			1,001
	$	5,475	$	59	$	(36	)	$	5,498

F-18

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
December 31, 2007:
U.S. government agencies	$	2,575	$	—	$	(13	)	$	2,562
Mortgage-backed securities		2,574		34		(14	)		2,594
State and political subdivisions		4,585		64		(3	)		4,646
Equity securities		3,358		530		—			3,888
	$	13,092	$	628	$	(30	)	$	13,690

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
Held-to-maturity Securities:
September 30, 2009 (Unaudited):
U.S. government agencies	$	500	$	44	$	—	$	544
Mortgage-backed securities		46		—		—		46
Collateralized mortgage obligations		3,518		176		—		3,694
State and political subdivisions		100		3		—		103
	$	4,164	$	223	$	—	$	4,387
December 31, 2008:
U.S. government agencies	$	500	$	66	$	—	$	566
Mortgage-backed securities		52		1		—		53
Collateralized mortgage obligation		944		19		—		963
State and political subdivisions		100		2		—		102
	$	1,596	$	88	$	—	$	1,684

F-19

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Approximate Fair Value
Held-to-maturity Securities:
December 31, 2007:
U.S. government agencies	$	849	$	—	$	(38	)	$	811
Mortgage-backed securities		70		—		—			70
State and political subdivisions		101		—		(1	)		100
	$	1,020	$	—	$	(39	)	$	981

With the exception of obligations of U.S. Treasury and other U.S. government agencies and corporations and a collateralized mortgage obligation with a book value and fair value of $1.4 million at September 30, 2009, the Company held no securities at September 30, 2009 with a book value that exceeded 10% of total equity.

All mortgage-backed securities at September 30, 2009 (unaudited), and December 31, 2008 and 2007 were issued by government sponsored enterprises.

As of September 30, 2009 (unaudited), and December 31, 2008 and 2007, the Company had held to maturity investments in privately-issued collateralized mortgage obligations with a carrying value of $3,518, $944, and $0, respectively. The investments had market values of $3,694, $963, and $0, respectively. Management performed an analysis and deemed the investments in private-issued collateralized mortgage obligations were not impaired.

Available for sale equity securities consist of shares in the Shay Asset Management mutual funds, shares of FHLMC and FNMA common stock, and shares in other financial institutions.

The Company recorded an other-than-temporary impairment on the FNMA and FHLMC common stock included in equity securities of $5, $757, $792 and $106 in the nine-month periods in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively. As of September 30, 2009 (unaudited), and December 31, 2008, the Company held investments in FNMA and FHLMC common stock with an amortized cost of $23 and $28, respectively. The investments in FNMA and FHLMC common stock are valued using available market prices. Management performed an analysis and deemed the remaining investment in FNMA and FHLMC common stock was not other than temporarily impaired as of September 30, 2009 (unaudited).

F-20

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The Company also recorded an other than temporary impairment on the Shay Asset Management mutual funds included in equity securities in the amount of $29, $317, $456 and $61 for the nine-month periods in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively. As of September 30, 2009 (unaudited), and December 31, 2008, the Company held investments in the mutual funds with an amortized cost of $419 and $931, respectively. The investments in mutual funds are valued using available market prices. Management performed an analysis and deemed the remaining investment in the mutual funds was not other than temporarily impaired as of September 30, 2009 (unaudited).

The Company recorded an other-than-temporary impairment on other equity securities of $11 and $0 for the months ended September 30, 2009 and 2008, respectively. As of September 30, 2009 (unaudited), and December 31, 2008. The Company held investments in other equity securities with an amortized cost of $31 and $42, respectively.

The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at September 30, 2009 (unaudited), and December 31, 2008, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2009 (unaudited):

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	32	$	32	$	—	$	—
One to five years		1,160		1,201		600		647
Five to ten years		228		228		—		—
After ten years		179		180		—		—
		1,599		1,641		600		647
Mortgage-backed securities		1,447		1,482		46		46
Collateralized mortgage obligations		—		—		3,518		3,694
Equity securities		473		524		—		—
Totals	$	3,519	$	3,647	$	4,164	$	4,387

F-21

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

December 31, 2008:

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	30	$	30	$	—	$	—
One to five years		1,351		1,380		100		102
Five to ten years		845		857		500		566
After ten years		228		214		—		—
		2,454		2,481		600		668
Mortgage-backed securities		2,020		2,016		52		53
Collateralized mortgage obligations		—		—		944		963
Equity securities		1,001		1,001		—		—
Totals	$	5,475	$	5,498	$	1,596	$	1,684

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $3,100 at September 30, 2009 (unaudited), $3,057 at December 31, 2008 and $1,797 at December 31, 2007.

Gross gains of $0, $23, $23 and $25 and gross losses of $7, $90, $89 and $14 resulting from sales of available-for-sale securities were realized for the nine-month periods in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively. The tax provision (benefit) applicable to these net realized gains (losses) amounted to $(2), $(23), $(22), and $4, respectively.

Certain investments in debt and marketable equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2009 (unaudited), and December 31, 2008 and 2007, was $0, $1,011 and $3,766, respectively, which is approximately 0%, 14% and 26% of the Company’s available-for-sale and held-to-maturity investment portfolio. These declines primarily resulted from recent increases in market interest rates and failure of certain investments to maintain consistent credit quality ratings.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified. Other than temporary impairment was recorded during the nine-month periods in 2009 and 2008 (unaudited), and for 2008 and 2007 and totaled $45, $1,074, $1,248 and $167, respectively as previously described.

F-22

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The following table shows our investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	September 30, 2009 (Unaudited)
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage-backed securities	$	—	$	—		$	—	$	—		$	—	$	—
State and political subdivisions		—		—			—		—			—		—
Total temporarily impaired securities	$	—	$	—		$	—	$	—		$	—	$	—
	December 31, 2008
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. government agencies	$	—	$	—		$	—	$	—		$	—	$	—
Mortgage-backed securities		557		(18	)		—		—			557		(18	)
State and political subdivisions		290		(3	)		164		(15	)		454		(18	)
Equity securities		—		—			—		—			—		—
Total temporarily impaired securities	$	847	$	(21	)	$	164	$	(15	)	$	1,011	$	(36	)

F-23

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

	December 31, 2007
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. government agencies	$	239	$	(9	)	$	2,514	$	(42	)	$	2,753	$	(51	)
Mortgage-backed securities		—		—			735		(14	)		735		(14	)
State and political subdivisions		—		—			278		(4	)		278		(4	)
Total temporarily impaired securities	$	239	$	(9	)	$	3,527	$	(60	)	$	3,766	$	(69	)

Note 3: Securities Purchased Under Agreements to Resell

The Company enters into purchases of securities under agreements to resell. The amounts advanced under these agreements were $12,250, $9,550 and $7,300 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively, and represent short-term SBA loans. The securities underlying the agreements are book-entry securities. During the period, the securities were delivered by appropriate entry into the third-party custodian’s account designated by the Company under a written custodial agreement that explicitly recognizes the Company’s interest in the securities. At September 30, 2009 (unaudited), and December 31, 2008, these agreements mature by notice by the Company or 30 days by the custodian. At September 30, 2009 (unaudited), and December 31, 2008 and 2007, $6,200, $8,800 and $7,300 of the agreements to resell securities purchased were outstanding with the BCM High Income Fund, LP. As of December 31, 2008, the remainder of the agreements were with Coastal Securities. As of September 30, 2009 (unaudited), the remainder of the agreements were with Solomon Hoss and Coastal Securities. The Company’s policy requires that all securities purchased under agreements to resell be fully collateralized.

F-24

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 4: Loans and Allowance for Loan Losses

Categories of loans include:

	September 30, 2009		December 31,
	(Unaudited)		2008		2007
Real estate
One-to-four family	$	55,920	$	62,809	$	58,704
Home equity lines of credit and other 2nd mortgages		11,670		11,115		9,778
Multi-family residential		178		1,114		1,349
Commercial		19,610		16,340		16,425
Construction and land development		5,572		6,112		4,815
Commercial and industrial		5,858		5,308		4,785
Indirect automobile, net of dealer reserve		12,625		18,203		23,191
Other consumer		556		916		1,123
Total loans		111,989		121,917		120,170
Less
Loans in process		458		123		1,593
Net deferred loan fees and costs		30		45		80
Allowance for loan losses		1,275		1,000		675
Net loans	$	110,226	$	120,749	$	117,822

Activity in the allowance for loan losses was as follows:

	September 30,
	2009			2008			December 31,
	(Unaudited)			(Unaudited)			2008			2007
Balance, beginning of period	$	1,000		$	675		$	675		$	681
Provision for (credit to) loan losses		1,048			248			634			(180	)
Recoveries		25			17			18			311
Loans charged off		(798	)		(226	)		(327	)		(137	)
Balance, end of period	$	1,275		$	714		$	1,000		$	675

F-25

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The Company has a program of purchasing participations in indirect new and used vehicle loans from two different sources. The amount of vehicle loan participations outstanding as of September 30, 2009 (unaudited), and December 31, 2008 and 2007, represented 11%, 15% and 17%, respectively of the total loans outstanding. The amounts shown in the previous table are net of the dealer reserve amount of $218, $373 and $461 as of September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively.

Impaired loans totaled $3,758, $3,106 and $1,660 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively. An allowance for loan losses of $394, $411 and $145 relates to impaired loans of $1,872, $1,856 and $988, at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively. At September 30, 2009 (unaudited), and December 31, 2008 and 2007, impaired loans of $1,886, $1,250 and $672, respectively, had no related allowance for loan losses.

Interest of $68, $31, $54 and $67 was recognized on average impaired loans of $3,432, $1,921, $2,383 and $1,399 for the nine-month periods in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively. Interest of $123, $160, $219 and $54 was recognized on impaired loans on a cash basis during the nine-month period in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively.

At September 30, 2009 (unaudited), and December 31, 2008 and 2007, accruing loans delinquent 90 days or more totaled $34, $23 and $0, respectively. Non-accruing loans at September 30, 2009 (unaudited), and December 31, 2008 and 2007 were $2,616, $2,730 and $1,248, respectively. The following table includes the amount of restructured loans as of September 30, 2009 (unaudited) and December 31, 2008 and 2007.

	September 30,			December 31,
	2009			2008			2007
Amount restructured	$	794		$	990		$	—
Weighted average interest rate
Pre-restructuring		6.75	%		7.05	%		—
Post-restructuring		4.50	%		4.39	%		—

F-26

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 5: Premises and Equipment

Major classifications of premises and equipment, stated at cost, are as follows:

	September 30, 2009		December 31,
	(Unaudited)		2008		2007
Land	$	403	$	403	$	403
Buildings and improvements		5,940		5,833		4,551
Furniture and equipment		2,414		2,293		2,165
Construction in progress		—		—		817
		8,757		8,529		7,936
Less accumulated depreciation		5,094		4,845		4,707
Net premises and equipment	$	3,663	$	3,684	$	3,229

Construction work in progress represented a remodeling project at the main bank. The project was completed in February 2008 and transferred to buildings and improvements.

Note 6: Loan Servicing

Residential mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others was $61,235, $50,513, $47,683 and $50,624 at September 30, 2009 and 2008 (unaudited), and December 31, 2008 and 2007, respectively. The Company has a credit enhancement obligation to individual loan losses, to the limit of $932, $987 and $814 at September 30, 2009 (unaudited) and December 31, 2008 and 2007, respectively. Management has determined that the allowance for losses on loans is adequate to cover possible future losses from its credit enhancement obligation.

Custodial escrow balances in connection with the foregoing loan servicing were approximately $167, $143, $329 and $296 at September 30, 2009 and 2008 (unaudited), and December 31, 2008 and 2007, respectively.

Other aggregate fair value of capitalized mortgage servicing rights at September 30, 2009 and 2008 (unaudited), and December 31, 2008 and 2007 was $380, $341, $301 and $329, respectively. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, custodial earnings rate, default rates and losses, and prepayment speeds.

F-27

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Activity in the balance of servicing assets was as follows:

	September 30,
	2009			2008			December 31,
	(Unaudited)			(Unaudited)			2008			2007
Fair value, beginning of period	$	301		$	329		$	329		$	367
Additions
Purchase of servicing assets		151			41			46			43
Less loans refinanced		(67	)		(42	)		—			—
Changes in fair value, due to changes in valuation inputs or assumptions		(5	)		13			(74	)		(81	)
Fair value, end of period	$	380		$	341		$	301		$	329

Note 7: Deposits

Interest-bearing deposits in denominations of $100,000 or more were $22,321, $19,448 and $20,562 on September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively.

The following table represents deposit interest expense by deposit type:

	September 30,				December 31,
	2009		2008		2008		2007
Demand	$	78	$	168	$	206	$	234
Savings, NOW and Money Market		312		422		538		616
Certificates of deposit		1,780		2,219		2,879		3,211
Brokered certificates of deposit		100		141		190		134
Total deposit interest expense	$	2,270	$	2,950	$	3,813	$	4,195

F-28

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

At September 30, 2009, the scheduled maturities of time and brokered time deposits are as follows:

October 1 – December 31, 2009	$	8,084
2010		32,698
2011		17,955
2012		6,028
2013		441
Thereafter		5,755
	$	70,961

At December 31, 2008, the scheduled maturities of time and brokered time deposits are as follows:

2009	$	41,101
2010		8,117
2011		13,737
2012		2,374
2013		105
Thereafter		5,683
	$	71,117

Note 8: Federal Home Loan Bank Advances

The Federal Home Loan Bank (“FHLB”) advances and lines of credit consisted of the following components:

	September 30, 2009		December 31,
	(Unaudited)		2008		2007
Open line of credit, 3.96% at December 31, 2007	$	—	$	—	$	218
Advances		19,778		26,064		27,007
Total	$	19,778	$	26,064	$	27,225

The Federal Home Loan Bank advances and line of credit are secured by mortgage loans totaling $45,457 and $45,713 at September 30, 2009 (unaudited) and December 31, 2008, respectively. Advances at September 30, 2009 (unaudited) and December 31, 2008 at interest rates from 2.08% to 5.36% and 0.45% to 6.95%, are subject to restrictions or penalties in the event of prepayment.

F-29

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Annual maturities of the advances at September 30, 2009 (unaudited) are:

October 1 – December 31, 2009	$	2,850
2010		5,731
2011		3,638
2012		2,228
2013		3,386
Thereafter		1,945
	$	19,778

Annual maturities of the advances at December 31, 2008, are:

2009	$	12,315
2010		5,731
2011		3,638
2012		953
2013		1,603
Thereafter		1,824
	$	26,064

Note 9: Income Taxes

The provision (benefit) for income taxes includes these components:

	September 30,
	2009			2008			December 31,
	(Unaudited)			(Unaudited)			2008			2007
Taxes currently payable (refundable)	$	—		$	(10	)	$	(4	)	$	7
Deferred income taxes		(224	)		(855	)		(1,061	)		(3	)
Income tax expense (benefit)	$	(224	)	$	(865	)	$	(1,065	)	$	4

F-30

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

A reconciliation of income tax expense (benefit) at the statutory rate to the Company’s actual income tax expense is shown below:

	September 30,
	2009			2008			December 31,
	(Unaudited)			(Unaudited)			2008			2007
Computed at the statutory rate (34%)	$	(218	)	$	(547	)	$	(767	)	$	(228	)
Decrease resulting from
Tax exempt interest		(8	)		(27	)		(31	)		(51	)
Nondeductible expenses		1			17			18			39
State income taxes		—			—			—			(40	)
Changes in deferred tax valuation allowance		(74	)		(344	)		(344	)		319
Cash surrender value of life insurance		(42	)		(33	)		(43	)		(46	)
Other		117			69			102			11
Actual tax expense (benefit)	$	(224	)	$	(865	)	$	(1,065	)	$	4
Tax rate (benefit) as a percentage of pre-tax loss		(35.0	)%		(53.8	)%		(47.2	)%		.6	%

F-31

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

	September 30, 2009 (Unaudited)			December 31,
				2008			2007
Deferred tax assets
Allowance for loan losses	$	519		$	213		$	6
Accrued employee benefits		704			650			305
Net operating loss carryforwards		794			680			542
Loss on other than temporary impairment of equity securities		334			519			57
Deferred compensation		—			—			329
Deductible merger expenses		—			—			199
Other		—			137			47
		2,351			2,199			1,485
Deferred tax liabilities
Depreciation		(99	)		(134	)		(98	)
FHLB stock dividends		(415	)		(415	)		(438	)
Unrealized gains on available-for-sale securities		(44	)		(8	)		(207	)
Mortgage servicing rights		(129	)		(102	)		(118	)
Other		(10	)		—			—
		(697	)		(659	)		(861	)
Net deferred tax asset before valuation allowance		1,654			1,540			624
Valuation allowance
Beginning balance		448			792			473
Increase (decrease) during the period		(74	)		(344	)		319
Ending balance		374			448			792
Net deferred tax asset (liability)	$	1,280		$	1,092		$	(168	)

F-32

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

At September 30, 2009 (unaudited), December 31, 2008 and 2007, the Company’s deferred tax asset relating to losses on other than temporary impairment of equity securities resulted in capital losses. Management has established a valuation allowance for the portion of the deferred tax asset as realization of the asset does not meet the “more likely than not” criteria. The carryback period on these losses is three years and the carryforward period is five years from the date of sale. As of December 31, 2008, the Company had not sold any of these securities. During the period ended September 30, 2009 (unaudited), the Company sold securities and was able to carryback the capital losses to prior periods, thereby decreasing the deferred tax asset and related valuation allowance. The carryback of the capital losses generated additional net operating losses for the prior carryback years.

At September 30, 2009 (unaudited), and December 31, 2008 and 2007, the Company had federal net operating loss carryforwards totaling approximately $2,335, $2,000 and $1,095, respectively, which expire in varying amounts between 2024 and 2028.

At September 30, 2009 (unaudited), and December 31, 2008 and 2007, the Company had Illinois net operating loss carryforwards totaling approximately $4,776, $4,396 and $3,482, respectively, which will expire in varying amounts between 2015 and 2020. Management has not recorded a deferred tax asset for the state net operating loss carryforwards.

The decrease in the valuation allowance for the year ended December 31, 2008, was due to the reversal of the previous valuation allowance related to the net operating losses for Morris Building and Loan, s.b. The decrease in the valuation allowance for the period ended September 30, 2009 (unaudited) was due to the carryback of capital losses realized to previous years. Management believes Harvard Savings, MHC will produce taxable earnings in the future which will enable the net operating loss carryforwards to be utilized prior to expiration.

Retained earnings at September 30, 2009 (unaudited), and December 31, 2008 and 2007, include approximately $2,434 for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liability on the preceding amount that would have been recorded if they were expected to reverse into taxable income in the foreseeable future was approximately $925 at September 30, 2009 (unaudited) and December 31, 2008 and 2007.

F-33

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of SFAS No, 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 as of January 1, 2007, and the adoption had no significant impact on the Company’s consolidated financial statements. The Company and subsidiaries file income tax returns in the U.S federal jurisdiction and the state jurisdiction of Illinois. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2005.

Note 10: Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes were as follows:

	September 30, 2009 (Unaudited)			December 31,
				2008			2007
Net unrealized gains (losses) on securities available-for-sale	$	53		$	(1,889	)	$	(1,197	)
Less reclassification adjustment for realized gains (losses) on sales of securities included in income		(7	)		(66	)		11
Less reclassification adjustment for loss on other than temporary impairment of equity securities		(45	)		(1,248	)		(167	)
Other comprehensive income (loss), before tax effect		105			(575	)		(1,041	)
Less tax expense (benefit)		36			(199	)		(381	)
Other comprehensive income (loss)	$	69		$	(376	)	$	(660	)

F-34

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	September 30, 2009 (Unaudited)			December 31,
				2008			2007
Net unrealized gain on securities available-for-sale	$	128		$	23		$	598
Tax effect		(44	)		(8	)		(207	)
Net-of-tax amount	$	84		$	15		$	391

Note 11: Regulatory Matters

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table). Management believes, as of September 30, 2009 (unaudited) and December 31, 2008 and 2007, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2008, the most recent notification from regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

F-35

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Then Bank’s actual capital amounts and ratios are also presented in this table:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2009 (Unaudited)
Total capital (to risk-weighted assets)	$	12,236	11.4	%	$	8,581	8.0	%	$	10,726	10.0	%
Tier I capital (to risk-weighted assets)		10,961	10.2	%		4,291	4.0	%		6,436	6.0	%
Tier I capital (to average assets)		10,961	6.9	%		6,338	4.0	%		7,923	5.0	%
As of December 31, 2008
Total capital (to risk-weighted assets)	$	12,369	11.0	%	$	8,959	8.0	%	$	11,199	10.0	%
Tier I capital (to risk-weighted assets)		11,369	10.2	%		4,480	4.0	%		6,719	6.0	%
Tier I capital (to average assets)		11,369	7.2	%		6,329	4.0	%		7,912	5.0	%

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2007
Total capital (to risk-weighted assets)	$	14,484	12.9	%	$	9,053	8.0	%	$	11,317	10.0	%
Tier I capital (to risk-weighted assets)		13,570	12.1	%		4,527	4.0	%		6,790	6.0	%
Tier I capital (to average assets)		13,570	8.6	%		6,271	4.0	%		7,839	5.0	%

F-36

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The following is a reconciliation of the Bank equity amount included in the consolidated balance sheets to the amounts reflected above for regulatory capital purposes:

	September 30, 2009 (Unaudited)		December 31,
			2008		2007
Bank equity	$	12,083	$	12,414	$	13,996
Less net unrealized gains (losses)		84		15		391
Less disallowed servicing amounts		38		30		35
Less disallowed deferred tax assets		1,000		1,000		—
Tier 1 capital		10,961		11,369		13,570
Plus allowance for loan losses		1,275		1,000		675
Plus unrealized gains on available-for-sale equity securities		—		—		239
Total risked-based capital	$	12,236	$	12,369	$	14,484

Note 12: Restriction on Dividends

Without prior approval, the Bank is restricted by Illinois law and regulations of the Illinois Department of Financial and Professional Regulation, State of Illinois, and the Federal Deposit Insurance Corporation as to the maximum amount of dividends it can pay to the Company to the balance of the undivided profits account, adjusted for defined bad debts. As a practical matter, the Bank restricts dividends to a lesser amount because of the need to maintain an adequate capital structure.

F-37

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 13: Related Party Transactions

At September 30, 2009 (unaudited), December 31, 2008 and 2007, the Company had loans outstanding to executive officers, directors and their affiliates (related parties). Changes in loans to executive officers and directors are summarized as follows:

	September 30, 2009 (Unaudited)			December 31,
				2008			2007
Balance beginning of year	$	1,200		$	1,469		$	1,682
New loans		306			—			—
Repayments		(252	)		(269	)		(213	)
Balance, end of year	$	1,254		$	1,200		$	1,469

Deposits from related parties held by the Company at September 30, 2009 (unaudited), and December 31, 2008 and 2007 totaled $3,852, $3,765 and $3,505, respectively.

The Company also has an employee loan program which is described more fully in Note 14.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectibility or present other unfavorable features.

Note 14: Employee Benefit Plans

The Company participates in a multi-employer defined benefit retirement plan covering all employees under 65 years of age. Although employees will receive defined benefits under the multi-employer plan, the multi-employer plan does not provide for the accrual of defined pension benefits for the future services of the present employees. The Company’s expense for this plan was $90, $115, $141 and $166 for the nine-month period ended September 30, 2009 and 2008 (unaudited), and the years ended December 31, 2008 and 2007, respectively. The contribution is based on a fixed rate; however, the Employee Retirement Security Act (ERISA) imposes certain contingent liabilities on contributors to multi-employer plans such as this. In the event of plan termination under certain other conditions, a contributor to a multi-employer pension plan may be liable to the government-established Pension Benefit Guarantee Corporation (PBGC) for the pension benefits guaranteed to ERISA in accordance with formulas established by the PBGC. At September 30, 2009 (unaudited), December 31, 2008 and 2007, the Company was unable to determine its share of liability, if any, in the event of such conditions on plan termination. Effective January 1, 2008, the Board approved to close the plan to new employees.

F-38

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The Company has a retirement savings 401(k) profit sharing plan covering substantially all employees. The Company matches 50% (25% in 2007) of the employee’s contribution on the first 6% of the employee’s compensation. Employer contributions charged to expense for the nine-month period in 2009 and 2008 (unaudited), and for 2008 and 2007 were $28, $27, $41 and $28, respectively.

The Company has a liability of $1,098, $1,079 and $798 as of September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively, for deferred compensation agreements with certain directors of the Company. The agreements provide for 120 monthly payments upon retirement of the directors. The charge to expense for the agreements was $83 and $93 for the nine-month period in 2009 and 2008 (unaudited), $120 for 2008 and $181 for 2007. Such charges reflect the deferred director fees plus the interest accrued at the rate of 6.00-8.50% on the contributions to the deferred compensation accounts.

The Company has a supplemental employee retirement plan with certain active officers of the Company. The plan provides for benefits to be paid upon retirement of the officers. The charge to the expense for the plan was $205, $132, $177 and $88 in the nine-month period in 2009 and 2008 (unaudited), and for 2008 and 2007, respectively. Such charges reflect the straight-line accrual over the period until full eligibility of the present value of benefits due each participant on the full eligibility date, using a 6.00% to 8.50% discount factor. The liability for the plan was $973, $834 and $716 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively.

The Company has adopted a lending policy which provides eligible employees, officers, and directors of the Company the opportunity to obtain one mortgage loan (primary residence only) at an interest rate below what is offered to customers in the normal course of business. The interest rate is based upon 1% below the Fannie Mae rate on the date of entering the program or the date the loan is scheduled to re-price. Employees who have been employed full-time for 3 months or have accumulated 1000 hours of employment are eligible to participate in the plan. The outstanding balance of such loans totaled approximately $2,449, $1,949 and $1,422 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively. Approximately $872, $566 and $753, respectively, were loans to executive officers and directors. Effective April 2008, directors are no longer eligible to obtain new loans through this program.

Note 15: Disclosures About Fair Value of Assets and Liabilities

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 has been applied prospectively as of the beginning of the year.

F-39

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include equity securities in FNMA and FHLMC common stock as well as shares in publicly traded financial institutions. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include U.S. government agencies, mortgage-backed securities, collateralized mortgage obligations, municipal securities, and mutual funds. Municipal securities are generally priced using a matrix pricing model. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. These securities include municipal securities with no observable market inputs.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the FAS 157 fair value hierarchy in which the fair value measurements fall:

F-40

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

September 30, 2009 (unaudited):

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
US government agencies	$	1,058	$	—	$	1,058	$	—
Mortgage-backed securities		1,482		—		1,482		—
State and political subdivisions		583		—		180		403
Equity securities		524		31		493		—
Mortgage servicing rights		380		—		—		380

December 31, 2008:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities:
US government agencies	$	1,243	$	—	$	1,243	$	—
Mortgage-backed securities		2,016		—		2,016		—
State and political subdivisions		1,238		—		805		433
Equity securities		1,001		70		931		—
Mortgage servicing rights		301		—		—		301

F-41

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs:

	Available-for-sale Securities			Mortgage Servicing Rights
Balance, January 1, 2009	$	433		$	301
Total realized and unrealized gains and losses
Included in net income (unaudited)		—			(5	)
Included in other comprehensive income (unaudited)		—			—
Purchases, issuances and settlements (unaudited)		(30	)		84
Transfers in and/or out of Level 3 (unaudited)		—			—
Balance, September 30, 2009 (unaudited)	$	403		$	380
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	—
	Available-for-sale Securities			Mortgage Servicing Rights
Balance, January 1, 2008	$	433		$	329
Total realized and unrealized gains and losses
Included in net income		—			(74	)
Included in other comprehensive income		—			—
Purchases, issuances and settlements		—			46
Transfers in and/or out of Level 3		—			—
Balance, December 31, 2008	$	433		$	301
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	—

F-42

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Impaired Loans

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment in accordance with the provisions of Financial Accounting Standard No. 114 (FAS 114), Accounting by Creditors for Impairment of a Loan. Allowable methods for estimating fair value include using the fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

If the impaired loan is determined not to be collateral dependent, then the discounted cash flow method is used. This method requires the impaired loan to be recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate. The effective interest rate of a loan is the contractual interest rate adjusted for any net deferred loan fees or costs, premiums or discount existing at origination or acquisition of the loan.

Impaired loans are classified within Level 3 of the fair value hierarchy.

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the FAS 157 fair value hierarchy in which the fair value measurements fall:

September 30, 2009 (unaudited):

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	1,844	$	—	$	—	$	1,844

F-43

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

December 31, 2008:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	1,608	$	—	$	—	$	1,608

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest-Bearing Deposits, Federal Home Loan Bank Stock, Interest Receivable, Interest Payable and Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Securities

Fair value is based on quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value.

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits. The carrying amount approximates fair value. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

F-44

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Federal Home Loan Bank Advances

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Originate Loans, Letters of Credit and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

The following table presents estimated fair values of the Company’s financial instruments in accordance with FAS 107 not previously disclosed at September 30, 2009 (unaudited), December 31, 2008 and 2007.

	September 30, 2009 (Unaudited)				December 31, 2008				December 31, 2007
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	15,009	$	15,009	$	14,019	$	14,019	$	10,994	$	10,994
Interest-bearing deposits		7,216		7,216		—		—		—		—
Available-for-sale securities		3,647		3,647		5,498		5,498		13,690		13,690
Held-to-maturity securities		4,164		4,387		1,596		1,684		1,020		981
Loans, net of allowance for loan losses		110,226		112,378		120,749		121,949		117,822		119,465
Federal Home Loan Bank stock		6,549		6,549		6,549		6,549		6,549		6,549
Interest receivable		472		472		491		491		584		584
Financial liabilities
Deposits		122,581		122,501		117,302		118,328		113,778		114,337
Federal Home Loan Bank advances		19,778		20,451		26,064		26,914		27,225		27,358
Advances from borrowers for taxes and insurance		180		180		453		453		427		427
Interest payable		93		93		139		139		154		154
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		0		0		0		0		0		0
Letters of credit		0		0		0		0		0		0
Lines of credit		0		0		0		0		0		0

F-45

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 16: Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnote on commitments and credit risk. Estimates related to other than temporary impairment of securities, Federal Home Loan Bank stock impairment, valuation of foreclosed assets held for sale, and income tax accruals and deferrals are described in Note 1. Other significant estimates and concentrations not discussed in those footnotes include:

Current Economic Conditions

The current economic environment presents financial institutions with unprecedented circumstances and challenges which in some cases have resulted in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.

Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses, capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Note 17: Commitments and Credit Risk

The Company generates commercial, mortgage and consumer loans and receives deposits from customers located primarily in McHenry and Grundy Counties. The Company’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions in McHenry and Grundy Counties.

F-46

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Commitments to Originate Loans

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At September 30, 2009 (unaudited), and December 31, 2008 and 2007, the Company had outstanding commitments to originate loans aggregating approximately $2,345, $2,077 and $1,064, respectively. The commitments extended over varying periods of time with the majority being disbursed within a one-year period. All loan commitments at September 30, 2009 (unaudited) and December 31, 2008 were at fixed rates of interest. The range of fixed rates was 4.50% to 6.50% as of September 30, 2009 and 4.88% to 7.50% as of December 31, 2008.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Should the Company be obligated to perform under the standby letters of credit, the Company may seek recourse from the customer for reimbursement of amounts paid.

The Company had total outstanding standby letters of credit amounting to $388, $388 and $0, at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively. The term of the standby letters of credit outstanding at September 30, 2009 (unaudited) and December 31, 2008 expire in 2009. At September 30, 2009 (unaudited), the Company’s deferred revenue under standby letters of credit agreements was nominal.

F-47

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At September 30, 2009 (unaudited), the Company had granted unused lines of credit to borrowers aggregating approximately $1,923 and $8,731 from commercial lines and open-end consumer lines, respectively. At December 31, 2008, the Company had granted unused lines of credit to borrowers aggregating approximately $2,916 and $8,339 for commercial lines and open-end consumer lines, respectively. At December 31, 2007, unused lines of credit to borrowers aggregated approximately $2,474 for commercial lines and $7,897 for open-end consumer lines.

Other Credit Risk

The Company had a concentration of funds on deposit with the Federal Home Loan Bank totaling $1,743, $3,473 and $2,458 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively.

The Company had a concentration of funds in securities purchased under agreements to resell with BCM High Income Fund, LP totaling $6,200, $8,800 and $7,300 at September 30, 2009 (unaudited), and December 31, 2008 and 2007, respectively.

Note 18: Merger

The Company consummated an agreement to merge Morris Building & Loan, s.b. (Bank) on July 24, 2007. Pursuant to this agreement, all assets and liabilities of the Bank were merged with and into the Company as of April 18, 2008. Accordingly, the financial information for all periods presents the combined financial condition and results of operations as if the combination had been in effect for all periods presented. Under accounting principles generally accepted in the United States of America, a business combination of mutual savings entities, such as this, are accounted for in a manner similar to a pooling-of interest, with the Company recording the assets and liabilities assumed at the carrying value of the Bank as of April 18, 2008.

Costs of the merger have been expensed as incurred and the total amount incurred during 2008 and 2007 was approximately $55 and $618, respectively. The expense amount for 2007 includes $467 of data processing early termination fees incurred by Morris Building & Loan, s.b. The remainder of the merger expenses during 2008 and 2007 were incurred by the Company.

F-48

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Separate financial information of the Company and Bank is as follows:

	January 1, 2008 through April 18, 2008						Year Ended December 31, 2007
	Harvard			Morris			Harvard			Morris
Net interest income	$	791		$	229		$	2,666		$	886
Provision for (credit to) loan losses		24			4			(184	)		4
Noninterest income		173			29			499			121
Nonintrest expense		967			424			3,174			1,848
Income taxes		(35	)		—			4			—
Net income (loss)		8			(170	)		171			(845	)
Retained earnings as of April 18, 2008 and December 31, 2007, respectively		11,214			2,327			11,206			2,497
Total assets as of April 18, 2008 and December 31, 2007, respectively		128,575			35,894			125,386			32,949

Note 19: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets

	September 30, 2009 (Unaudited)		December 31,
			2008		2007
Assets
Cash and due from banks	$	8	$	9	$	9
Investment in common stock of subsidiary		12,172		12,518		14,086
Other assets		351		—		—
Total assets	$	12,531	$	12,527	$	14,095
Liabilities
Other liabilities	$	351	$	—	$	1
Total liabilities		351		—		1
Stockholders’ Equity		12,180		12,527		14,094
Total liabilities and stockholders’ equity	$	12,531	$	12,527	$	14,095

F-49

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Condensed Statements of Income

	Period Ending September 30,						Year Ending December 31,
	2009 (Unaudited)			2008 (Unaudited)			2008			2007
Income	$	—		$	—		$	—		$	—
Expenses
Other expenses		1			—			—			1
Total expenses		1			—			—			1
Loss Before Income Tax and Equity in Undistributed Income of Subsidiary		(1	)		—			—			(1	)
Provision (Benefit) for Income Taxes		—			—			—			—
Income Before Equity in Undistributed Loss of Subsidiary		(1	)		—			—			(1	)
Equity in Undistributed Loss of Subsidiary		(415	)		(743	)		(1,191	)		(673	)
Net Loss	$	(416	)	$	(743	)	$	(1,191	)	$	(674	)

F-50

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Condensed Statements of Cash Flows

	Period Ending September 30,						Year Ending December 31,
	2009 (Unaudited)			2008 (Unaudited)			2008			2007
Operating Activities
Net loss	$	(416	)	$	(743	)	$	(1,191	)	$	(674	)
Items not providing cash, net
Change in other assets and liabilities, net		415			743			1,191			674
Net cash used in operating activities		(1	)		—			—			—
Net Change in Cash and Cash Equivalents		(1	)		—			—			—
Cash and Cash Equivalents at Beginning of Period		9			9			9			9
Cash and Cash Equivalents at End of Period	$	8		$	9		$	9		$	9

Note 20: Subsequent Event

On May 22, 2009, the FDIC adopted a final rule to impose a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009 which was collected on September 30, 2009. The amount of the special assessment for any institution, however, will not exceed 10 basis points times the institution’s assessment base for the second quarter 2009 risk-based assessment. The special assessment was collected on September 30, 2009. The final rule also provided that if, after June 30, 2009, the reserve ratio of the Deposit Insurance Fund falls to a level that the Board believes would adversely affect public confidence or to a level that shall be close to or below zero at the end of any calendar quarter, the Board, by vote, may impose additional special assessments of up to 5 basis points on all insured depository institutions based on each institution’s total assets minus Tier 1 capital reported on the report of condition for that calendar quarter. As of September 30, 2009 (unaudited), the 5 basis point assessment based on total assets less Tier 1 capital paid by the Company was $74.

F-51

Harvard Savings, MHC

Notes to Consolidated Financial Statements

(in thousands)

Note 21: Subsequent Event (Unaudited)

For the period ending September 30, 2009, subsequent events have been evaluated through December 23, 2009 which is the date the financial statements were issued.

Subsequent to December 31, 2008, the increased FDIC insurance limits referred to in Note 1 were extended until December 31, 2013.

Note 22: Plan of Conversion (Unaudited)

On July 16, 2009, the Company’s Board of Directors approved a plan (the “Plan”) to convert from a federally-chartered mutual holding company to a federally-chartered stock holding company. The Plan is subject to approval by the Office of Thrift Supervision (OTS) and includes the filing of a registration statement with the Securities and Exchange Commission.

The Plan calls for the common stock of the holding company to be offered to various parties in a subscription offering at a price based on an independent appraisal of the Company. It is anticipated that any shares not purchased in the subscription offering will be offered in a community offering. The Company may not declare or pay a cash dividend if the effect thereof would cause its net worth to be reduced below either the amount required for the liquidation account discussed below or the regulatory capital requirements imposed by the OTS.

At the time of conversion, the Company will establish a liquidation account in an amount equal to its retained earnings as reflected in the latest balance sheet used in the final conversion prospectus. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their deposit accounts in the Company after conversion. In the event, eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account before any liquidation may be made with respect to common stock.

Total expenses related to the conversion were $350,967 at September 30, 2009. These costs are being capitalized and will be offset against proceeds from the offering, should the conversion be successful. If the conversion is not successful, these costs will immediately be recorded as an expense in the income statement.

F-52

You should rely only on the information contained in this document or that to which we have referred you. No person has been authorized to give any information or to make any representation other than as contained in this prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by Harvard Illinois Bancorp, Inc. or Harvard Savings Bank. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of Harvard Illinois Bancorp, Inc. or Harvard Savings Bank since any of the dates as of which information is furnished herein or since the date hereof.

HARVARD ILLINOIS BANCORP, INC.

(Proposed Holding Company for

Harvard Savings Bank)

Up to 1,035,000 Shares of

Common Stock

Par value $0.01 per share

(Subject to Increase to up to 1,190,250 Shares)

PROSPECTUS

KEEFE, BRUYETTE & WOODS

[prospectus date]

Until [expiration date] or 25 days after commencement of the syndicated community offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver the prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

		Amount(1)
*	Registrant’s Legal Fees and Expenses	$	245,000
*	Registrant’s Accounting Fees and Expenses		78,525
*	Conversion Agent and Data Processing Fees		15,000
*	Marketing Agent Fees (1)		180,000
*	Marketing Agent Expenses (Including Legal Fees and Expenses)		49,000
*	Appraisal Fees and Expenses		40,000
*	Printing, Postage, Mailing and EDGAR Fees		64,335
*	Filing Fees (OTS, IDFPR, FINRA and SEC)		24,457
*	Business Plan Fees and Expenses		21,000
*	Financial Consulting Fees and Expenses		20,000
*	Benefit Plans Restructuring Fees		10,000
*	Other		2,683
*	Total	$	750,000

* Estimated

(1) Harvard Illinois Bancorp, Inc. has retained Keefe, Bruyette & Woods, Inc. to assist in the sale of common stock on a best efforts basis in the offerings.

Item 14. Indemnification of Directors and Officers

Articles 10 and 11 of the Articles of Incorporation of Harvard Illinois Bancorp, Inc. (the “Corporation”) set forth circumstances under which directors, officers, employees and agents of the Corporation may be insured or indemnified against liability which they incur in their capacities as such:

ARTICLE 10. Indemnification, etc. of Directors and Officers.

A. Indemnification. The Corporation shall indemnify (1) its current and former directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the MGCL now or hereafter in force, including the advancement of expenses under the procedures and to the fullest extent permitted by law, and (2) other employees and agents to such extent as shall be authorized by the Board of Directors and permitted by law; provided, however, that, except as provided in Section B of this Article 10 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

B. Procedure. If a claim under Section A of this Article 10 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be reimbursed the expense of prosecuting or defending such suit. It shall be a defense to any action for advancement of expenses that the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the indemnitee of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard for indemnification set forth in the MGCL. Neither the failure of the Corporation (including its Board of Directors,

II-1

independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 10 or otherwise shall be on the Corporation.

C. Non-Exclusivity. The rights to indemnification and to the advancement of expenses conferred in this Article 10 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, these Articles, the Corporation’s Bylaws, any agreement, any vote of stockholders or the Board of Directors, or otherwise.

D. Insurance. The Corporation may maintain insurance, at its expense, to insure itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such Person against such expense, liability or loss under the MGCL.

E. Miscellaneous. The Corporation shall not be liable for any payment under this Article 10 in connection with a claim made by any indemnitee to the extent such indemnitee has otherwise actually received payment under any insurance policy, agreement, or otherwise, of the amounts otherwise indemnifiable hereunder. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article 10 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

Any repeal or modification of this Article 10 shall not in any way diminish any rights to indemnification or advancement of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this Article 10 is in force.

ARTICLE 11. Limitation of Liability. An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the Person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the Person is entered in a proceeding based on a finding in the proceeding that the Person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

Item 15. Recent Sales of Unregistered Securities

Not Applicable.

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Item 16. Exhibits and Financial Statement Schedules:

The exhibits and financial statement schedules filed as part of this registration statement are as follows:

(a) List of Exhibits

1.1	Engagement Letter between Harvard Savings, MHC and Keefe, Bruyette & Woods, Inc.*
1.2	Form of Agency Agreement between Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank and Harvard Illinois Bancorp, Inc., and Keefe, Bruyette & Woods, Inc.
2.1	Plan of Conversion and Reorganization*
2.2	Merger Agreement with Morris Building & Loan, s.b.
3.1	Articles of Incorporation of Harvard Illinois Bancorp, Inc.*
3.2	Bylaws of Harvard Illinois Bancorp, Inc.*
4	Form of Common Stock Certificate of Harvard Illinois Bancorp, Inc.*
5	Opinion of Luse Gorman Pomerenk & Schick, P.C. regarding legality of securities being registered*
8	Federal Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.
10.1	Proposed Form of Employee Stock Ownership Plan*
10.2	Proposed Employment Agreement between Harvard Savings Bank and Duffield J. Seyller, III*
10.3	Proposed Employment Agreement between Harvard Savings Bank and Donn L. Claussen*
10.4	Proposed Form of Change in Control Agreement between Harvard Savings Bank and Richard J. Lipinsky*
10.5	Employment Agreement between Harvard Savings Bank and Donn L. Claussen*
10.6	Salary Continuation Agreement with Duffield J. Seyller, III*
10.7	Salary Continuation Agreement with Michael T. Neese *
10.8	Salary Continuation Agreement with Donn L. Claussen*
10.9	Split Dollar Life Insurance Agreement with Donn L. Claussen*
10.10	Form of Director Deferred Fee Agreements*
10.11	Form of 2009 Director Deferred Fee Agreement*
21	Subsidiaries of Registrant*
23.1	Consent of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included as Exhibits 5 and 8)
23.2	Consent of BKD, LLP
23.3	Consent of RP Financial, LC.*
24	Power of Attorney (set forth on signature page)
99.1	Appraisal Agreement between Harvard Savings Bank and RP Financial, LC.*
99.2	Letter of RP Financial, LC. with respect to Subscription Rights*
99.3	Updated Appraisal Report of RP Financial, LC**
99.4	Marketing Materials*
99.5	Stock Order and Certification Form*
99.6	Business Plan Agreement with Keller & Company, Inc.*
99.7	Conversion Agent Agreement between Keefe, Bruyette & Woods, Inc. and Harvard Savings, MHC*
99.8	Engagement Letter between Harvard Savings Bank and Donati Financial Services, Inc.*

* Previously filed.

** Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation S-T. Available for inspection during business hours at the principal offices of the SEC in Washington, D.C.

(b) Financial Statement Schedules

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes.

II-3

Item 17. Undertakings

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which it offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

II-4

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(6) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(7) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Harvard, State of Illinois on December 23, 2009.

HARVARD ILLINOIS BANCORP, INC.
By:	/S/    DUFFIELD J. SEYLLER, III
	Duffield J. Seyller, III
	President and Chief Executive Officer
	(Duly Authorized Representative)

POWER OF ATTORNEY

We, the undersigned directors and officers of Harvard Illinois Bancorp, Inc. (the “Company”) hereby severally constitute and appoint Duffield J. Seyller, III as our true and lawful attorney and agent, to do any and all things in our names in the capacities indicated below which said Duffield J. Seyller, III may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the registration statement on Form S-1 relating to the offering of the Company’s common stock, including specifically, but not limited to, power and authority to sign for us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said Duffield J. Seyller, III shall do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date
/S/    DUFFIELD J. SEYLLER, III	President, Chief Executive Officer	December 23, 2009
Duffield J. Seyller, III	and Director (Principal Executive Officer)
/S/    DONN CLAUSSEN	Executive Vice President, Chief Financial Officer	December 23, 2009
Donn Claussen	and Director (Principal Financial and Accounting Officer)
/S/    RONALD M. SEELEY	Chairman of the Board	December 23, 2009
Ronald M. Seeley
/S/    MICHAEL P. FEENEY	Director	December 23, 2009
Michael P. Feeney
/S/    JOHN W. REBHORN	Director	December 23, 2009
John W. Rebhorn
/S/    WILLIAM D. SCHACK	Director	December 23, 2009
William D. Schack
/S/    RICHARD L. WALKER	Director	December 23, 2009
Richard L. Walker

As filed with the Securities and Exchange Commission on December 23, 2009

Registration No. 333-161931

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

EXHIBITS

TO

PRE-EFFECTIVE AMENDMENT NO. 1 TO THE

REGISTRATION STATEMENT

ON

FORM S-1

Harvard Illinois Bancorp, Inc.

Harvard, Illinois

Volume 1 of 1

EXHIBIT INDEX

1.1	Engagement Letter between Harvard Savings, MHC and Keefe, Bruyette & Woods, Inc.*
1.2	Form of Agency Agreement between Harvard Savings, MHC, Harvard Illinois Financial Corporation, Harvard Savings Bank and Harvard Illinois Bancorp, Inc., and Keefe, Bruyette & Woods, Inc.
2.1	Plan of Conversion and Reorganization*
2.2	Merger Agreement with Morris Building & Loan, s.b.
3.1	Articles of Incorporation of Harvard Illinois Bancorp, Inc.*
3.2	Bylaws of Harvard Illinois Bancorp, Inc.*
4	Form of Common Stock Certificate of Harvard Illinois Bancorp, Inc.*
5	Opinion of Luse Gorman Pomerenk & Schick, P.C. regarding legality of securities being registered*
8	Federal Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.
10.1	Proposed Form of Employee Stock Ownership Plan*
10.2	Proposed Employment Agreement between Harvard Savings Bank and Duffield J. Seyller, III*
10.3	Proposed Employment Agreement between Harvard Savings Bank and Donn L. Claussen*
10.4	Proposed Form of Change in Control Agreement between Harvard Savings Bank and Richard J. Lipinsky*
10.5	Employment Agreement between Harvard Savings Bank and Donn L. Claussen*
10.6	Salary Continuation Agreement with Duffield J. Seyller, III*
10.7	Salary Continuation Agreement with Michael T. Neese *
10.8	Salary Continuation Agreement with Donn L. Claussen*
10.9	Split Dollar Life Insurance Agreement with Donn L. Claussen*
10.10	Form of Director Deferred Fee Agreements*
10.11	Form of 2009 Director Deferred Fee Agreement*
21	Subsidiaries of Registrant*
23.1	Consent of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included as Exhibits 5 and 8)
23.2	Consent of BKD, LLP
23.3	Consent of RP Financial, LC.*
24	Power of Attorney (set forth on signature page)
99.1	Appraisal Agreement between Harvard Savings Bank and RP Financial, LC.*
99.2	Letter of RP Financial, LC. with respect to Subscription Rights*
99.3	Updated Appraisal Report of RP Financial, LC.**
99.4	Marketing Materials*
99.5	Stock Order and Certification Form*
99.6	Business Plan Agreement with Keller & Company, Inc.*
99.7	Conversion Agent Agreement between Keefe, Bruyette & Woods, Inc. and Harvard Savings, MHC*
99.8	Engagement Letter between Harvard Savings Bank and Donati Financial Services, Inc.*

* Previously filed.

** Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation S-T. Available for inspection during business hours at the principal offices of the SEC in Washington, D.C.

EX-1.2

Exhibit 1.2

HARVARD ILLINOIS BANCORP INC.

up to 1,092,500 Shares

(subject to increase up to 1,256,375 shares)

COMMON SHARES

($.01 Par Value)

Subscription Price $10.00 Per Share

AGENCY AGREEMENT

[            ], 2010

Keefe, Bruyette & Woods, Inc.

Ten South Wacker Drive, Suite 3400

Chicago, Illinois 60606

Ladies and Gentlemen:

Harvard Illinois Bancorp Inc., a Maryland corporation (the “Company”), Harvard Savings, MHC, a federally chartered mutual holding company (the “MHC”), Harvard Illinois Financial Corporation, a federal corporation (“Harvard Financial”), and Harvard Savings Bank, an Illinois chartered savings bank headquartered in Harvard, Illinois (the “Bank” and, together with the Company, the MHC and Harvard Financial, the “Harvard Parties”) (references to the “Bank” include the Bank in the mutual holding company or stock holding company form of organization, as indicated by the context), the deposit accounts of which are insured by the Federal Deposit Insurance Corporation (“FDIC”), hereby confirm their agreement with Keefe, Bruyette & Woods, Inc. (the “Agent”) as follows:

Section 1. The Offering. The MHC, in accordance with the plan of conversion and reorganization adopted by the Board of Directors of each of the Harvard Parties, [as amended] (the “Plan”), intends to convert from the mutual holding company form of organization to the stock holding company form of organization (the “Conversion”). In connection with the Conversion, the Bank will become a wholly owned subsidiary of the Company, and the corporate existence of the MHC and Harvard Financial will cease. Pursuant to the Plan, the Company will offer and sell up to 1,092,500 shares (subject to increase up to 1,256,375 shares) of its common stock, $.01 par value per share (the “Shares” or “Common Shares”), in a subscription offering (the “Subscription Offering”) to (1) depositors of the Bank with Qualifying Deposits (as defined in the Plan) as of June 30, 2008 (“Eligible Account Holders”), (2) the Bank’s tax-qualified employee benefit plans, including the employee stock ownership plan established by the Bank (the “ESOP”), (3) depositors of the Bank with Qualifying Deposits as of [SUPPLEMENTAL DATE] (“Supplemental Eligible Account Holders”), and (4) other members of the MHC as defined in the Plan. Subject to the prior subscription rights of the above-listed parties, the Company may offer for sale in a community offering (the “Community Offering” and when referred to together with or subsequent to the Subscription Offering, the “Subscription and Community Offering”) the Shares not subscribed for or ordered in the Subscription Offering to

members of the general public to whom a copy of the Prospectus (as hereinafter defined) is delivered with a preference given first to natural persons residing in the counties of McHenry and Grundy in the State of Illinois. It is anticipated that shares not subscribed for in the Subscription and Community Offering may be offered to certain members of the general public on a best efforts basis through a selected dealers agreement (the “Syndicated Community Offering”) (the Subscription Offering, Community Offering and Syndicated Community Offering are collectively referred to as the “Offering”). It is acknowledged that the purchase of Shares in the Offering is subject to the maximum and minimum purchase limitations as described in the Plan and that the Company may reject, in whole or in part, any orders received in the Community Offering or Syndicated Community Offering.

In October 2005, the Bank’s mutual predecessor reorganized into the mutual holding company form of organization by forming the MHC. The MHC currently owns 100% of the outstanding shares of Harvard Financial. The MHC is a mutual holding company that has no stockholders and is controlled by its members. Harvard Financial currently owns 100% of the outstanding shares of common stock of the Bank. Harvard Financial has not issued shares of its stock to the public. Pursuant to the terms of the Plan, upon completion of the Conversion and the Offering, the MHC and Harvard Financial will cease to exist and the Bank will be a wholly owned subsidiary of the Company.

The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (File No. 333-161931) (the “Registration Statement”), containing a prospectus relating to the Offering, for the registration of the Shares under the Securities Act of 1933 (the “1933 Act”), and has filed such amendments thereof and such amended prospectuses as may have been required to the date hereof. The term “Registration Statement” shall include any documents incorporated by reference therein and all financial schedules and exhibits thereto, as amended, including post-effective amendments. The prospectus, as amended, on file with the Commission at the time the Registration Statement initially became effective is hereinafter called the “Prospectus,” except that if any prospectus is filed by the Company pursuant to Rule 424(b) or (c) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) differing from the prospectus on file at the time the Registration Statement initially became effective, the term “Prospectus” shall refer to the prospectus filed pursuant to Rule 424(b) or (c) from and after the time said prospectus is filed with the Commission.

In accordance with Title 12, Part 563b of the Code of Federal Regulations (the “Conversion Regulations”), the MHC has filed with the Office of Thrift Supervision (the “OTS”) an Application For Conversion on Form AC (the “Form AC”), including the Prospectus and the Conversion Valuation Appraisal Report prepared by RP Financial, LC, dated August 28, 2009 and as amended or supplemented, regarding the estimated pro forma value of the Common Shares (the “Appraisal”), and has filed such amendments thereto as may have been required by the OTS. The Form AC has been approved by the OTS and the related Prospectus has been authorized for use by the OTS. In addition, the Company has filed with the OTS an Application H-(e)l-S (the “Holding Company Application”) to become a savings and loan holding company under the Home Owners’ Loan Act, as amended (“HOLA”) and the regulations promulgated thereunder (the “Control Act Regulations”).

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The Bank has filed an Application with the Director (the “Director”) of the Division of Banking of the Illinois Department of Financial and Professional Regulation (the “Division”), including the Prospectus, exhibits, and all amendments and supplements required to be filed with respect thereto to the date hereof (as so amended and supplemented, the “Division Application”) for approval of the Conversion and with the FDIC under the Bank Merger Act (the “FDIC Application”). The Division Application and the FDIC Application include, among other things, the Plan and the MHC’s proxy statement (the “Proxy Statement”) for the special meeting of the MHC’s members to approve the Plan to be held on             , 2010 (the “Special Meeting”) and the Prospectus.

Section 2. Retention of Agent; Compensation. Subject to the terms and conditions herein set forth, the Company and the Bank hereby appoint the Agent as their exclusive financial advisor and marketing agent (i) to utilize its best efforts to solicit subscriptions for Common Shares and to advise and assist the Company and the Bank with respect to the Company’s sale of the Shares in the Offering and (ii) to participate in the Offering in the areas of market making and in syndicate formation (if necessary).

On the basis of the representations, warranties, and agreements herein contained, but subject to the terms and conditions herein set forth, the Agent accepts such appointment and agrees to consult with and advise the Company and the Bank as to the matters set forth in the letter agreement, dated April 27, 2009, between the Bank and the Agent (a copy of which is attached hereto as Exhibit A). It is acknowledged by the Company and the Bank that the Agent shall not be required to purchase any Shares or be obligated to take any action which is inconsistent with all applicable laws, regulations, decisions or orders.

The obligations of the Agent pursuant to this Agreement shall terminate upon termination of the Offering, but in no event later than 45 days after the completion of the Subscription Offering (the “End Date”). Full payment of the Agent’s actual and accountable expenses, advisory fees and compensation shall be made in next day funds on the earlier of the Closing Date (as defined hereinafter) or a determination by the Company and the Bank to terminate or abandon the Offering. The payment of such expenses assume no unusual circumstances or delays, or a re-solicitation in connection with the Subscription and Community Offerings. The Company and the Bank acknowledge that such expense cap may be increased by mutual consent, including in the event of a material delay in the Offering which would require an update of the financial information in tabular form to reflect a period later than that set forth in the original filing. In the event the Offering is extended beyond the End Date, the Company and the Agent may agree to renew this Agreement under mutually acceptable terms.

In the event the Company is unable to sell a minimum of 807,500 Shares within the period herein provided, this Agreement shall terminate and the Company shall refund to any persons who have subscribed for any of the Shares the full amount which it may have received from them plus accrued interest, as set forth in the Prospectus; and none of the parties to this Agreement shall have any obligation to the other parties hereunder, except as set forth in this Section 2 and in Sections 7, 9 and 10 hereof. In the event the Offering is terminated for any reason not attributable to the action or inaction of the Agent, the Agent shall be paid the fees due to the date of such termination pursuant to subparagraphs (a) and (d) below.

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The Agent shall receive the following compensation for its services hereunder:

(a) A management fee of $30,000 payable in five consecutive monthly installments of $6,000 commencing on May 1, 2009, all of which has been paid as of the date hereof. This fee shall be due as it is earned and shall be non-refundable.

(b) A success fee upon completion of the Offering of $140,000 for Common Shares sold in the Subscription Offering. In addition, the Agent shall receive a success fee equal to 2.5% of the aggregate purchase price of the Common Shares sold in the Community Offering. The management fee will be credited against the first success fee paid pursuant to this paragraph. The total of the success fees for the sale of Common Shares in the Subscription and the Community Offerings shall not exceed $180,000.

(c) If any of the Common Shares remain available after the Subscription Offering and Community Offering, at the request of the Company, the Agent will seek to form a syndicate of registered broker-dealers (“Selected Dealers”) to assist in the sale of such Common Shares on a best efforts basis, subject to the terms and conditions set forth in the selected dealers agreement to be entered into between the Company and the Agent. The Agent will endeavor to distribute the Common Shares among the Selected Dealers in a fashion which best meets the distribution objectives of the Bank and the Plan. The Agent will be paid a fee not to exceed 7.0% of the aggregate Purchase Price of the Shares sold in the Syndicated Community Offering. The Agent will pass onto the Selected Dealers who assist in the Syndicated Community Offering an amount competitive with gross underwriting discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment. Fees with respect to purchases effected with the assistance of Selected Dealers other than the Agent shall be transmitted by the Agent to such Selected Dealers. The decision to utilize Selected Dealers will be made by the Company upon consultation with the Agent. The fees set forth in this paragraph 2(c) shall be in addition to the fees to be earned by the Agent in connection with the Subscription Offering and Community Offering described in paragraph 2(b) above. However, in the event, with respect to any purchases of Common Shares, that fees are paid pursuant to this subparagraph 2(c), such fees shall be in lieu of, and not in addition to, payment pursuant to paragraph 2(b).

(d) The Company and the Bank shall reimburse the Agent for reasonable out-of-pocket expenses, including costs of travel, meals and lodging, photocopying, telephone, facsimile and couriers. The Company and the Bank will reimburse the Agent for its reasonable out-of-pocket expenses an amount not to exceed $7,500. In addition, the Company and the Bank will reimburse the Agent for fees and expenses of its counsel not to exceed $37,500. The Company will bear the expenses of the Offering customarily borne by issuers including, without limitation, regulatory filing fees, SEC, Blue Sky and Financial Institution Regulatory Authority (“FINRA”) filing and registration fees; the fees of the Company’s accountants, attorneys, appraiser, transfer agent and registrar, printing, mailing and marketing and syndicate expenses associated with the Offering; the fees set forth under this Section 2; and fees for Blue Sky legal work.

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Section 3. Sale and Delivery of Shares. If all conditions precedent to the consummation of the Conversion, including without limitation, the sale of all Shares required by the Plan to be sold, are satisfied, the Company agrees to issue, or have issued, the Shares sold in the Offering and to release for delivery certificates for such Shares on the Closing Date against payment to the Company by any means authorized by the Plan; provided, however, that no funds shall be released to the Company until the conditions specified in Section 8 hereof shall have been complied with to the reasonable satisfaction of the Agent or its counsel. The release of Shares against payment therefor shall be made on a date and at a place acceptable to the Company, the Bank and the Agent as set forth in Section 14. Certificates for shares shall be delivered directly to the purchasers in accordance with their directions as provided by the Company to the Company’s registrar and transfer agent. The date upon which the Company shall release or deliver the Shares sold in the Offering, in accordance with the terms herein, is called the “Closing Date.”

Section 4. Representations and Warranties of the Harvard Parties. The Harvard Parties jointly and severally represent and warrant to and agree with the Agent as follows:

(a) The Registration Statement, which was prepared by the Company and the Bank and filed with the Commission, has been declared effective by the Commission, no stop order has been issued with respect thereto and no proceedings therefor have been initiated or, to the knowledge of the Company or the Bank, threatened by the Commission. At the time the Registration Statement, including the Prospectus contained therein (including any amendment or supplement), became effective, at the Applicable Time (as defined in Section 4(c) hereof) and at the Closing Date, the Registration Statement complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations, and the Registration Statement, including the Prospectus contained therein (including any amendment or supplement thereto), and any information regarding the Company contained in Sales Information (as such term is defined in Section 9 hereof) authorized by the Company for use in connection with the Offering, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and at the time any Rule 424(b) or (c) Prospectus is filed with the Commission and at the Closing Date referred to in Section 2 hereof, the Prospectus (including any amendment or supplement thereto) and any information regarding the Company contained in Sales Information (as such term is defined in Section 9 hereof) authorized by the Company for use in connection with the Offering will contain all statements that are required to be stated therein in accordance with the 1933 Act and the 1933 Act Regulations and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this Section 4(a) shall not apply to statements or omissions made in reliance upon and in conformity with written information furnished to the Company by the Agent or its counsel expressly regarding the Agent for use in the Prospectus in the first sentence of the second paragraph under the caption “The Conversion; Plan of Distribution—Marketing and Distribution; Compensation.”

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(b) Neither the Company nor the Bank has directly or indirectly distributed or otherwise used and will not directly or indirectly distribute or otherwise use any prospectus, any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations) or other offering material (including, without limitation, content on the Company’s website that may be deemed to be a prospectus, free writing prospectus or other offering material) in connection with the offering and sale of the Shares other than any Permitted Free Writing Prospectus or the Prospectus or other materials permitted by the 1933 Act and the 1933 Act Regulations distributed by the Company and reviewed and approved (which approval shall not be unreasonably withheld) in advance for distribution by the Agent. The Company has not, directly or indirectly, prepared or used and will not directly or indirectly, prepare or use, any Permitted Free Writing Prospectus except in compliance with the filing and other requirements of Rules 164 and 433 of the 1933 Act Regulations; assuming that such Permitted Free Writing Prospectus is so sent or given after the Registration Statement was filed with the Commission (and after such Permitted Free Writing Prospectus was, if required pursuant to Rule 433(d) under the Act, filed with the Commission), the sending or giving, by the Agent, of any Permitted Free Writing Prospectus will satisfy the provisions of Rules 164 and 433 (without reliance on subsections (b), (c) and (d) for Rule 164); and the Company is not an “ineligible issuer” (as defined in Rule 405 of the 1933 Act Regulations) as of the eligibility determination date for purposes of Rules 164 and 433 of the 1933 Act Regulations with respect to the offering of the Shares or otherwise precluded under Rule 164 from using free writing prospectuses in connection with the offering of the Shares.

(c) As of the Applicable Time (as defined below), neither (i) the Issuer-Represented General Free Writing Prospectus(es) issued at or prior to the Applicable Time and the Statutory Prospectus, all considered together (collectively, the “General Disclosure Package”), nor (ii) any individual Issuer-Represented Limited-Use Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Prospectus included in the Registration Statement relating to the offered Shares or any Issuer-Represented Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Agent specifically for use therein. As used in this paragraph and elsewhere in this Agreement:

1. “Applicable Time” means each and every date when a potential purchaser submitted a subscription or otherwise committed to purchase Shares.

2. “Statutory Prospectus,” as of any time, means the Prospectus relating to the offered Shares that is included in the Registration Statement relating to the offered Shares immediately prior to the Applicable Time, including any document incorporated by reference therein.

3. “Issuer-Represented Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433(h) of the 1933 Act Regulations, relating to the offered Shares in the form filed or required or, if not required to be

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filed, in the form retained in the Company’s records pursuant to Rule 433(g) under the 1933 Act Regulations. The term does not include any writing exempted from the definition of prospectus pursuant to clause (a) of Section 2(a)(10) of the 1933 Act, without regard to Rule 172 or Rule 173 of the 1933 Act Regulations.

4. “Issuer-Represented General Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is intended for general distribution to prospective investors.

5. “Issuer-Represented Limited-Use Free Writing Prospectus” means any Issuer-Represented Free Writing Prospectus that is not an Issuer-Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing Prospectus also includes any “bona fide electronic road show,” as defined in Rule 433 of the 1933 Act Regulations, that is made available without restriction pursuant to Rule 433(d)(8)(ii) of the 1933 Act Regulations or otherwise, even though not required to be filed with the Commission.

6. “Permitted Free Writing Prospectus” means any free writing prospectus as defined in Rule 405 of the 1933 Act Regulations that is consented to by the Company, the Bank and the Agent.

(d) Each Issuer-Represented Free Writing Prospectus, as of its date of first use and at all subsequent times through the completion of the Offering and sale of the offered Shares or until any earlier date that the Company notified or notifies the Agent (as described in the next sentence), did not, does not and will not include any information that, in any material respect, conflicted, conflicts or will conflict with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. If at any time following the date of first use of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus, in any material respect, conflicted or would conflict with the information contained in the Registration Statement relating to the offered Shares or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify promptly the Agent so that any use of such Issuer-Represented Free-Writing Prospectus may cease until it is amended or supplemented and the Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer-Represented Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Agent specifically for use therein.

(e) The Form AC, which was prepared by the Harvard Parties and filed with the OTS, has been approved by the OTS and the related Prospectus and Proxy Statement to be delivered to members of the MHC have been authorized for use by the OTS. No

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order has been issued by the OTS preventing or suspending the use of the Prospectus or the Proxy Statement, and no action by or before the OTS to revoke any approval, authorization or order of effectiveness related to the Offering is pending or, to the best knowledge of the Company, threatened. At the time of the approval of the Form AC, including the Prospectus (including any amendment or supplement thereto) by the OTS and at all times subsequent thereto until the Closing Date, the Form AC, including the Prospectus (including any amendment or supplement thereto), will comply in all material respects with the Conversion Regulations, except to the extent waived or otherwise approved by the OTS. The Form AC, including the Prospectus (including any amendment or supplement thereto), does not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this Section 4(e) shall not apply to statements or omissions made in reliance upon and in conformity with written information furnished to the Company by the Agent or its counsel expressly regarding the Agent for use in the Prospectus contained in the Form AC under the caption “The Conversion; Plan of Distribution—Marketing and Distribution; Compensation.”

(f) The Company has filed the Holding Company Application with the OTS and has published notice of such filing and the Holding Company Application is accurate and complete in all material respects. The Company has received written notice from the OTS of its approval of the acquisition of the Bank, such approval remains in full force and effect and no order has been issued by the OTS suspending or revoking such approval and no proceedings therefor have been initiated or, to the knowledge of the Company or the Bank, threatened by the OTS. At the date of such approval, the Holding Company Application complied in all material respects with the applicable provisions of HOLA and the regulations promulgated thereunder, except as the OTS has expressly waived such regulations in writing.

(g) The Bank filed the FDIC Application with the FDIC in the form heretofore delivered to the Agent. The Bank received notice of non-objection or approval from the FDIC on             , 2010.

(h) The Company, the Bank and the MHC have, to the extent required, filed the Prospectus and any supplemental sales literature with the Commission, the FDIC, the Division and the OTS. The Prospectus and all supplemental sales literature, as of the date the Registration Statement became effective and on the Closing Date referred to in Section 2, complied and will comply in all material respects with the applicable requirements of the 1933 Act Regulations and, at or prior to the time of their first use, will have received all required authorizations of the FDIC, the Division, the OTS and the Commission for use in final form. No approval of any other regulatory or supervisory or other public authority is required in connection with the distribution of the Prospectus and any supplemental sales literature that has not been obtained and a copy of which has been delivered to the Agent. The Company and the MHC have not distributed any offering material in connection with the Offering except for the Prospectus and any supplemental sales material that has been filed with the Registration Statement, the

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Form AC, the FDIC Application and the Division Application and authorized for use by the Commission, the Division, the FDIC and the OTS. The information contained in the supplemental sales material filed as an exhibit to the Registration Statement, the Form AC, the FDIC Application and the Division Application does not conflict in any material respects with information contained in the Registration Statement and the Prospectus.

(i) The Plan has been adopted by the Boards of Directors of each of the Harvard Parties and, at the Closing Date, will have been approved by the members of the MHC, and the offer and sale of the Shares will have been conducted in all material respects in accordance with the Plan, the Conversion Regulations except to the extent waived or otherwise approved by the OTS, the FDIC and the Division, and all other applicable laws, regulations, decisions and orders, including all terms, conditions, requirements and provisions precedent to the Offering imposed upon the Company and the Bank by the OTS, the FDIC and the Division, the Commission, or any other regulatory authority and in the manner described in the Prospectus. To the best knowledge of the Harvard Parties, no person has sought to obtain review of the final action of the OTS, the Division or the FDIC in issuing the required regulatory approvals for the Conversion.

(j) The Bank has been duly organized and validly existing as an Illinois-chartered savings bank in stock form and upon completion of the Conversion will continue to be a duly organized and validly existing Illinois-chartered savings bank in stock form, in both instances duly authorized to conduct its business and own its property as described in the Registration Statement and the Prospectus; the Bank has obtained all licenses, permits and other governmental authorizations currently required for the conduct of its business, except those that individually or in the aggregate would not have a material adverse effect on the conduct of the business, financial condition, results of operations, affairs or prospects of the Harvard Parties, taken as a whole (a “Material Adverse Effect”); all such licenses, permits and governmental authorizations are in full force and effect, and the Bank is in compliance with all laws, rules, regulations and orders applicable to the operation of its business, except where failure to be in compliance would not have a Material Adverse Effect; the Bank is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which its ownership of property or leasing of property or the conduct of its business requires such qualification, unless the failure to be so qualified in one or more of such jurisdictions would not have a Material Adverse Effect. The Bank does not own equity securities or any equity interest in any other business enterprise except as described in the Prospectus or as would not be material to the operations of the Harvard Parties, taken as a whole. The authorized capital stock of the Bank consists of 5,100,000 shares, of which 5,000,000 shares are authorized to be issued as common stock, par value $1.00 per share (the “Bank Common Stock”), and of which 100,000 shares are authorized to be issued as preferred stock (the “Bank Preferred Stock”). As of the date hereof, [            ] shares of Bank Common Stock and no shares of Bank Preferred Stock are issued and outstanding; no additional shares of Bank Common Stock and no shares of Bank Preferred Stock will be issued prior to the Closing (defined below); the issued and outstanding shares of Bank Common Stock have been duly authorized and validly issued and are fully paid and

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nonassessable and have been issued in compliance with all federal and state securities laws; the MHC owns, indirectly, [            ] shares of Bank Common Stock beneficially and of record free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; the terms and provisions of the Bank Common Stock conform to all statements thereto contained in the Prospectus. At the Closing, (i) all of the outstanding capital stock of the Bank will be duly authorized, validly issued and fully paid and non-assessable and owned directly by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrances or legal or equitable claim and (ii) the Company will have no direct subsidiaries other than the Bank, and no indirect subsidiaries. The Conversion will be effected in all material respects in accordance with all applicable statutes, regulations, decisions and orders; and, except with respect to the filing of certain post-sale, post-Conversion reports, and documents in compliance with the 1933 Act Regulations, the Conversion Regulations or letters of approval, at the Closing Date, all terms, conditions, requirements and provisions with respect to the Conversion imposed by the Commission, the OTS, the FDIC and the Division, if any, will have been complied with by the Harvard Parties in all material respects or appropriate waivers will have been obtained and all applicable notice and waiting periods will have been satisfied, waived or elapsed.

(k) The Company is duly organized, validly existing and in good standing as a corporation under the laws of the State of Maryland with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and the Company is, and at the Closing Date will be, qualified to do business as a foreign corporation in each jurisdiction in which the conduct of its business requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect. The Company has obtained all licenses, permits and other governmental authorizations currently required for the conduct of its business except those that individually or in the aggregate would not have a Material Adverse Effect; all such licenses, permits and governmental authorizations are in full force and effect, and the Company is in all material respects complying therewith and is in compliance with all laws, rules, regulations and orders applicable to the operation of its business. There are no outstanding warrants or options to purchase any securities of the Company.

(l) The MHC is duly organized, validly existing and in good standing as a mutual holding company organized under the laws of the United States of America with full corporate power and authority to own and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus and, at the Closing Date, the corporate existence of the MHC will cease to exist. The MHC has obtained all licenses, permits and other governmental authorizations currently required for the conduct of its business except those that individually or in the aggregate would not have a Material Adverse Effect; all such licenses, permits and governmental authorizations are in full force and effect, and the MHC is in all material respects complying therewith and is in compliance with all laws, rules, regulations and orders applicable to the operation of its business.

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(m) Harvard Financial is duly organized, validly existing and in good standing as a stock holding company organized under the laws of the United States of America with full corporate power and authority to own and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus and, at the Closing Date, the corporate existence of Harvard Financial will cease to exist. Harvard Financial has obtained all licenses, permits and other governmental authorizations currently required for the conduct of its business except those that individually or in the aggregate would not have a Material Adverse Effect; all such licenses, permits and governmental authorizations are in full force and effect, and Harvard Financial is in all material respects complying therewith and is in compliance with all laws, rules, regulations and orders applicable to the operation of its business.

(n) Except as described in the Prospectus there are no contractual encumbrances or restrictions or requirements or legal restrictions or requirements required to be described therein, on the ability of any of the Harvard Parties, (A) to pay dividends or make any other distributions on its capital stock or to pay any indebtedness owed to another party, (B) to make any loans or advances to, or investments in, another party or (C) to transfer any of its property or assets to another party. Except as described in the Prospectus, there are no restrictions, encumbrances or requirements affecting the payment of dividends or the making of any other distributions on any of the capital stock of the Company.

(o) The Bank has properly administered all accounts for which it acts as a fiduciary, including but not limited to accounts for which they serve as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law and regulation, except where the failure to do so would not have a Material Adverse Effect. Neither the Bank nor any of its directors, officers or employees has committed any material breach of trust with respect to any such fiduciary account, and the accountings for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account in all material respects.

(p) The Bank is a member of the Federal Home Loan Bank of Chicago (“FHLB-Chicago”). The deposit accounts of the Bank are insured by the FDIC up to the applicable limits, and no proceedings for the termination or revocation of such insurance are pending or, to the best knowledge of the Company or the Bank, threatened.

(q) The Bank and the Company have good and marketable title to all real property and good title to all other assets material to the business of the Company and the Bank, taken as a whole, and to those properties and assets described in the Registration Statement and Prospectus as owned by them, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Registration Statement and Prospectus or as are not material to the business of the Company and the Bank, taken as a whole; and all of the leases and subleases material to the business of the Company and the Bank, taken as a whole, under which the Company or the Bank hold properties, including those described in the Registration Statement and Prospectus, are in full force and effect.

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(r) The Company has received an opinion of its special counsel, Luse Gorman Pomerenk & Schick, P.C., with respect to the federal income tax consequences of the Conversion and the opinions of its tax advisor, Lindgren, Callihan, Van Osdol & Co., Ltd., with respect to the Illinois income tax consequences of the Conversion and such opinions are accurately summarized in the Registration Statement and the Prospectus. The Company and the Bank represent and warrant that the facts upon which such opinions are based are truthful, accurate and complete in all material respects. Neither the Company nor the Bank will take any action inconsistent therewith.

(s) Each of the Harvard Parties has all such power, authority, authorizations, approvals and orders as may be required to enter into this Agreement, to carry out the provisions and conditions hereof and to issue and sell the Shares to be sold by the Company as provided herein and as described in the Prospectus, subject to approval or confirmation by the OTS, the Division and the FDIC of the final Appraisal. The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated have been duly and validly authorized by all necessary corporate action on the part of each of the Harvard Parties. This Agreement has been validly executed and delivered by each of the Harvard Parties and, assuming due execution and delivery by the Agent, is the valid, legal and binding agreement of each of the Harvard Parties enforceable in accordance with its terms (except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally or the rights of creditors of savings and loan holding companies, the accounts of whose subsidiaries are insured by the FDIC, or by general equity principles, regardless of whether such enforceability is considered in a proceeding in equity or at law, and except to the extent, if any, that the provisions of Sections 9 and 10 hereof may be unenforceable as against public policy or pursuant to applicable Federal law and the rules and regulations of the Federal Reserve System).

(t) None of the Harvard Parties is in violation of any directive received from the Division, the OTS, the FDIC, or any other agency to make any material change in the method of conducting its business so as to comply in all material respects with all applicable statutes and regulations (including, without limitation, regulations, decisions, directives and orders of the Division, the OTS and the FDIC) and, except as may be set forth in the Registration Statement, the General Disclosure Package and the Prospectus, there is no suit or proceeding or charge or action before or by any court, regulatory authority or governmental agency or body, pending or, to the knowledge of any of the Harvard Parties, threatened, which might materially and adversely affect the Offering, or which might result in any Material Adverse Effect.

(u) The consolidated financial statements, schedules and notes related thereto which are included in the General Disclosure Package and the Prospectus fairly present the balance sheet, income statement, statement of changes in equity capital and statement of cash flows of the MHC on a consolidated basis at the respective dates indicated and for the respective periods covered thereby and comply as to form in all material respects with the applicable accounting requirements of the 1933 Act Regulations and Title 12 of the Code of Federal Regulations. Such consolidated financial statements, schedules and

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notes related thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently applied through the periods involved except as noted therein and present fairly in all material respects the information required to be stated therein and are consistent with financial statements and other reports filed by the Bank with the Division, the FDIC and OTS, except to the extent that accounting principles employed in such filings conform to the requirements of the OTS and not necessarily to GAAP. The other financial, statistical and pro forma information and related notes included in the Prospectus present fairly the information shown therein on a basis consistent with the audited and unaudited consolidated financial statements of the Bank included in the Prospectus, and as to the pro forma adjustments, the adjustments made therein have been properly applied on the basis described therein.

(v) The Harvard Parties carry, or are covered by, insurance in such amounts and covering such risks as the Harvard Parties deem reasonably adequate for the conduct of their respective businesses and the value of their respective properties.

(w) Since the respective dates as of which information is given in the Registration Statement including the Prospectus and except as disclosed in the General Disclosure Package and the Prospectus: (i) there has not been any material adverse change, financial or otherwise, in the condition of the Harvard Parties considered as one enterprise, or in the earnings, capital, properties, business or prospects of the Harvard Parties considered as one enterprise, whether or not arising in the ordinary course of business; (ii) there has not been any material increase in the principal amount of the Harvard Parties’ consolidated assets which are classified by any of such entities as impaired, substandard, doubtful or loss or in loans past due 90 days or more or real estate acquired by foreclosure, by deed-in-lieu of foreclosure or deemed in-substance foreclosure or any material decrease in equity capital or total assets of any of the Harvard Parties; nor has any of the Harvard Parties issued any securities (other than in connection with the incorporation of the Company) or incurred any liability or obligation for borrowing other than in the ordinary course of business; (iii) there have not been any material transactions entered into by the Harvard Parties; (iv) there has not been any material adverse change in the aggregate dollar amount (on a consolidated basis with the Harvard Parties) of the MHC’s deposits or its net worth; (v) there has been no material adverse change in any of the Harvard Parties’ relationship with its insurance carriers, including, without limitation, cancellation or other termination of any of the Harvard Parties’ fidelity bond or any other type of insurance coverage; (vi) there has been no material change in management of any of the Harvard Parties; (vii) none of the Harvard Parties has sustained any material loss or interference with its respective business or properties from fire, flood, windstorm, earthquake, accident or other calamity, whether or not covered by insurance; (viii) none of the Harvard Parties has defaulted in the payment of principal or interest on any outstanding debt obligations; (ix) the capitalization, liabilities, assets, properties and business of the Harvard Parties conform in all material respects to the descriptions thereof contained in the General Disclosure Package and the Prospectus; and (x) none of the Harvard Parties has any material liabilities, contingent or otherwise, except as set forth in the Prospectus.

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(x) None of the Harvard Parties is (i) in violation of their respective articles, charters or bylaws (and none of the Harvard Parties will not be in violation of its articles of incorporation, charter or bylaws upon completion of the Conversion), or (ii) in default in the performance or observance of any obligation, agreement, covenant, or condition contained in any material contract, lease, loan agreement, indenture or other instrument to which it is a party or by which it or any of its property may be bound. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated will not: (i) conflict with or constitute a breach of, or default under, or result in the creation of any lien, charge or encumbrance upon any of the assets of any of the Harvard Parties pursuant to the respective articles of incorporation, charters or bylaws of the Harvard Parties or any contract, lease or other instrument in which the Harvard Parties has a beneficial interest, or any applicable law, rule, regulation or order; (ii) violate any authorization, approval, judgment, decree, order, statute, rule or regulation applicable to any of the Harvard Parties; or (iii) result in the creation of any lien, charge or encumbrance upon any property of the Harvard Parties.

(y) All documents made available or delivered by, or to be made available to or delivered by the Harvard Parties or their representatives in connection with the issuance and sale of the Shares, including records of account holders and depositors of the Bank, or in connection with the Agent’s exercise of due diligence, except for those documents which were prepared by parties other than the Harvard Parties or their representatives, to the best knowledge of the Harvard Parties, were on the dates on which they were delivered, or will be on the dates on which they are to be delivered, true, complete and correct in all material respects.

(z) Upon consummation of the Conversion, the authorized, issued and outstanding equity capital of the Company will be within the range set forth in the General Disclosure Package and the Prospectus under the caption “Capitalization,” and no Shares have been or will be issued and outstanding prior to the Closing Date; the Shares will have been duly and validly authorized for issuance and, when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan and in the Prospectus, will be duly and validly issued, fully paid and non-assessable, except for shares purchased by the ESOP with funds borrowed from the Company to the extent payment therefor in cash has not been received by the Company; except to the extent that subscription rights and priorities pursuant thereto exist pursuant to the Plan, no preemptive rights exist with respect to the Shares; and the terms and provisions of the Shares will conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus. The Shares have been approved for quotation on the Over-the-Counter Bulletin Board, subject to issuance. Upon the issuance of the Shares, good title to the Shares will be transferred from the Company to the purchasers thereof against payment therefor, subject to such claims as may be asserted against the purchasers thereof by third-party claimants.

(aa) No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default, on the part of any of the Harvard Parties in the due performance and observance of any term, covenant, agreement, obligation, representation, warranty or condition of any indenture, mortgage, deed of trust, note,

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bank loan or credit agreement, lease, license, Permit or any other instrument or agreement to which the Harvard Parties or by which any of them or any of their respective property is bound or affected which, in any such case, could have, individually or in the aggregate with other breaches, violations or defaults, a Material Adverse Effect; each of such agreements is in full force and effect and is the legal, valid and binding agreement of the applicable party and the other parties thereto, enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity and no other party to any such agreement has instituted or, to the knowledge of the Harvard Parties, threatened any action or proceeding wherein any of the Harvard Parties would or might be alleged to be in default thereunder where such action or proceeding, if determined adversely to the Harvard Parties, would have a Material Adverse Effect. There are no contracts or documents that are required to be filed as exhibits to the Registration Statement or described in the Registration Statement, the Prospectus, or any Permitted Free Writing Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement, the Prospectus, and any Permitted Free Writing Prospectus are fairly summarized therein in all material respects. No party has sent or received any notice indicating the termination of or intention to terminate any of the contracts or agreements referred to or described in the Registration Statement, the Prospectus, or any Permitted Free Writing Prospectus, or filed as an exhibit to the Registration Statement, and, to the knowledge of the Harvard Parties, no such termination has been threatened by any party to any such contract or agreement.

(bb) Subsequent to the date the Registration Statement is declared effective by the Commission and prior to the Closing Date, except as otherwise may be indicated or contemplated in the Registration Statement, none of the Harvard Parties has or will have issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, except borrowings from the same or similar sources indicated in the Prospectus in the ordinary course of its business.

(cc) Except for the Bank’s [defined benefit pension plan and the profit sharing and 401(k) plan,] none of the Harvard Parties maintains any other “pension plan,” as defined in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In addition, (A) the employee benefit plans, including employee welfare benefit plans, of the Harvard Parties (the “Employee Plans”) have been operated in compliance with the applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended (the “Code”), all regulations, rulings and announcements promulgated or issued thereunder and all other applicable laws and governmental regulations, (B) no reportable event under Section 4043(c) of ERISA has occurred with respect to any Employee Plan of the Harvard Parties for which the reporting requirements have not been waived by the Pension Benefit Guaranty Corporation, (C) no prohibited transaction under Section 406 of ERISA, for which an exemption does not apply, has occurred with respect to any Employee Plan of the Harvard Parties and (D) all Employee Plans that are group health plans have been operated in compliance with the group health plan continuation coverage requirements of Section 4980B of the Code, except to the extent such noncompliance, reportable event or prohibited transaction would not have, individually or

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in the aggregate, a Material Adverse Effect. There are no pending or, to the knowledge of the Harvard Parties, threatened, claims by or on behalf of any Employee Plan, by any employee or beneficiary covered under any such Employee Plan or by any governmental authority, or otherwise involving such Employee Plans or any of their respective fiduciaries (other than for routine claims for benefits).

(dd) No approval of any regulatory or supervisory or other public authority is required in connection with the execution and delivery of this Agreement or the issuance of the Shares, except for the approval of the Commission, the FDIC and the OTS, and any necessary qualification, notification, registration or exemption under the securities or blue sky laws of the various states in which the Shares are to be offered, and except as may be required under the rules and regulations of the FINRA.

(ee) BKD LLP, which has certified the audited consolidated financial statements and schedules of the MHC included in the Prospectus, has advised the Harvard Parties in writing that they are, with respect to the Harvard Parties, independent registered public accountants within the applicable rules of the Public Company Accounting Oversight Board (United States).

(ff) RP Financial, LC, which has prepared the Appraisal, has advised the MHC in writing that it is independent of the Harvard Parties within the meaning of the Conversion Regulations and is believed by the Harvard Parties to be experienced and expert in the valuation and the appraisal of business entities, including savings institutions, and the Harvard Parties believe that RP Financial, LC has prepared the pricing information set forth in the Prospectus in accordance with the requirements of the Conversion Regulations.

(gg) The Harvard Parties have timely filed or extended all required federal, state and local tax returns; the Harvard Parties have paid all taxes that have become due and payable in respect of such returns, except where permitted to be extended or where such taxes may be contested in good faith, have made adequate reserves for similar future tax liabilities and no deficiency has been asserted with respect thereto by any taxing authority. The Harvard Parties have no knowledge of any tax deficiency which has been or might be assessed against either of them which, if the subject of an unfavorable decision, ruling or finding, could have, individually or in the aggregate with other tax deficiencies, a Material Adverse Effect. All material tax liabilities have been adequately provided for in the financial statements of the Harvard Parties in accordance with GAAP. There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement by the Company or with the issuance or sale by the Company of the Shares.

(hh) Each of the Harvard Parties is in compliance in all material respects with the applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and the regulations and rules thereunder.

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(ii) All Sales Information (as defined in Section 9(a)) used by the Company in connection with the Conversion that is required by the OTS, the Division or the FDIC to be filed has been filed with and approved by the OTS, the Division or the FDIC.

(jj) To the knowledge of the Harvard Parties, none of the Harvard Parties or the employees of the Harvard Parties has made any payment of funds of the Harvard Parties as a loan for the purchase of the Shares or made any other payment of funds prohibited by law, and no funds have been set aside to be used for any payment prohibited by law.

(kk) None of the Harvard Parties has: (i) issued any securities within the last 18 months (except for notes to evidence bank loans and reverse repurchase agreements or other liabilities in the ordinary course of business or as described in the Prospectus); (ii) had any dealings within the 12 months prior to the date hereof with any member of the FINRA, or any person related to or associated with such member, other than discussions and meetings relating to the proposed Offering and routine purchases and sales of United States government and agency and other securities in the ordinary course of business; (iii) entered into a financial or management consulting agreement except as contemplated hereunder; and (iv) engaged any intermediary between the Agent and the Company or the Bank in connection with the offering of the Shares, and no person is being compensated in any manner for such service. Appropriate arrangements have been made for placing the funds received from subscriptions for Shares in a special interest-bearing account with the Bank until all Shares are sold and paid for, with provision for refund to the purchasers in the event that the Offering is not completed for whatever reason or for delivery to the Company if all Shares are sold.

(ll) The Harvard Parties have not relied upon the Agent or its legal counsel for any legal, tax or accounting advice in connection with the Conversion.

(mm) The records used by the Harvard Parties to determine the identities of Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are accurate and complete in all material respects.

(nn) None of the Harvard Parties is, and neither intends to conduct business in a manner which would cause it to become, an “investment company,” an entity “controlled” by an “investment company” or an “investment adviser” within the meaning of the Investment Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as amended.

(oo) None of the Harvard Parties or any properties owned or operated by any of the Harvard Parties, is in violation of or liable under any Environmental Law (as defined below), except for such violations or liabilities that, individually or in the aggregate, would not have a Material Adverse Effect. There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation, notices, demand letters or requests for information from any environmental agency) instituted or pending or, to the knowledge of the Harvard Parties, threatened relating to the liability of any property owned or operated by the Harvard Parties under any Environmental Law. To

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the knowledge of the Harvard Parties, there are no events or circumstances that could form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Harvard Parties relating to any Environmental Law. For purposes of this subsection, the term “Environmental Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component.

(pp) The Harvard Parties maintain a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization, and (D) the recorded accounts or assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The books, records and accounts and systems of internal accounting control of the Company and the Bank comply in all material respects with the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934 (the “1934 Act”). The Company has established and maintains “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that the information it will be required to disclose in the reports it files or submits under the 1934 Act is accumulated and communicated to the Company’s management (including the Company’s chief executive officer and chief financial officer) in a timely manner and recorded, processed, summarized and reported within the periods specified in the Commission’s rules and forms.

(qq) All of the loans represented as assets of the Harvard Parties in the Prospectus meet or are exempt from all requirements of federal, state and local law pertaining to lending, including, without limitation, truth in lending (including the requirements of Regulation Z and 12 C.F.R. Part 226), real estate settlement procedures, consumer credit protection, equal credit opportunity and all disclosure laws applicable to such loans, except for violations which, if asserted, would not have a Material Adverse Effect.

(rr) To the Harvard Parties’ knowledge, there are no affiliations or associations between any member of the FINRA and any of the Harvard Parties’ officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement and the Prospectus.

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(ss) The Company has taken all actions necessary to obtain at the Closing Date a blue sky memorandum from Luse Gorman Pomerenk & Schick, P.C.

(tt) Any certificates signed by an officer of any of the Harvard Parties pursuant to the conditions of this Agreement and delivered to the Agent or their counsel that refers to this Agreement shall be deemed to be a representation and warranty by such Harvard Party to the Agent as to the matters covered thereby with the same effect as if such representation and warranty were set forth herein.

(uu) The statistical and market related data contained in any Permitted Free Writing Prospectus, the Prospectus and the Registration Statement are based on or derived from sources which the Harvard Parties believe were reliable and accurate at the time they were filed with the Commission. No forward-looking statement (within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act) contained in the Registration Statement, the Prospectus, or any Permitted Free Writing Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

Section 5. Representations and Warranties of the Agent. The Agent represents and warrants to the Company and the Bank as follows:

(a) The Agent is a corporation and is validly existing in good standing under the laws of the State of New York with full power and authority to provide the services to be furnished to the Company and the Bank hereunder.

(b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Agent, and this Agreement has been duly and validly executed and delivered by the Agent and is a legal, valid and binding agreement of the Agent, enforceable in accordance with its terms, except as the legality, validity, binding nature and enforceability thereof may be limited by (i) bankruptcy, insolvency, moratorium, reorganization, conservatorship, receivership or other similar laws relating to or affecting the enforcement of creditors’ rights generally, and (ii) general equity principles regardless of whether such enforceability is considered in a proceeding in equity or at law.

(c) Each of the Agent and its employees, agents and representatives who shall perform any of the services hereunder shall be duly authorized and empowered, and shall have all licenses, approvals and permits necessary to perform such services; and the Agent is a registered selling agent in each of the jurisdictions in which the Shares are to be offered by the Company in reliance upon the Agent as a registered selling agent as set forth in the blue sky memorandum prepared with respect to the Offering.

(d) The execution and delivery of this Agreement by the Agent, the consummation of the transactions contemplated hereby and compliance with the terms and provisions hereof will not conflict with, or result in a breach of, any of the terms, provisions or conditions of, or constitute a default (or an event which with notice or lapse

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of time or both would constitute a default) under, the articles of incorporation or bylaws of the Agent or any agreement, indenture or other instrument to which the Agent is a party or by which it or its property is bound.

(e) No approval of any regulatory or supervisory or other public authority is required in connection with the Agent’s execution and delivery of this Agreement, except as may have been received.

(f) There is no suit or proceeding or charge or action before or by any court, regulatory authority or government agency or body or, to the knowledge of the Agent, pending or threatened, which might materially adversely affect the Agent’s performance under this Agreement.

Section 6. Covenants of the Harvard Parties. The Company and the Bank hereby jointly and severally covenant and agree with the Agent as follows:

(a) The Company will not, at any time after the date the Registration Statement is declared effective, file any amendment or supplement to the Registration Statement without providing the Agent and its counsel an opportunity to review such amendment or supplement or file any amendment or supplement to which amendment or supplement the Agent and its counsel shall reasonably object.

(b) If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in light of the circumstances prevailing at the subsequent time, not misleading, the Company has notified or will notify promptly the Agent so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is amended or supplemented and the Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission; provided, however, that this covenant shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Agent expressly for use therein.

(c) Each of the Harvard Parties represents and agrees that, unless it obtains the prior consent of the Agent, and the Agent represents and agrees that, unless it obtains the prior consent of the Harvard Parties, it has not made and will not make any offer relating to the offered Shares that would constitute an “issuer free writing prospectus” as defined in Rule 433 of the 1933 Act Regulations, or that would constitute a “free writing prospectus,” as defined in Rule 405 of the 1933 Act Regulations, required to be filed with the Commission. Any such free writing prospectus consented to by the Company, the Bank and the Agent is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company and the Bank represent that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in

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Rule 433 of the 1933 Act Regulations, and has complied and will comply in all material respects with the requirements of Rule 433 of the 1933 Act Regulations applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping. The Company and the Bank need not treat any communication as a free writing prospectus if it is exempt from the definition of prospectus pursuant to clause (a) of Section 2(a)(10) of the 1933 Act without regard to Rule 172 or 173 of the 1933 Act Regulations.

(d) The Harvard Parties will not, at any time after the Form AC is approved by the OTS, file any amendment or supplement to such Form AC without providing the Agent and its counsel an opportunity to review such amendment or supplement or file any amendment or supplement to which amendment or supplement the Agent and its counsel shall reasonably object.

(e) The Harvard Parties will not, at any time after either the Division Application is filed with and approved by the Division or the FDIC Application is filed with and not objected to by the FDIC, file any amendments or supplements to such applications without providing the Agent and its counsel an opportunity to review such amendments or supplements or file any amendment or supplement to which amendment or supplement the Agent and its counsel shall reasonably object.

(f) The Company will not, at any time after the Holding Company Application is approved by the OTS, file any amendment or supplement to such Holding Company Application without providing the Agent and its counsel an opportunity to review such amendment or supplement or file any amendment or supplement to which amendment or supplement the Agent and its counsel shall reasonably object.

(g) The Harvard Parties will use their best efforts to cause any post-effective amendment to the Registration Statement to be declared effective by the Commission and any post-effective amendment to the Form AC, the Division Application, the FDIC Application or the Holding Company Application to be approved by the OTS, the Division or the FDIC, as the case may be, and will promptly upon receipt of any information concerning the events listed below notify the Agent: (i) when the Registration Statement, as amended, has become effective; (ii) when the Form AC, the Division Application, the FDIC Application or the Holding Company Application, as amended, has been approved by the OTS, the Division or the FDIC, as the case may be; (iii) of any comments from the Commission, the Division, the FDIC, the OTS or any other governmental entity with respect to the Conversion contemplated by this Agreement; (iv) of the request by the Commission, the Division, the FDIC, the OTS or any other governmental entity for any amendment or supplement to the Registration Statement, the Form AC, the Division Application, the FDIC Application, Holding Company Application or for additional information; (v) of the issuance by the Commission, the Division, the FDIC, the OTS or any other governmental entity of any order or other action suspending the Conversion or the use of the Registration Statement or the Prospectus or any other filing of the Company or the Bank under the Conversion Regulations, or other applicable law, or the threat of any such action; (vi) of the issuance by the Commission, the Division, the FDIC, the OTS or any authority of any stop order

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suspending the effectiveness of the Registration Statement or of the initiation or threat of initiation or threat of any proceedings for that purpose; or (vii) of the occurrence of any event mentioned in paragraph (h) below. The Harvard Parties will make every reasonable effort (i) to prevent the issuance by the Commission, the Division, the FDIC, the OTS or any other state authority of any such order and, (ii) if any such order shall at any time be issued, to obtain the lifting thereof at the earliest possible time.

(h) The Harvard Parties will deliver to the Agent and to its counsel two conformed copies of the Registration Statement, the Division Application, the FDIC Application, the Form AC and the Holding Company Application, as originally filed and of each amendment or supplement thereto, including all exhibits. Further, the Harvard Parties will deliver such additional copies of the foregoing documents to counsel to the Agent as may be required for any FINRA filings.

(i) The Company and the Bank will furnish to the Agent, from time to time during the period when the Prospectus (or any later prospectus related to this offering) is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of such Prospectus (as amended or supplemented) as the Agent may reasonably request for the purposes contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or the rules and regulations promulgated under the 1934 Act (the “1934 Act Regulations”). The Company authorizes the Agent to use the Prospectus (as amended or supplemented, if amended or supplemented) in any lawful manner contemplated by the Plan in connection with the sale of the Shares by the Agent.

(j) The Harvard Parties will comply with any and all material terms, conditions, requirements and provisions with respect to the Offering imposed by the Commission, the Division, the FDIC, the OTS or the Conversion Regulations, and by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations to be complied with prior to or subsequent to the Closing Date and during such time period as the Prospectus is required to be delivered, and during such time period the Harvard Parties will comply, at their own expense, with all material requirements imposed upon them by the Commission, the Division, the FDIC, the OTS or the Conversion Regulations, and by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations, including, without limitation, Rule 10b-5 under the 1934 Act, in each case as from time to time in force, so far as necessary to permit the continuance of sales or dealing in the Common Shares during such period in accordance with the provisions hereof and the Prospectus. The Company will comply with all undertakings contained in the Registration Statement.

(k) If, at any time during the period when the Prospectus is required to be delivered, any event relating to or affecting any of the Harvard Parties shall occur, as a result of which it is necessary or appropriate, in the opinion of counsel for the Company and in the reasonable opinion of the Agent’s counsel, to amend or supplement the Registration Statement or Prospectus in order to make the Registration Statement or Prospectus not misleading in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, the Company will immediately so inform the Agent and prepare and file, at its own expense, with the Commission, the Division, the

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FDIC and the OTS, and furnish to the Agent a reasonable number of copies, of an amendment or amendments of, or a supplement or supplements to, the Registration Statement or Prospectus (in form and substance reasonably satisfactory to the Agent and its counsel after a reasonable time for review) which will amend or supplement the Registration Statement or Prospectus so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading. For the purpose of this Agreement, the Company will timely furnish to the Agent such information with respect to the Harvard Parties as the Agent may from time to time reasonably request.

(l) The Harvard Parties and its counsel will take all necessary actions required to qualify or register the Shares for offering and sale by the Company or to exempt such Shares from registration, or to exempt the Company as a broker-dealer and its officers, directors and employees as broker-dealers or agents under the applicable securities or blue sky laws of such jurisdictions in which the Shares are required under the Conversion Regulations to be sold or as the Agent and the Company may reasonably agree upon; provided, however, that the Company shall not be obligated to file any general consent to service of process, to qualify to do business in any jurisdiction in which it is not so qualified, or to register its directors or officers as brokers, dealers, salesmen or agents in any jurisdiction. In each jurisdiction where any of the Shares shall have been qualified or registered as above provided, the Company will make and file such statements and reports in each fiscal period as are or may be required by the laws of such jurisdiction.

(m) The liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders will be duly established and maintained in accordance with the requirements of the Conversion Regulations, and such Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain their savings accounts in the Bank will have an inchoate interest in their pro rata portion of the liquidation account, which shall have a priority superior to that of the holders of the Common Shares in the event of a complete liquidation of the Bank.

(n) The Company and the Bank will not sell or issue, contract to sell or otherwise dispose of, for a period of 90 days after the Closing Date, without the Agent’s prior written consent, any of their shares of their common stock, other than the Common Shares or other than in connection with any plan or arrangement described in the Prospectus.

(o) The Company will register its common stock under Section 12(g) of the 1934 Act. The Company shall maintain the effectiveness of such registration for not less than three years from the time of effectiveness or such shorter period as may be required by the Division, the FDIC or the OTS.

(p) During the period during which the Common Shares are registered under the 1934 Act or for three years from the date hereof, whichever period is greater, the Company will furnish to its shareholders as soon as practicable after the end of each

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fiscal year an annual report of the Company (including a consolidated balance sheet and statements of consolidated income, shareholders’ equity and cash flows of the Company and its subsidiaries as at the end of and for such year, certified by independent registered public accountants in accordance with Regulation S-X under the 1933 Act and the 1934 Act) and make available as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the first fiscal quarter ending after the effective time of the Registration Statement) financial information of the Company for such quarter in reasonable detail.

(q) During the period of three years from the date hereof, the Company will furnish to the Agent: (i) as soon as practicable after such information is publicly available, a copy of each report of the Company furnished to or filed with the Commission under the 1934 Act or any national securities exchange or system on which any class of securities of the Company is listed or quoted (including, but not limited to, reports on Forms 10-K, 10-Q and 8-K and all proxy statements and annual reports to stockholders): (ii) a copy of each other non-confidential report of the Company mailed to its shareholders or filed with the Commission, the FDIC, the Division, the OTS or any other supervisory or regulatory authority or any national securities exchange or system on which any class of securities of the Company is listed or quoted, each press release and material news items and additional documents and information with respect to the Company or the Bank as the Agent may reasonably request; and (iii) from time to time, such other nonconfidential information concerning the Company or the Bank as the Agent may reasonably request.

(r) The Company and the Bank will use the net proceeds from the sale of the Shares in the manner set forth in the Prospectus under the caption “Use of Proceeds.”

(s) The Company will make generally available to its security holders as soon as practicable, but not later than 60 days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date (as defined in such Rule 158) of the Registration Statement.

(t) The Company will use its best efforts to include the Common Shares for quotation on the Over-the-Counter Bulletin Board on or prior to the Closing Date.

(u) The Bank will maintain appropriate arrangements for depositing all funds received from persons mailing or delivering subscriptions for or orders to purchase Shares in the Offering with the Bank or another financial institution whose deposits are insured by the FDIC, on an interest-bearing basis at the rate described in the Prospectus until the Closing Date and satisfaction of all conditions precedent to the release of the Company’s or the Bank’s obligation to refund payments received from persons subscribing for or ordering Shares in the Offering in accordance with the Plan and as described in the Prospectus or until refunds of such funds have been made to the persons entitled thereto or withdrawal authorizations canceled in accordance with the Plan and as described in the Prospectus. The Bank will maintain such records of all funds received to

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permit the funds of each subscriber to be separately insured by the FDIC (to the maximum extent allowable) and to enable the Bank to make the appropriate refunds of such funds in the event that such refunds are required to be made in accordance with the Plan and as described in the Prospectus.

(v) The Company will report the use of proceeds of the Offering in accordance with Rule 463 under the 1933 Act.

(w) The Company will promptly take all necessary action to register as a savings and loan holding company under the HOLA.

(x) The Company and the Bank will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with FINRA Rule 2790.

(y) None of the Harvard Parties will amend the Plan without notifying the Agent and the Agent’s counsel prior thereto.

(z) The Company shall assist the Agent, if necessary, in connection with the allocation of the Shares in the event of an oversubscription and shall provide the Agent with any information necessary to assist the Company in allocating the Shares in such event and such information shall be accurate and reliable in all material respects.

(aa) Prior to the Closing Date, the Company will inform the Agent of any event or circumstances of which it is aware as a result of which the Registration Statement and/or Prospectus, as then amended or supplemented, would contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading.

(bb) The Company will not deliver the Shares until the Harvard Parties have satisfied or caused to be satisfied each condition set forth in Section 8 hereof, unless such condition is waived in writing by the Agent.

(cc) Subsequent to the date the Registration Statement is declared effective by the Commission and prior to the Closing Date, except as otherwise may be indicated or contemplated therein or set forth in an amendment or supplement thereto, none of the Harvard Parties will have: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, except borrowings from the same or similar sources indicated in the Prospectus in the ordinary course of its business, or (ii) entered into any transaction which is material in light of the business and properties of the Harvard Parties, taken as a whole.

(dd) Until the Closing Date, the Harvard Parties will conduct their businesses in compliance with all applicable federal and state laws, rules, regulations, decisions, directives and orders, including all decisions, directives and orders of the Commission, the Division, the FDIC and the OTS.

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(ee) The facts and representations provided to Luse Gorman Pomerenk & Schick, P.C. by the Harvard Parties and upon which Luse Gorman Pomerenk & Schick, P.C. will base its opinion under Section 8(c)(1) are and will be truthful, accurate and complete.

(ff) The Harvard Parties will not distribute any offering material in connection with the Offering except for the Prospectus and any supplemental sales material that has been filed with the Registration Statement, the Division Application, the FDIC Application and the Form AC and authorized for use by the Commission, the Division, the FDIC and the OTS. The information contained in any supplemental sales material (in addition to the supplemental sales material filed as an exhibit to the Registration Statement, the Division Application, the FDIC Application and the Form AC) shall not conflict with the information contained in the Registration Statement and the Prospectus.

(gg) The Company will comply with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules, regulations, guidelines and interpretations promulgated thereunder by the Commission.

Section 7. Payment of Expenses. Whether or not the Conversion is completed or the sale of the Shares by the Company is consummated, the Harvard Parties jointly and severally agree to pay or reimburse the Agent for: (a) all filing fees in connection with all filings related to the Conversion with the FINRA; (b) any stock issue or transfer taxes which may be payable with respect to the sale of the Shares; (c) subject to Section 2(d), all expenses of the Conversion, including but not limited to the Agent’s attorneys’ fees and expenses, blue sky fees, transfer agent, registrar and other agent charges, fees relating to auditing and accounting or other advisors and costs of printing all documents necessary in connection with the Offering. In the event the Company is unable to sell the minimum number of shares necessary to complete the Conversion or the Conversion is terminated or otherwise abandoned, the Harvard Parties shall promptly reimburse the Agent in accordance with Section 2(d) hereof.

In the event that the Agent incurs any expenses on behalf of the Company or the Bank that are customarily borne by the issuer, the Company and the Bank will pay or reimburse the Agent for such expenses regardless of whether the Offering is successfully completed, and such reimbursements will not be included in the expense limitations set forth in Section 2(d) hereof. The Company and the Bank acknowledge, however, that such limitations may be increased by the mutual consent of the Bank and Agent in the event of a delay in the Offering requiring the Agent to utilize a Syndicated Community Offering, a delay as a result of circumstances requiring material additional work by Agent or its counsel or an update of the financial information in tabular form contained in the Prospectus for a period later than [December 31, 2009]. Not later than two days prior to the Closing Date, the Agent will provide the Company with an accounting of all reimbursable expenses to be paid at the Closing in next day funds. In the event the Bank determines to abandon or terminate the Conversion prior to Closing, payment of such expenses shall be made in next day funds on the date such determination is made.

Section 8. Conditions to the Agent’s Obligations. The obligations of the Agent hereunder, as to the Shares to be delivered at the Closing Date, are subject, to the extent not waived in writing by the Agent, to the condition that all representations and warranties of the

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Harvard Parties herein are, at and as of the commencement of the Offering and at and as of the Closing Date, true and correct in all material respects, the condition that the Harvard Parties shall have performed all of its obligations hereunder to be performed on or before such dates, and to the following further conditions:

(a) At the Closing Date, the Harvard Parties shall have conducted the Conversion in all material respects in accordance with the Plan, the Conversion Regulations, and all other applicable laws, regulations, decisions and orders, including all terms, conditions, requirements and provisions precedent to the Conversion imposed upon them by the OTS.

(b) The Registration Statement shall have been declared effective by the Commission, the Form AC and Holding Company Application shall have been approved by the OTS not later than, and the Division Application shall have been approved by the Division, and the FDIC Application shall not have been objected to by the FDIC prior to, 5:30 p.m. on the date of this Agreement, or with the Agent’s consent at a later time and date; and at the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefore initiated or threatened by the Commission or any state authority, and no order or other action suspending the authorization of the Prospectus or the consummation of the Conversion shall have been issued or proceedings therefore initiated or, to the Harvard Parties’ knowledge, threatened by the Commission, the Division, the OTS, the FDIC or any other state authority.

(c) At the Closing Date, the Agent shall have received the favorable opinion, dated as of the Closing Date and addressed to the Agent and for its benefit, of Luse Gorman Pomerenk & Schick, P.C., special counsel for the Company and the Bank, in form and substance as attached hereto as Exhibit C.

(d) At the Closing Date, the Agent shall have received the favorable opinion, dated as of the Closing Date and addressed to the Agent and for its benefit, of Vedder Price P.C., special counsel for the Agent, in form and substance as attached hereto as Exhibit D.

(e) A blue sky memorandum from Luse Gorman Pomerenk & Schick, P.C. relating to the Offering, including Agent’s participation therein, shall have been furnished prior to the mailing of the Prospectus to the Company with a copy thereof addressed to Agent or upon which Luse Gorman Pomerenk & Schick, P.C. shall state the Agent may rely. The blue sky memorandum will relate to the necessity of obtaining or confirming exemptions, qualifications or the registration of the Shares under applicable state securities law.

(f) At the Closing Date, the Agent shall receive a certificate of the Chief Executive Officer and the Chief Financial Officer of each of the Harvard Parties in form and substance reasonably satisfactory to the Agent’s Counsel, dated as of such Closing Date, to the effect that: (i) they have carefully examined the Prospectus and, in their opinion, at the time the Prospectus became authorized for final use, the Prospectus did

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not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) since the date the Prospectus became authorized for final use, no event has occurred which should have been set forth in an amendment or supplement to the Prospectus which has not been so set forth, including specifically, but without limitation, any material adverse change in the condition, financial or otherwise, or in the earnings, capital, properties or business of the Harvard Parties and the conditions set forth in this Section 8 have been satisfied; (iii) since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package and the Prospectus, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, capital, properties or business of the Harvard Parties independently, or of the Harvard Parties considered as one enterprise, whether or not arising in the ordinary course of business; (iv) the representations and warranties in Section 4 are true and correct with the same force and effect as though expressly made at and as of the Closing Date; (v) the Harvard Parties complied in all material respects with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Date and will comply in all material respects with all obligations to be satisfied by them after the Closing Date; (vi) no stop order suspending the effectiveness of the Registration Statement has been initiated or, to the best knowledge of the Harvard Parties, threatened by the Commission or any state authority; (vii) no order suspending the Conversion, the Offering or the use of the Prospectus has been issued and no proceedings for that purpose are pending or, to the best knowledge of the Harvard Parties, threatened by the FDIC, the Division, the OTS or any other state authority; and (viii) to the best knowledge of the Harvard Parties, no person has sought to obtain review of the final action of each of the OTS, the Division or the FDIC approving the Conversion.

(g) None of the Harvard Parties shall have sustained, since the date of the latest financial statements included in the Registration Statement, the General Disclosure Package and Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in the Registration Statement and the Prospectus, and since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any Material Adverse Effect that is in the Agent’s reasonable judgment sufficiently material and adverse as to make it impracticable or inadvisable to proceed with the Offering or the delivery of the Shares on the terms and in the manner contemplated in the Prospectus.

(h) Prior to and at the Closing Date: (i) in the reasonable opinion of the Agent, there shall have been no material adverse change in the financial condition, results of operations or business of the Harvard Parties considered as one enterprise, from that as of the latest dates as of which such condition is set forth in the Prospectus, other than transactions referred to or contemplated therein; (ii) none of the Harvard Parties shall have received from the OTS, the Division or the FDIC any direction (oral or written) to make any material change in the method of conducting their business with which it has not complied (which direction, if any, shall have been disclosed to the Agent) or which

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materially and adversely would affect the financial condition, results of operations or business of the Harvard Parties taken as a whole; (iii) none of the Harvard Parties shall have been in default (nor shall an event have occurred which, with notice or lapse of time or both, would constitute a default) under any provision of any agreement or instrument relating to any outstanding indebtedness; (iv) no action, suit or proceeding, at law or in equity or before or by any federal or state commission, board or other administrative agency, not disclosed in the Prospectus, shall be pending or, to the knowledge of the Harvard Parties, threatened against the any of the Harvard Parties or affecting any of their properties wherein an unfavorable decision, ruling or finding would materially and adversely affect the financial condition, results of operations or business of the Harvard Parties taken as a whole; and (v) the Shares shall have been qualified or registered for offering and sale or exempted therefrom under the securities or blue sky laws of the jurisdictions as the Agent shall have reasonably requested and as agreed to by the Harvard Parties.

(i) Concurrently with the execution of this Agreement, the Agent shall receive a letter from BKD LLP, dated as of the date hereof and addressed to the Agent: (i) confirming that BKD LLP is a firm of independent registered public accountants within the applicable rules of the Public Company Accounting Oversight Board (United States) and stating in effect that in its opinion the consolidated financial statements and related notes of the MHC as of December 31, 2008 and 2007, and for each of the years in the two-year period ended December 31, 2008, and covered by their opinion included in the Prospectus, and any other more recent unaudited financial statements included in the Prospectus comply as to form in all material respects with the applicable accounting requirements of the OTS and the 1933 Act and related published rules and regulations of the OTS and the 1933 Act Regulations; (ii) stating in effect that, on the basis of certain agreed upon procedures (but not an audit in accordance with standards of the Public Company Accounting Oversight Board (United States)) consisting of a reading of the latest available consolidated financial statements of the MHC prepared by the MHC, a reading of the minutes of the meetings of the Boards of Directors of each of the Harvard Parties and consultations with officers of the Bank responsible for financial and accounting matters, nothing came to their attention which caused them to believe that: (A) the audited consolidated financial statements and any unaudited interim financial statements included in the Prospectus are not in conformity with the 1933 Act, applicable accounting requirements of the OTS and accounting principles generally accepted in the United States of America applied on a basis substantially consistent with that of the audited consolidated financial statements included in the Prospectus; or (B) during the period from the date of the latest consolidated financial statements included in the Prospectus to a specified date not more than three business days prior to the date of the Prospectus, except as has been described in the Prospectus, there was any increase in borrowings of the MHC, other than normal deposit fluctuations for the Bank; or (C) there was any decrease in the net assets of the MHC at the date of such letter as compared with amounts shown in the latest balance sheet included in the Prospectus; and (iii) stating that, in addition to the audit referred to in their opinion included in the Prospectus and the performance of the procedures referred to in clause (ii) of this subsection (h), they have compared with the general accounting records of the MHC, which are subject to the internal controls of the MHC, the accounting system and other data prepared by the

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MHC, directly from such accounting records, to the extent specified in such letter, such amounts and/or percentages set forth in the Prospectus as the Agent may reasonably request; and they have found such amounts and percentages to be in agreement therewith (subject to rounding).

(j) At the Closing Date, the Agent shall receive a letter dated the Closing Date, addressed to the Agent, confirming the statements made by BKD LLP in the letter delivered by it pursuant to subsection (g) of this Section 8, the “specified date” referred to in clause (i) of subsection (h) to be a date specified in the letter required by this subsection (h) which for purposes of such letter shall not be more than three business days prior to the Closing Date.

(k) At the Closing Date, the Company shall receive a letter from RP Financial, LP, dated the Closing Date (i) confirming that said firm is independent of the Harvard Parties and is experienced and expert in the area of corporate appraisals within the meaning of Title 12 of the Code of Federal Regulations, Section 563b.200(b), (ii) stating in effect that the Appraisal prepared by such firm complies in all material respects with the applicable requirements of Title 12 of the Code of Federal Regulations, and (iii) further stating that its opinion of the aggregate pro forma market value of the Company including the Bank, as most recently updated, remains in effect.

(l) At or prior to the Closing Date, the Agent shall receive: (i) a copy of the letters from the OTS approving the Form AC, the Holding Company Application and authorizing the use of the Prospectus; (ii) a copy of the letter from the Division approving the Division Application; (iii) a copy of the letter from the FDIC providing its approval or non-objection to the Conversion; (iv) a copy of the order from the Commission declaring the Registration Statement effective; (v) certificates from the OTS evidencing the valid existence of the Company, the MHC and Harvard Financial; (vi) a certificate from the Division evidencing the valid existence of the Bank; (vii) a certificate from the FDIC evidencing the Bank’s insurance of accounts; (viii) a certificate from the FHLB-Chicago evidencing the Bank’s membership therein; and (ix) such other documents and certificates as the Agent may reasonably request.

(m) Subsequent to the date hereof, there shall not have occurred any of the following; (i) a suspension or limitation in trading in securities generally on the New York Stock Exchange (the “NYSE”) or in the over-the-counter market, or quotations halted generally on the Nasdaq Stock Market, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required by either of such exchanges or the Nasdaq Stock Market or by order of the Commission or any other governmental authority; (ii) a general moratorium on the operations of commercial banks, or federal savings and loan associations or a general moratorium on the withdrawal of deposits from commercial banks or federal savings and loan associations declared by federal or state authorities; (iii) the engagement by the United States in hostilities which have resulted in the declaration, on or after the date hereof, of a national emergency or war or a material decline in the price of equity or debt securities, if the effect of such declaration or decline, in the Agent’s reasonable judgment, makes it impracticable or inadvisable to proceed with the Offering or the delivery of the Shares on

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the terms and in the manner contemplated in the Registration Statement and the Prospectus.

(n) At or prior to the Closing Date, counsel to the Agent shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the sale of the Shares as herein contemplated and related proceedings or in order to evidence the occurrence or completeness of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Harvard Parties in connection with the sale of the Shares as herein contemplated shall be satisfactory in form and substance to the Agent or its counsel.

(o) All such opinions, certificates, letters and documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Agent or to counsel for the Agent. Any certificate signed by an officer of any of the Harvard Parties and delivered to the Agent or to counsel for the Agent shall be deemed a representation and warranty by such Harvard Party to the Agent as to the statements made therein.

Section 9. Indemnification.

(a) The Company and the Bank jointly and severally agree to indemnify and hold harmless the Agent, its officers and directors, employees and agents, and each person, if any, who controls the Agent within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss, liability, claim, damage or expense whatsoever (including, but not limited to, settlement expenses), joint or several, that the Agent or any of them may suffer or to which the Agent and any such persons may become subject under all applicable federal or state laws or otherwise, and to promptly reimburse the Agent and any such persons upon written demand for any expense (including all fees and disbursements of counsel) incurred by the Agent or any of them in connection with investigating, preparing or defending any actions, proceedings or claims (whether commenced or threatened) to the extent such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus, any Issuer Represented General Free Writing Prospectus, preliminary or final Prospectus (or any amendment or supplement thereto), the Form AC (or any amendment or supplement thereto), the Holding Company Application (or any amendment or supplement thereto) or any instrument or document executed by the Harvard Parties or based upon written information supplied by the Company filed in any state or jurisdiction to register or qualify any or all of the Shares or to claim an exemption therefrom or provided to any state or jurisdiction to exempt the Harvard Parties as a broker-dealer or its officers, directors and employees as broker-dealers or agents, under the securities laws thereof (collectively, the “Blue Sky Application”), or any document, advertisement, oral statement or communication (“Sales Information”) prepared, made or executed by or on behalf of the Harvard Parties with its consent and based upon written or oral information furnished by or on behalf of the

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Harvard Parties, whether or not filed in any jurisdiction, in order to qualify or register the Shares or to claim an exemption therefrom under the securities laws thereof; (ii) arise out of or are based upon the omission or alleged omission to state in any of the foregoing documents or information a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iii) arise from any theory of liability whatsoever relating to or arising from or based upon the Registration Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus, any Issuer–Represented General Free Writing Prospectus, the Form AC, the Division Application or the FDIC Application (or any amendment or supplement thereto), the Holding Company Application (or any amendment or supplement thereto), any Blue Sky Application or Sales Information or other documentation distributed in connection with the Conversion; provided, however, that no indemnification is required under this paragraph (a) to the extent such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue material statement or alleged untrue material statement in, or material omission or alleged material omission from, the Registration Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), the General Disclosure Package, any Issuer-Represented Limited-Use Free Writing Prospectus, any Issuer-Represented General Free Writing Prospectus, the Form AC, the Division Application, the FDIC Application, the Holding Company Application, any Blue Sky Application or Sales Information made in reliance upon and in conformity with information furnished in writing to the Company, by the Agent or its counsel regarding the Agent, and provided, that it is agreed and understood that the only information furnished in writing to the Company, by the Agent regarding the Agent is set forth in the Prospectus in the first sentence of the second paragraph under the caption “The Conversion; Plan of Distribution—Marketing and Distribution; Compensation”; and, provided further, that such indemnification shall be limited to the extent prohibited by the Commission, the OTS, the Division and the FDIC.

(b) The Agent agrees to indemnify and hold harmless the Harvard Parties, their directors and officers and each person, if any, who controls the Company or the Bank within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act against any and all loss, liability, claim, damage or expense whatsoever (including but not limited to settlement expenses), joint or several, which they, or any of them, may suffer or to which they, or any of them may become subject under all applicable federal and state laws or otherwise, and to promptly reimburse the Harvard Parties, and any such persons upon written demand for any expenses (including reasonable fees and disbursements of counsel) incurred by them, or any of them, in connection with investigating, preparing or defending any actions, proceedings or claims (whether commenced or threatened) to the extent such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), the Form AC, the Division Application or the FDIC Application (or any amendment or supplement thereto), the Holding Company Application, the preliminary or final Prospectus (or any amendment or supplement thereto), any Blue Sky Application or Sales Information, (ii) are based upon the omission or alleged omission to

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state in any of the foregoing documents a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) arise from any theory of liability whatsoever relating to or arising from or based upon the Registration Statement (or any amendment or supplement thereto), preliminary or final Prospectus (or any amendment or supplement thereto), the Form AC, the Division Application or the FDIC Application (or any amendment or supplement thereto), the Holding Company Application, or any Blue Sky Application or Sales Information or other documentation distributed in connection with the Offering; provided, however, that the Agent’s obligations under this Section 9(b) shall exist only if and only to the extent that such untrue statement or alleged untrue statement was made in, or such material fact or alleged material fact was omitted from, the Registration Statement (or any amendment or supplement thereto), the preliminary or final Prospectus (or any amendment or supplement thereto), the Form AC, the Division Application, the FDIC Application (or any amendment or supplement thereto), the Holding Company Application, any Blue Sky Application or Sales Information in reliance upon and in conformity with information furnished in writing to the Company or the Bank, by the Agent or its counsel regarding the Agent, and provided, that it is agreed and understood that the only information furnished in writing to the Company or the Bank, by the Agent regarding the Agent is set forth in the Prospectus in [the first sentence of the second paragraph under the caption “The Conversion; Plan of Distribution-Marketing and Distribution; Compensation.”]

(c) Each indemnified party shall give prompt written notice to each indemnifying party of any action, proceeding, claim (whether commenced or threatened), or suit instituted against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve it from any liability which it may have on account of this Section 9 or otherwise. An indemnifying party may participate at its own expense in the defense of such action. In addition, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume defense of such action with counsel chosen by it and approved by the indemnified parties that are defendants in such action, unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them that are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action, proceeding or claim, other than reasonable costs of investigation. In no event shall the indemnifying parties be liable for the fees and expenses of more than one separate firm of attorneys (and any special counsel that said firm may retain) for each indemnified party in connection with any one action, proceeding or claim or separate but similar or related actions, proceedings or claims in the same jurisdiction arising out of the same general allegations or circumstances.

Section 10. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 9 is due in accordance with its terms but is for any reason held by a court to be unavailable from the Harvard Parties or the Agent, the Harvard Parties and the Agent shall contribute to the aggregate losses, claims,

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damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding, but after deducting any contribution received by the Harvard Parties or the Agent from persons other than the other parties thereto, who may also be liable for contribution) in such proportion so that the Agent is responsible for that portion represented by the percentage that the fees paid to the Agent pursuant to Section 2 of this Agreement (not including expenses) bears to the gross proceeds received by the Company from the sale of the Shares in the Offering, and the Harvard Parties shall be responsible for the balance. If, however, the allocation provided above is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault of the Harvard Parties on the one hand and the Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions, proceedings or claims in respect thereto), but also the relative benefits received by the Harvard Parties on the one hand and the Agent on the other from the Offering (before deducting expenses). The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Harvard Parties on the one hand or the Agent on the other and the parties’ relative intent, good faith, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Harvard Parties and the Agent agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro-rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 10. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions, proceedings or claims in respect thereof) referred to above in this Section 10 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action, proceeding or claim. It is expressly agreed that the Agent shall not be liable for any loss, liability, claim, damage or expense or be required to contribute any amount pursuant to Section 9(b) or this Section 10 which in the aggregate exceeds the amount paid (excluding reimbursable expenses) to the Agent under this Agreement. It is understood that the above stated limitation on the Agent’s liability is essential to the Agent and that the Agent would not have entered into this Agreement if such limitation had not been agreed to by the parties to this Agreement. No person found guilty of any fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation. The obligations of the Harvard Parties under this Section 10 and under Section 9 shall be in addition to any liability which the Company and the Agent may otherwise have. For purposes of this Section 10, each of the Agent’s and the Harvard Parties’ officers and directors and each person, if any, who controls the Agent or any of the Harvard Parties within the meaning of the 1933 Act and the 1934 Act shall have the same rights to contribution as the Agent on the one hand, or, the Harvard Parties on the other hand. Any party entitled to contribution, promptly after receipt of notice of commencement of any action, suit, claim or proceeding against such party in respect of which a claim for contribution may be made against another party under this Section 10, will notify such party from whom contribution may be sought, but the omission to so notify such party shall not relieve the party from whom contribution may be sought from any other obligation it may have hereunder or otherwise than under this Section 10.

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Section 11. Termination. The Agent may terminate this Agreement by giving the notice indicated below in Section 12 at any time after this Agreement becomes effective as follows:

(a) If any domestic or international event or act or occurrence has materially disrupted the United States securities markets such as to make it, in the Agent’s reasonable opinion, impracticable to proceed with the offering of the Shares; or if trading on the NYSE shall have suspended (except that this shall not apply to the imposition of NYSE trading collars imposed on program trading); or if the United States shall have become involved in a war or major hostilities; or if a general banking moratorium has been declared by a state or federal authority which has a material effect on the Harvard Parties on a consolidated basis; or if a moratorium in foreign exchange trading by major international banks or persons has been declared; or if there shall have been a material adverse change in the financial condition, results of operations or business of any of the Harvard Parties, or if any of the Harvard Parties shall have sustained a material or substantial loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act, whether or not said loss shall have been insured; or, if there shall have been a material adverse change in the financial condition, results of operations or business of the Harvard Parties taken as a whole.

(b) In the event the Company fails to sell the required minimum number of the Shares by the date when such sales must be completed, in accordance with the provisions of the Plan or as required by the Conversion Regulations, and applicable law, this Agreement shall terminate upon refund by the Company to each person who has subscribed for or ordered any of the Shares the full amount which it may have received from such person, together with interest as provided in the Prospectus, and no party to this Agreement shall have any obligation to the other hereunder, except as set forth in Sections 2(a) and (d), 6, 8 and 9 hereof.

(c) If any of the conditions specified in Section 8 shall not have been fulfilled when and as required by this Agreement, unless waived in writing, or by the Closing Date, this Agreement and all of the Agent’s obligations hereunder may be cancelled by the Agent by notifying the Company of such cancellation in writing or by telegram at any time at or prior to the Closing Date, and any such cancellation shall be without liability of any party to any other party except as otherwise provided in Sections 2(a), 2(d), 6, 8 and 9 hereof.

(d) If the Agent elects to terminate this Agreement as provided in this Section, the Company and the Bank shall be notified promptly by telephone or telegram, confirmed by letter.

Any of the Harvard Parties may terminate this Agreement in the event the Agent is in material breach of the representations and warranties or covenants contained in Section 5 and such breach has not been cured within a reasonable time period after the Harvard Party has provided the Agent with notice of such breach.

This Agreement may also be terminated by mutual written consent of the parties hereto.

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Section 12. Notices. All communications hereunder, except as herein otherwise specifically provided, shall be mailed in writing and if sent to the Agent shall be mailed, delivered or telegraphed and confirmed to Keefe, Bruyette & Woods, Inc., Ten South Wacker Drive, Suite 3400, Chicago, Illinois 60606, Attention: Charles E. Sloane (with a copy to Vedder Price P.C., 222 North LaSalle Street, Suite 2600, Chicago, Illinois 60601, Attention: Jennifer Durham King, Esq.) and, if sent to the Company or the Bank, shall be mailed, delivered or telegraphed and confirmed to the Company at 58 North Ayer Street, Harvard, Illinois 60033, Attention: Duffield J. Seyller, III (with a copy to Luse Gorman Pomerenk & Schick, P.C., 5335 Wisconsin Avenue, N.W., Suite 780, Washington, D.C. 20015, Attention: Kip A. Weissman, Esq.).

Section 13. Parties. The Harvard Parties shall be entitled to act and rely on any request, notice, consent, waiver or agreement purportedly given on behalf of the Agent when the same shall have been given by the undersigned. The Agent shall be entitled to act and rely on any request, notice, consent, waiver or agreement purportedly given on behalf of the Harvard Parties, when the same shall have been given by the undersigned or any other officer of any of the Harvard Parties. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Agent, the Harvard Parties and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained.

Section 14. Closing. The closing for the sale of the Shares (the “Closing”) shall take place on the Closing Date at such location as mutually agreed upon by the Agent and the Company and the Bank. At the Closing, the Harvard Parties shall deliver to the Agent in next day funds the commissions, fees and expenses due and owing to the Agent as set forth in Sections 2 and 7 hereof and the opinions and certificates required hereby and other documents deemed reasonably necessary by the Agent shall be executed and delivered to effect the sale of the Shares as contemplated hereby and pursuant to the terms of the Prospectus.

Section 15. Partial Invalidity. In the event that any term, provision or covenant herein or the application thereof to any circumstance or situation shall be invalid or unenforceable, in whole or in part, the remainder hereof and the application of said term, provision or covenant to any other circumstances or situation shall not be affected thereby, and each term, provision or covenant herein shall be valid and enforceable to the full extent permitted by law.

Section 16. Governing Law and Construction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law.

Section 17. Counterparts. This Agreement may be executed in separate counterparts, each of which so executed and delivered shall be an original, but all of which together shall constitute but one and the same instrument.

Section 18. Entire Agreement. This Agreement, including schedules and exhibits hereto, which are integral parts hereof and incorporated as though set forth in full, constitutes the entire agreement between the parties pertaining to the subject matter hereof superseding any and all prior or contemporaneous oral or prior written agreements, proposals, letters of intent and

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understandings, and cannot be modified, changed, waived or terminated except by a writing which expressly states that it is an amendment, modification or waiver, refers to this Agreement and is signed by the party to be charged. No course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the provisions hereof.

Section 19. Survival. The respective indemnities, agreements, representations, warranties and other statements of the Harvard Parties and the Agent, as set forth in this Agreement, and the provisions relating to contribution, shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation (or any statement as to the results thereof) made by or on behalf of the Agent or any of the Agent’s officers or directors or any person controlling the Agent, or the Harvard Parties, or any of their respective officers or directors or any person controlling the Harvard Parties, and shall survive termination of this Agreement and receipt or delivery of any payment for the Shares and any such controlling person shall be entitled to the benefit of such respective agreements, indemnifications, warranties and representations.

Section 20. Waiver of Trial by Jury. Each of the Agent and the Harvard Parties waives all right to trial by jury in any action, proceeding, claim or counterclaim (whether based on contract, tort or otherwise) related to or arising out of this Agreement.

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This agreement is made solely for the benefit of and will be binding upon the parties hereto and their respective successors and the directors, officer and controlling persons and no other person will have any right or obligation hereunder.

[Remainder of page intentionally blank]

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If the foregoing correctly sets forth the arrangement among the Harvard Parties and the Agent, please indicate acceptance thereof in the space provided below for that purpose, whereupon this letter and the Agent’s acceptance shall constitute a binding agreement.

Very truly yours,
HARVARD SAVINGS BANK	HARVARD ILLINOIS BANCORP, INC.
By Its Authorized Representative:	By Its Authorized Representative:
[Name]	[Name]
[Title]	[Title]
HARVARD SAVINGS, MHC	HARVARD ILLINOIS FINANCIAL CORPORATION
By Its Authorized Representative:	By Its Authorized Representative:
[Name]	[Name]
[Title]	[Title]
Accepted as of the date first above written
KEEFE, BRUYETTE & WOODS, INC.
By its Authorized Representative
Managing Director

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Exhibit C to Agency Agreement

Form of Opinion of Luse Gorman Pomerenk & Schick, P.C., to be addressed to the Agent.

(i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland.

(ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, Prospectus and any Permitted Free Writing Prospectus.

(iii) The Bank has been organized and is validly existing as an Illinois-chartered savings bank in stock form and immediately following the completion of the Conversion will continue to be organized and validly existing as an Illinois-chartered savings bank in stock form and, in both instances, duly authorized to conduct its business and own its property as described in the Registration Statement and the Prospectus and in any Permitted Free Writing Prospectus. All of the outstanding capital stock of the Bank, upon completion of the Conversion, will be duly authorized and, upon payment therefor, validly issued, fully-paid and non-assessable and will be owned by the Company, free and clear of any liens, encumbrances, claims or other restrictions.

(iv) The MHC has been organized and is validly existing as a federally-chartered mutual holding company, and the corporate existence of the MHC shall cease immediately following the completion of the Conversion. The MHC has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus and in any Permitted Free Writing Prospectus.

(v) Harvard Financial has been organized and is validly existing as a federally-chartered stock holding company, and the corporate existence of Harvard Financial shall cease immediately following the completion of the Conversion. Harvard Financial has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus and in any Permitted Free Writing Prospectus.

(vi) Each of the Company, the MHC, Harvard Financial and the Bank has the authority to transact its business as currently or proposed to be conducted in the States of Illinois and Wisconsin. The Bank is a member of the Federal Home Loan Bank of Chicago.

(vii) The deposit accounts of the Bank are insured by the FDIC up to the maximum amount allowed under law except that the Bank does not participate in the Temporary Liquidity Guarantee Program, and, to such counsel’s knowledge, no proceedings for the termination or revocation of such insurance are pending or threatened. The description of the liquidation account as set forth in the Prospectus under the caption “The Conversion; Plan of Distribution—Liquidation Rights,” to the extent that such information constitutes matters of law and legal conclusions, has been reviewed by such counsel and is accurate in all material respects.

(viii) The authorized equity capital of the Company consists of 30,000,000 shares of common stock and 1,000,000 shares of preferred stock. Immediately following the consummation of the Conversion, the authorized, issued and outstanding Common Shares of the

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Company will be consistent with that set forth in the Prospectus under the caption “Capitalization,” and no shares of capital stock of the Company have been issued prior to the Closing Date; the Common Shares have been duly and validly authorized for issuance, and when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan, the Registration Statement and the Prospectus, will be duly and validly issued and fully paid and non-assessable, except for shares purchased by the ESOP with funds borrowed from the Company to the extent payment therefore in cash has not been received by the Company; except to the extent that subscription rights and priorities pursuant thereto exist pursuant to the Plan, the issuance of the Shares is not subject to preemptive rights (other than subscription rights as provided in the Plan). The Shares will not, when issued, be subject to any preemptive rights, liens, charges, encumbrances or other claims created by the Company.

(ix) The Harvard Parties have full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated thereby and by the Plan. The execution and delivery of this Agreement and the consummation of the transactions contemplated thereby have been duly and validly authorized, executed and delivered by the Harvard Parties; and this Agreement is a legal, valid and binding obligation of the Harvard Parties, enforceable against the Harvard Parties, in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, conservatorship, receivership or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors’ rights generally or the rights of creditors of federally chartered savings institutions or their holding companies as applicable, (ii) general equitable principles, (iii) laws relating to the safety and soundness of insured depository institutions, and (iv) applicable law or public policy with respect to the indemnification and/or contribution provisions contained herein and except that no opinion need be expressed as to the effect or availability of equitable remedies or injunctive relief (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(x) The Form AC and the Holding Company Application have been approved by the OTS, the Prospectus has been authorized for use by the OTS, and the acquisition by the Company of all of the issued and outstanding capital stock of the Bank has been approved by the OTS and no action has been taken, and none is pending or threatened, to revoke any such authorization or approval.

(xi) To such counsel’s knowledge, each of the OTS’s, the Division’s and the FDIC’s approval or non-objection, as the case may be, of the Plan remains in full force and effect; each of the Form AC, the Holding Company Application, the Division Application, the FDIC Application and Plan comply in all material respects with the regulations of the OTS, the Division and the FDIC, as applicable (other than the financial statements, notes to financial statements, stock valuation information and other financial, tabular and statistical data included therein, as to which no opinion need be rendered). Such counsel has been advised by the OTS staff, the Director and Commission staff that no order has been issued by the OTS, the Division or the Commission and, to the knowledge of such counsel, no order has been issued by any other state authority, to prevent the Conversion or the offer, sale or issuance of the Shares, or to suspend the Offering or the use of the Prospectus, and no action for such purposes has been instituted or, to the knowledge of such counsel, threatened by the OTS, the Division, the

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Commission, or any other state authority; and, to the knowledge of such counsel, no person has sought to obtain regulatory or judicial review of the final action of the OTS or the Division approving the Plan, the Form AC, the Holding Company Application, the Division Application or the Prospectus or to otherwise prevent the Conversion or the offer, sale or issuance of the Shares.

(xii) The Plan has been duly adopted by the required vote of the directors of each of the Harvard Parties and, based solely on the report of the inspector of elections, by the required vote of the MHC’s members.

(xiii) All conditions imposed by each of the OTS, the Division and the FDIC in connection with its approval or non-objection, as the case may be, of the Conversion, the Holding Company Application, the Division Application and the FDIC Application have been satisfied, other than any post-closing filings and submissions, and no further approval, registration, authorization, consent or other order of any federal regulatory agency is required in connection with the execution and delivery of this Agreement, the consummation of the Conversion and the issuance of the Shares, except as may be required under the securities or blue sky laws of various jurisdictions (as to which no opinion need be rendered) and except as may be required under the rules and regulations of the FINRA (as to which no opinion need be rendered) and the SEC.

(xiv) The Registration Statement is effective under the 1933 Act; any required filing of the Prospectus and any Permitted Free Writing Prospectus pursuant to Rule 424(b) or Rule 433 has been made within the time period required by Rule 424(b) or Rule 433, and no stop order proceedings with respect thereto have been instituted or, to the knowledge of such counsel, are pending or threatened under the 1933 Act.

(xv) At the time the Form AC, including the Prospectus contained therein, was approved by the OTS, the Form AC, including the Prospectus contained therein, complied as to form in all material respects with the requirements of the Conversion Regulations except as waived or otherwise approved by the OTS (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal data included therein, as to which no opinion need be rendered).

(xvi) At the time the Holding Company Application was approved by the OTS, the Holding Company Application complied as to form in all material respects with the requirements and the rules and regulations of the OTS (except as waived or otherwise approved by the OTS, and other than the financial statements, the notes thereto, and other tabular, financial, statistical, business plan and appraisal data included therein, as to which no opinion need be rendered).

(xvii) At the time the Division Application was approved by the Director, the Division Application complied as to form in all material respects with the requirements and the rules and regulations of the Division (except as waived or otherwise approved by the Division, and other than the financial statements, the notes thereto, and other tabular, financial, statistical, business plan and appraisal data included therein, as to which no opinion need be rendered).

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(xviii) At the time that the Registration Statement, including the Prospectus, became effective, (A) the Registration Statement (as amended or supplemented, if so amended or supplemented) (other than the financial statements, the notes thereto, and other tabular, financial, statistical and appraisal data included therein, as to which no opinion need be rendered), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations, and (B) the Prospectus (other than the financial statements, the notes thereto, and other tabular, financial, statistical, business plan and appraisal data included therein, as to which no opinion need be rendered) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations.

(xix) The terms and provisions of the Shares conform, in all material respects, to the description thereof contained in the Registration Statement, the General Disclosure Package and Prospectus, and the form of certificate used to evidence the Shares complies with the laws of the State of Maryland.

(xx) To such counsel’s knowledge, no action, suit or proceeding at law or in equity is pending or threatened in writing against or affecting any of the Harvard Parties or any of their properties before or by any court or governmental official, commission, board or other administrative agency, authority or body, or any arbitrator, wherein an unfavorable decision, ruling or finding would have a material adverse effect on any of the Harvard Parties’ ability to consummate the transactions contemplated by this Agreement or which is required to be disclosed in the Registration Statement or the Prospectus and is not so disclosed.

(xxi) None of the Harvard Parties are required to be registered as an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended and, upon completion of the Conversion and the Offering and the sale of the Shares and the application of the net proceeds therefrom, neither the Company nor the Bank will be required to be registered as an investment company or an entity controlled by an investment company under the Investment Company Act of 1940.

(xxii) To such counsel’s knowledge, none of the Harvard Parties is in violation of any written directive from the OTS, the Division or the FDIC to make any material change in the method of conducting its respective business.

(xxiii) To such counsel’s knowledge, there are no material contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Form AC, the Holding Company Application, the Division Application, the FDIC Application, the Registration Statement, the General Disclosure Package or the Prospectus or required to be filed as exhibits to each of the Form AC, the Holding Company Application, the Division Application, the FDIC Application, and the Registration Statement that are not so filed or described as required. The description in each of the Form AC, the Holding Company Application, the Division Application, the FDIC Application, the Registration Statement, the General Disclosure Package and the Prospectus summarizing such exhibits are accurate in all material respects and fairly present, in all material respects, the information required to be shown.

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(xxiv) To such counsel’s knowledge, the Conversion has been effected by the Company and the Bank in all material respects in accordance with the Conversion Regulations and the OTS approvals issued thereunder, except to the extent that the OTS shall have specifically waived the Conversion Regulations or any conditions or requirements contained in the OTS approvals.

(xxv) To such counsel’s knowledge, the Conversion has been effected by the Company and the Bank in all material respects in accordance with the rules and regulations of the Division and the Division approvals issued thereunder, except to the extent that the Division shall have specifically waived any conditions or requirements contained in the Division approvals.

(xxvi) To such counsel’s knowledge, none of the Harvard Parties is currently in violation of its articles of incorporation, Charter or Bylaws or in default or violation of any obligation, agreement, covenant, instrument or condition contained in any agreement filed as an exhibit to the Registration Statement, except for such defaults or violations which would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the incurrence of the obligations herein set forth and the consummation of the transactions contemplated herein will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the any of the Harvard Parties pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument filed as an exhibit to the Registration Statement; and such action will not result in any violation of the provisions of the articles of incorporation, Charter or Bylaws of any of the Harvard Parties, or result in any violation of or conflict with any applicable federal or state law, act, regulation (except that no opinion with respect to the rules or regulations of the FINRA need be rendered) or order or court order, writ, injunction or decree.

(xxvii) The information in the Prospectus under the captions “Our Policy Regarding Dividends,” “Supervision and Regulation,” “Taxation,” “The Conversion,” “Restrictions on Acquisition of Harvard Illinois Bancorp, Inc.” and “Description of Capital Stock,” to the extent that such information constitutes matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material respects. The descriptions in the Prospectus summarizing statutes or regulations are accurate summaries in all materials respects and fairly present, in all material respects, the information required to be shown.

In addition, such counsel shall state that during the preparation of the Form AC, the Holding Company Application, the Division Application, the FDIC Application, the Registration Statement and the Prospectus, they participated in conferences with management of, the independent public and internal accountants for, and other representatives of, the Company and the Bank. Based upon such conferences and such review of corporate records of the Company and the Bank as such counsel conducted in connection with the preparation of the information contained in the Registration Statement, the Prospectus, any Permitted Free Writing Prospectus and the Proxy Statement nothing has come to their attention that would lead them to believe that the Registration Statement (except for the financial statements and schedules, notes to financial statements, stock valuation information, business plan or other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material

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fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (except for financial statements and schedules, notes to financial statements, stock valuation information, business plan or other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time the Registration Statement became effective or at the Closing Time, or that the General Disclosure Package as of the Applicable Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

In rendering such opinion, such counsel may rely, to the extent such counsel deems such reliance necessary or appropriate, on certificates of public officials, certificates or opinions of other counsel reasonably satisfactory to the Agent, and as to matters of fact, officers’ certificates. Such counsel’s opinion need refer only to matters of federal law, the laws of the State of Illinois and the State of Maryland and, with respect to enforceability, New York law, and may add other qualifications and explanations of the basis of their opinion as may be reasonably acceptable to the Agent. Such opinion shall specifically state that Vedder Price, P.C., as special counsel to the Agent, is authorized to rely on such opinion for purposes of its opinion to be delivered to the Agent pursuant to Section 8(d) of this Agreement.

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Exhibit D to Agency Agreement

Form of Opinion of Vedder Price P.C., to be addressed to the Agent.

(i) The Company has been incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland.

(ii) The Bank has been organized and is validly existing as a federally-chartered savings bank in stock form and immediately following the completion of the Conversion will continue to be organized and validly existing as a federally-chartered savings bank in stock form.

(iii) The MHC has been organized and is validly existing as a federally-chartered mutual holding company.

(iv) Harvard Financial has been organized and is validly existing as a federally-chartered stock holding company.

(v) The Common Shares have been duly and validly authorized for issuance, and when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan, the Registration Statement and the Prospectus, will be duly and validly issued and fully paid and non-assessable, except for shares purchased by the ESOP with funds borrowed from the Company to the extent payment therefore in cash has not been received by the Company; except to the extent that subscription rights and priorities pursuant thereto exist pursuant to the Plan, the issuance of the Shares is not subject to preemptive rights (other than subscription rights as provided in the Plan). The Shares will not, when issued, be subject to any preemptive rights, liens, charges, encumbrances or other claims created by the Company.

(vi) The Registration Statement is effective under the 1933 Act; any required filing of the Prospectus and any Permitted Free Writing Prospectus pursuant to Rule 424(b) or Rule 433 has been made within the time period required by Rule 424(b) or Rule 433, and no stop order proceedings with respect thereto have been instituted or, to the knowledge of such counsel, are pending or threatened under the 1933 Act.

(vii) The terms and provisions of the shares of common stock of the Company as set forth in its Certificate of Incorporation conform, in all material respects, to the description thereof contained in the Registration Statement, the General Disclosure Package and Prospectus, [and the form of certificate used to evidence the Shares complies with the laws of the State of Maryland].

(viii) To such counsel’s knowledge, the Conversion has been effected by the Company and the Bank in all material respects in accordance with the Conversion Regulations and the OTS approvals issued thereunder, and in accordance with the rules and regulations of the Division and the approvals issued thereunder.

In addition, such counsel shall state that during the preparation of the Registration Statement and the Prospectus, they participated in conferences with management of, the independent public and internal accountants for, and other representatives of, the Company and

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the Bank. Based upon such conferences and such review of corporate records of the Company and the Bank as such counsel conducted in connection with the preparation of the information contained in the Registration Statement, the Prospectus, any Permitted Free Writing Prospectus and the Proxy Statement, nothing has come to their attention that would lead them to believe that the Registration Statement (except for the financial statements and schedules, notes to financial statements, stock valuation information or other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (except for financial statements and schedules, notes to financial statements, stock valuation information or other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time the Registration Statement became effective or at the Closing Time, or that the General Disclosure Package as of the Applicable Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

In rendering such opinion, such counsel may rely, to the extent such counsel deems such reliance necessary or appropriate, on certificates of public officials, the opinion of Luse Gorman Pomerenk & Schick, P.C. set forth in Exhibit C to the Agency Agreement, and as to matters of fact, officers’ certificates. Such counsel’s opinion need refer only to matters of federal law, the laws of the State of Illinois [and the State of Maryland and,] with respect to enforceability, New York law, and may add other qualifications and explanations of the basis of their opinion as may be reasonably acceptable to the Agent.

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EX-2.2

Exhibit 2.2

AGREEMENT AND PLAN OF MERGER

by and among

HARVARD SAVINGS BANK,

HARVARD SAVINGS BANK, MHC

and

MORRIS BUILDING & LOAN, S.B.

Dated July 24, 2007 and amended

as of December 18, 2007 (amendment attached)

AGREEMENT AND PLAN OF MERGER

ARTICLE I CERTAIN DEFINITIONS	1
Section 1.01 Definitions	1
ARTICLE II THE MERGER AND RELATED MATTERS	5
Section 2.01 Effects of Merger; Surviving Institution	5
Section 2.02 Closing	5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MBL	5
Section 3.01 Organization	6
Section 3.02 Authority, No Violation	6
Section 3.03 Consents	7
Section 3.04 Financial Statements	7
Section 3.05 Taxes	8
Section 3.06 Absence of Certain Changes	8
Section 3.07 Contracts	8
Section 3.08 Ownership of Property; Insurance Coverage	10
Section 3.09 Legal Proceedings	10
Section 3.10 Compliance With Applicable Law	10
Section 3.11 Employee Benefit Plans	11
Section 3.12 Brokers, Finders and Financial Advisors	13
Section 3.13 Environmental Matters	13
Section 3.14 Loan Portfolio	14
Section 3.15 Related Party Transactions	16
Section 3.16 Deposits	16
Section 3.17 Derivative Transactions	16
Section 3.18 Information to be Supplied	16
Section 3.19 Schedule of Termination Benefits	16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HSB	16
Section 4.01 Organization	17
Section 4.02 Authority; No Violation	17
Section 4.03 Consents	18
Section 4.04 Financial Statements	18
Section 4.05 Absence of Certain Changes	19
Section 4.06 Legal Proceedings	19
Section 4.07 Compliance With Applicable Law	19
Section 4.08 Information to be Supplied	20
ARTICLE V COVENANTS OF THE PARTIES	20
Section 5.01 Conduct of MBL’s Business	20
Section 5.02 Access; Confidentiality	23
Section 5.03 Regulatory Matters and Consents	24
Section 5.04 Taking of Necessary Action	25
Section 5.05 Certain Agreements	25
Section 5.06 Duty to Advise; Duty to Update the MBL Disclosure Schedules	27
Section 5.07 Conduct of HSB’s Business	27
Section 5.08 Board and Committee Minutes	27
Section 5.09 Undertakings by the Parties	27

Section 5.10 Employee and Termination Benefits; Directors and Management	29
Section 5.11 Duty to Advise; Duty to Update HSB’s Disclosure Schedules	31
Section 5.12 Merger Proposals	31
Section 5.13 Classified Loan Update	32
Section 5.14 Operation of Premises	32
ARTICLE VI CONDITIONS	32
Section 6.01 Conditions to Obligations of MBL Under this Agreement	32
Section 6.02 Conditions to the Obligations of HSB Under this Agreement	33
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT	35
Section 7.01 Termination	35
Section 7.02 Effect of Termination	35
ARTICLE VIII MISCELLANEOUS	36
Section 8.01 Expenses	36
Section 8.02 Non-Survival of Representations, Warranties and Covenants	36
Section 8.03 Amendment, Extension and Waiver	36
Section 8.04 Entire Agreement	36
Section 8.05 No Assignment	37
Section 8.06 Notices	37
Section 8.07 Captions	38
Section 8.08 Counterparts	38
Section 8.09 Severability	38
Section 8.10 Governing Law	38
Section 8.11 Specific Performance	38

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of July 24, 2007, is by and among Harvard Savings Bank, an Illinois chartered stock savings bank (“HSB”), Harvard Savings Bank, MHC, a federally chartered mutual holding company (“HSB MHC”) and Morris Building & Loan, S.B., an Illinois chartered mutual savings bank (“MBL”).

RECITALS

1. HSB is an Illinois stock savings bank with its principal offices located in Harvard, Illinois.

2. HSB MHC is a federally chartered mutual holding company located in Harvard, Illinois.

3. MBL is an Illinois mutual savings bank with its principal offices located in Morris, Illinois.

4. The Boards of Directors of the respective parties have determined that this Agreement and the business combination and related transactions contemplated hereby are advisable and in the best interests of the parties, including the depositors of HSB and MBL, and have determined that this Agreement and the transactions contemplated hereby are consistent with, and in furtherance of, each party’s respective business strategies.

5. The parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with the transactions contemplated by this Agreement and to prescribe various conditions to such transactions.

In consideration of the premises and of the mutual representations, warranties and covenants herein contained, and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

Section 1.01 Definitions. Except as otherwise provided herein, as used in this Agreement, the following terms shall have the indicated meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Affiliate” means, with respect to any Person, any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. Without limiting the generality of the foregoing, Affiliate includes any executive officer or director of such Person and any Affiliate of such executive officer or director.

“Agreement” means this agreement, and any amendment or supplement hereto, and shall include the Schedules, Exhibits and Disclosure Schedules referenced herein.

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“Applications” mean the applications to be filed with the appropriate Regulatory Authorities requesting approval or nonobjection of the transactions described in this Agreement.

“Bank Merger” means the merger of MBL with and into HSB with HSB as the surviving institution.

“Closing” means the closing of the Merger as set forth in Section 2.02 of this Agreement.

“Closing Date” means the date determined by HSB, in consultation with and upon no less than five (5) days prior written notice to MBL, but in no event later than fifteen (15) days after the last condition precedent pursuant to this Agreement has been fulfilled or waived (including the expiration of any applicable waiting period), or such other date as to which the parties shall mutually agree.

“Code” means the Internal Revenue Code of 1986, as amended. “IRS” means the Internal Revenue Service.

“Environmental Law” means any Federal or state law, statute, rule, regulation, code, order, judgment, decree, injunction, common law or agreement with any Federal or state governmental authority relating to (i) the protection, preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), (ii) human health or safety, or (iii) exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of, Hazardous Material, in each case as amended and now in effect.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Financial Institution Party” means HSB or MBL as the context requires.

“FDIA” means the Federal Deposit Insurance Act, as amended.

“FDIC” means the Federal Deposit Insurance Corporation.

“FHLB” means the Federal Home Loan Bank of Chicago.

“GAAP” means generally accepted accounting principles in the United States as in effect at the relevant date and consistently applied.

“Hazardous Material” means any substance (whether solid, liquid or gas) which is detrimental to human health or safety or to the environment, currently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any Environmental Law, whether by type or by quantity, including any substance containing any such substance as a component. Hazardous Material includes, without limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic

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substance, hazardous waste, special waste, industrial substance, oil or petroleum, or any derivative or by-product thereof, radon, radioactive material, asbestos, asbestos-containing material, urea formaldehyde foam insulation, lead and polychlorinated biphenyl.

“HOLA” means the Home Owners’ Loan Act of 1956, as amended.

“HSB” means Harvard Savings Bank, an Illinois chartered stock savings bank, and/or any direct or indirect Subsidiary or such entity.

“HSB Disclosure Schedules” means the Disclosure Schedules delivered by HSB to MBL pursuant to Article IV of this Agreement.

“HSB Financials” means the audited consolidated financial statements of HSB MHC as of December 31, 2006 and December 31, 2005, including the notes thereto and the unaudited financial statements at and for the period ended March 31, 2007 delivered to MBL.

“HSB MHC” means Harvard Savings Bank MHC, a federally chartered mutual holding company.

“HSB Regulatory Reports” means the Call Reports of HSB and accompanying schedules, as filed with the FDIC for each calendar quarter beginning with the quarter ended March 31, 2007, through the Closing Date.

“HSB Subsidiary” means any corporation, 50% or more of the capital stock of which is owned, either directly or indirectly, by HSB, except any corporation the stock of which is held as security by HSB in the ordinary course of its lending activities.

“IDFPR” means Illinois Department of Financial and Professional Responsibility.

“IRS” means the Internal Revenue Service.

“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) means those facts that are known by the officers and directors of such Person, and includes any facts, matters or circumstances set forth in any written notice from any Regulatory Authority.

“Loan Property” shall have the meaning given to such term in Section 3.13(b) of this Agreement.

“Material Adverse Effect” shall mean, with respect to HSB or MBL, as the context may dictate, and its subsidiaries, any adverse effect on its business, assets, financial condition or results of operations which is material, except for any Material Adverse Effect caused by (i) any change in the value of the assets of HSB or MBL resulting from a change in interest rates generally, (ii) any individual or combination of changes occurring after the date hereof in any Federal or state law, rule or regulation or in GAAP, which change(s) affect(s) financial institutions generally, or (iii) omissions or

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actions taken with the prior consent of the other party or the direct effects of compliance with this Agreement, including reasonable expenses incurred in connection with this Agreement and the transactions contemplated hereby.

“MBL” means Morris Building & Loan, S.B., an Illinois chartered mutual savings bank, and/or any direct or indirect Subsidiary of such entity.

“MBL Disclosure Schedules” means the Disclosure Schedules delivered by MBL to HSB pursuant to Article III of this Agreement.

“MBL Employee Plan” has the meaning given to that term in Section 3.11 of this Agreement.

“MBL Financials” means the audited consolidated financial statements of MBL as of December 31, 2006 and 2005, including the notes thereto and the unaudited financial statements at and for the period ended March 31, 2007 delivered to HSB.

“MBL Regulatory Reports” means the Call Reports of MBL and accompanying schedules, as filed with the FDIC for each calendar quarter beginning with the quarter ended March 31, 2007, through the Closing Date.

“MBL Subsidiary” means any corporation, 50% or more of the capital stock of which is owned, either directly or indirectly, by MBL, except that it does not include any corporation the stock of which is held in the ordinary course of the lending activities of MBL.

“Merger” shall mean the Bank Merger and any other mergers by interim corporate entities necessary to effectuate the transactions contemplated by this Agreement.

“Merger Effective Date” means the date upon which the certificate of merger is issued and filed in accordance with the regulations of the IDFPR.

“Merger Proposal” means any proposal or offer by a third party with respect to: (i) a merger, consolidation, business combination or other similar transaction involving HSB or MBL; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of HSB’s or MBL’s consolidated assets in a single transaction or series of transactions; or (iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

“OTS” means the Office of Thrift Supervision.

“Person” means any natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity.

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“Regulatory Agreement” has the meaning given to that term in Section 3.10 of this Agreement.

“Regulatory Authority” or “Regulatory Authorities” means any agency or department of any Federal or state government, including without limitation the OTS, the FDIC and the respective staffs thereof.

“Subsidiary” means any corporation, 50% or more of the capital stock of which is owned, either directly or indirectly, by another entity, except any corporation the stock of which is held as security by either HSB or MBL, as the case may be, in the ordinary course of its lending activities.

ARTICLE II

THE MERGER AND RELATED MATTERS

Section 2.01 Effects of Merger; Surviving Institution. Upon the terms and conditions set forth in this Agreement, on the Merger Effective Date, MBL shall merge with and into HSB, with HSB as the surviving institution (the “Bank Merger”). The Bank Merger shall be effected pursuant to the Plan of Bank Merger substantially in the form of Exhibit A hereto. As a result of the Bank Merger, the separate corporate existence of MBL shall cease and HSB shall be the surviving institution and continue its name and separate corporate existence as a savings bank under the laws of the United States, with all its rights, privileges, immunities, powers and franchises unaffected by the Merger. As result of the Merger, each borrower member of MBL and each holder of a deposit account in MBL as of the Merger Effective Date shall have the same rights and privileges in HSB as if such borrowing and/or deposit account had been established at HSB, including membership rights in HSB MHC, provided however that, persons establishing borrowing relationships after the completion of the Merger shall not be afforded membership rights in HSB MHC.

Section 2.02 Closing. The Closing of the Merger shall take place at the offices of HSB in Harvard, Illinois, or at such other location as shall be mutually agreeable by the parties, on the Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

MBL

MBL represents and warrants to HSB that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III), except as set forth in the MBL Disclosure Schedules delivered to HSB on or prior to the date hereof, and except as to any representation or warranty which specifically relates to an earlier date. MBL has made a good faith effort to ensure that the disclosure on each schedule of the MBL Disclosure Schedules corresponds to the section referenced herein. The mere inclusion of a fact, circumstance or event in a Disclosure Schedule shall not be deemed an admission by a party that such item represents a material exception or that such item is reasonably likely to result in a Material Adverse Effect. For purposes of the

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MBL Disclosure Schedules, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant.

Section 3.01 Organization.

(a) MBL is an Illinois mutual savings bank duly organized, validly existing and in good standing under the laws of Illinois and has all requisite authority and power to own, lease and operate its properties and to conduct the business currently conducted by it. The deposits of MBL are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due by MBL. Each MBL Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority and power to own, lease and operate its properties and to conduct the business currently conducted by it.

(b) MBL is a member in good standing of the FHLB and owns the requisite amount of stock therein.

(c) The respective minute books of MBL and each MBL Subsidiary accurately record, in all material respects, all material corporate actions of their respective members, stockholders and boards of directors (including committees), as applicable, through the date of this Agreement.

(d) Prior to the date of this Agreement, true and correct copies of the charter, articles of incorporation and bylaws of MBL, and each MBL Subsidiary, have been made available to HSB.

Section 3.02 Authority, No Violation

(a) MBL has full power and authority to execute and deliver this Agreement to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by MBL and the completion by MBL of the transactions contemplated hereby have been duly and validly approved by the requisite vote of the Board of Directors of MBL and no other corporate proceedings on the part of MBL are necessary to complete the transactions contemplated hereby other than the requisite approval by the members of MBL. This Agreement has been duly and validly executed and delivered by MBL; and the Bank Merger has been duly and validly approved by the Board of Directors of MBL. Subject to the receipt of the required approvals of the Regulatory Authorities and the members of MBL this Agreement constitutes the valid and binding obligations of MBL enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and as to MBL, the conservatorship or receivership provisions of the FDIA, and subject, as to enforceability, to general principles of equity.

(b) Subject to the receipt of approvals from the Regulatory Authorities referred to in Section 5.03 hereof and the compliance by MBL and HSB with any conditions contained therein and receipt of approval of the members of MBL,

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(i) the execution and delivery of this Agreement by MBL,

(ii) the consummation of the transactions contemplated hereby, and

(iii) compliance by MBL with any of the terms or provisions hereof,

will not (A) conflict with or result in a material breach of any provision of its articles of incorporation or bylaws (copies of which have been provided to HSB) or any MBL Subsidiary; (B) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to MBL or any of the properties or assets of MBL; or (C) violate, conflict with, result in a breach of any provisions of, constitute a default under (or an event which, with notice or lapse of time, or both, would constitute a default under), result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of MBL under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which MBL is a party, or by which they or any of their respective properties or assets may be bound or affected, except in the case of clause (C) above for violations which, individually or in the aggregate, would not have a Material Adverse Effect on MBL.

Section 3.03 Consents. Except for the consents, waivers, approvals, filings and registrations from or with the Regulatory Authorities and compliance with any conditions contained therein, no consents, waivers or approvals of, or filings or registrations with, any governmental authority are necessary, and, no consents, waivers or approvals of, or filings or registrations with, any third parties are necessary or will be, in connection with the execution and delivery of this Agreement by MBL, and the completion by MBL of the transactions described in or contemplated by this Agreement.

MBL has no reason to believe that (a) any required consents or approvals will not be received or will be received with conditions, limitations or restrictions unacceptable to any of the parties to this Agreement, which would adversely impact the parties’ ability to complete the transactions described in this Agreement or that would be inconsistent with the terms set forth in this Agreement, or (b) any public body or authority, the consent or approval of which is not required or any filing with which is not required, will object to the completion of the transactions described in this Agreement.

Section 3.04 Financial Statements

(a) MBL has previously made available to HSB the MBL Regulatory Reports. The MBL Regulatory Reports have been, or will be, prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements, and fairly present, or will fairly present in all material respects, the consolidated financial position, results of operations and equity of MBL, as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles applied on a consistent basis.

(b) MBL has previously made available to HSB, the MBL Financials. The MBL Financials have been prepared from the books and records of MBL in accordance with

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GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments), the consolidated financial condition, results of operations and cash flows of MBL and its Subsidiaries as of and for the respective periods ending on the dates thereof, in accordance with GAAP applied on a consistent basis during the periods involved.

(c) At the date of each statement of financial condition included in the MBL Financials or the MBL Regulatory Reports, MBL did not have, and will not have, any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such MBL Financials or MBL Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which are not material or which are incurred in the ordinary course of business, consistent with past practice.

Section 3.05 Taxes. MBL and the MBL Subsidiaries are members of the same affiliated group within the meaning of Code Section 1504(a). MBL has timely filed all federal, state and material local tax returns required to be filed by or with respect to MBL on or prior to the date hereof (all such returns being accurate and correct in all material respects) and has duly paid or has made provisions for the payment of, all material federal, state and local taxes which have been incurred by or are due or, to the best of its knowledge, claimed to be due from MBL by any taxing authority or pursuant to any written tax sharing agreement on or prior to the date hereof other than taxes or other charges which (i) are not delinquent, (ii) are being contested in good faith, or (iii) have not yet been fully determined. As of the date of this Agreement, to the best of its knowledge, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of MBL, and no claim has been made by any authority in a jurisdiction where MBL does not file tax returns that MBL is subject to taxation in that jurisdiction. MBL has not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. MBL has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor or stockholder, and MBL has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements.

Section 3.06 Absence of Certain Changes. Except as provided for or contemplated in this Agreement, MBL has not suffered any Material Adverse Effect since December 31, 2006 and no event has occurred or circumstance arisen since that date which, in the aggregate, has had, or is reasonably likely to have a Material Adverse Effect on MBL.

Section 3.07 Contracts.

(a) Except as set forth on Schedule 3.07, MBL is not a party to or subject to: (i) any employment, consulting or severance contract or material arrangement with any past or present officer, director or employee of MBL; (ii) any plan, material arrangement or contract providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar material arrangements for or with any past or present officers, directors or employees of MBL; (iii) any collective bargaining agreement with any labor union relating to

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employees of MBL; (iv) any agreement which by its terms limits the payment of dividends by any MBL Subsidiary; (v) any instrument evidencing or related to material indebtedness for borrowed money whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which MBL is an obligor to any person, which instrument evidences or relates to indebtedness other than deposits, repurchase agreements, bankers’ acceptances, advances from the FHLB, and “treasury tax and loan” accounts established in the ordinary course of business and transactions in “Federal funds” or which contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) which would be applicable on or after the Closing Date to HSB; (vi) any contract (other than this Agreement) limiting the freedom, in any material respect, of MBL to engage in any type of banking or bank-related business in which MBL is permitted to engage under applicable law as of the date of this Agreement; or (vii) any agreement, written or oral, that obligates MBL for the payment of more than $10,000 annually.

(b) True and correct copies of agreements, plans, contracts, arrangements and instruments referred to in Section 3.07(a), if any, have been made available to HSB on or before the date hereof and are in full force and effect on the date hereof, and MBL (nor, to the knowledge of MBL, any other party to any such contract, plan, arrangement or instrument) has not materially breached any provision of, or is in default in any respect under any term of, any such contract, plan, arrangement or instrument. No party to any material contract, plan, arrangement or instrument as to which MBL is a party, will have the right to terminate any or all of the provisions of any such contract, plan, arrangement or instrument as a result of the execution of, and the transactions contemplated by, this Agreement. None of the employees (including officers) of MBL possesses the right to terminate his/her employment and receive or be paid (or cause MBL to accrue on his/her behalf) benefits solely as a result of the execution of this Agreement or the consummation of the transactions contemplated thereby. No plan, contract, employment agreement, termination agreement, or similar agreement or arrangement to which MBL is a party or under which MBL may be liable contains provisions which permit any employee or independent contractor to terminate it without cause and continue to accrue future benefits thereunder. No such agreement, plan, contract, or arrangement provides for acceleration in the vesting of benefits or payments due thereunder upon the occurrence of a change in ownership or control of MBL or upon the occurrence of a subsequent event. No such agreement, plan or arrangement with respect to officers or directors of MBL or to any of their respective employees, provides for benefits which may cause an “excess parachute payment” or the disallowance of a federal income tax deduction under Code Section 280G.

(c) Neither MBL nor its Subsidiary is in default under (an no event has occurred which, with due notice or lapse of time or both, would constitute a default under) or is in violation of any provision of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or other agreement to which it is a party or by which it is bound or to which any of its respective properties or assets is subject and, to the knowledge of MBL, no other party to any such agreement (excluding any loan or extension of credit made by MBL or its Subsidiary) is in default in any respect thereunder, except for such defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect on MBL.

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Section 3.08 Ownership of Property; Insurance Coverage.

(a) MBL has good and, as to real property, marketable title to all material assets and properties owned by MBL in the conduct of its business, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the statements of financial condition contained in the MBL Regulatory Reports and in the MBL Financials or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such statements of financial condition), and such property is not subject to material encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the FHLB, inter-bank credit facilities, or any transaction by MBL acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith. MBL, as lessee, has the right under valid and subsisting leases of real and personal properties used by MBL in the conduct of its businesses to occupy or use all such properties as presently occupied and used by it.

(b) MBL currently maintains insurance considered by MBL to be reasonable for its operations, in accordance with good business practice. MBL has not received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no material claims pending under such policies of insurance and no notices have been given by MBL under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last two years, MBL has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies.

Section 3.09 Legal Proceedings. Except as set forth on Schedule 3.09, MBL is not a party to any, and there are no pending or, to the best of MBL’s knowledge, threatened legal, administrative, arbitration or other proceedings, actions or governmental investigations of any nature (a) against MBL, (b) to which MBL’s assets are or may be subject, (c) challenging the validity or propriety of any of the transactions contemplated by this Agreement or (d) which could adversely affect the ability of MBL to perform under this Agreement, except for any proceedings, claims, actions, investigations or inquiries referred to in clauses (a) or (b) which, if adversely determined, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on MBL.

Section 3.10 Compliance With Applicable Law.

(a) MBL and the MBL Subsidiary hold all licenses, franchises, permits and authorizations necessary for the lawful conduct of its businesses under, and have complied in all material respects with, applicable laws, statutes, orders, rules or regulations of any federal, state or local governmental authority relating to them, other than where such failure to hold or such noncompliance will neither result in a limitation in any material respect on the conduct of their business or otherwise have a Material Adverse Effect on MBL and the MBL Subsidiary taken as a whole.

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(b) Neither MBL nor the MBL Subsidiary has received any notification or communication from any Regulatory Authority: (i) asserting that MBL or any MBL Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Regulatory Authority enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to MBL or the MBL Subsidiary; (iii) requiring or threatening to require MBL or any MBL Subsidiary, or indicating that MBL or any MBL Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority which is charged with the supervision or regulation of banks or engages in the insurance of bank deposits restricting or limiting, or purporting to restrict or limit, in any material respect the operations of MBL or any MBL Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any material manner the operations of MBL (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither MBL nor any MBL Subsidiary is party to, nor has consented to any Regulatory Agreement.

(c) CRA, Anti-Money Laundering, OFAC and Customer Information Security. MBL has received a rating of “Satisfactory” or better in its most recent examination or interim review with respect to the Community Reinvestment Act (“CRA”). MBL is not aware of, and has not been advised of, any facts or circumstances exist that would cause it: (i) to be deemed not to be in satisfactory compliance in any material respect with the CRA, and the regulations promulgated thereunder, or assigned a rating for CRA purposes by federal or state bank regulators of lower than “satisfactory”; or (ii) to be deemed to be operating in violation in any material respect of the Bank Secrecy act, the patriot Act, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance in any material respect with the applicable privacy of customer information requirements contained in any federal and state privacy laws and regulations, including without limitation, in Title V of the Gramm-Leach Bliley Act of 1999 and the regulations promulgated thereunder, as well as the provisions of the information security program adopted by it. MBL is not aware of any facts or circumstances that would cause it to believe that any non-public customer information has been disclosed to or accessed by an unauthorized third party in a manner which would cause either MBL or its Subsidiary to undertake any remedial action. The Board of Directors of MBL has adopted, and it has implemented, an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with Section 326 of the Patriot Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the Patriot Act and the regulations thereunder, and it has complied in all material respects with any requirements to file reports and other necessary documents as required by the Patriot Act and the regulations thereunder.

Section 3.11 Employee Benefit Plans.

(a) All existing bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, phantom stock, severance, welfare and fringe benefit plans, employment, severance and change in control agreements and all other benefit practices, policies

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and arrangements maintained by MBL or any MBL Subsidiary in which any employee or former employee, consultant or former consultant or director or former director of MBL or any MBL Subsidiary participates or to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the “MBL Employee Plans”) have been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code, the Age Discrimination in Employment Act, and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Age Discrimination in Employment Act and any other applicable law have been timely made. Each MBL Employee Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, and MBL is not aware of any circumstances which are reasonably likely to result in revocation of any such favorable determination letter. There is no material pending or, to the best knowledge of MBL, threatened action, suit or claim relating to any of the MBL Employee Plans (other than routine claims for benefits). Neither MBL nor any MBL Subsidiary has engaged in a transaction, or omitted to take any action, with respect to any MBL Employee Plan that would reasonably be expected to subject MBL or any MBL Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code that the taxable period of any such transaction expired as of the date hereof and subsequently expires as of the date next preceding the Merger Effective Date.

(b) Neither MBL nor any of its Subsidiaries has any commitment to create any additional MBL Employee Plan or to modify, change or renew any existing MBL Employee Plan.

(c) Neither MBL nor any MBL Subsidiary or any entity which is considered one employer with MBL under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an “ERISA Affiliate”) is a sponsor of or maintains a defined benefit Pension Plan or any MBL Employee Plan subject to Title IV of ERISA, or has any liability under any such plan that was previously sponsored or maintained by it. No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any MBL Employee Plan or by any single employer plan of an ERISA Affiliate (an “ERISA Affiliate Plan”) within the 12-month period ending on the date hereof. To the best knowledge of MBL, there is no pending investigation or enforcement action by any Regulatory Authority with respect to any MBL Employee Plan or any ERISA Affiliate Plan.

(d) All material contributions required to be made under the terms of any MBL Employee Plan or ERISA Affiliate Plan or any employee benefit arrangements to which MBL or any MBL Subsidiary is a party or a sponsor have been timely made, and all anticipated contributions and funding obligations are accrued monthly on MBL’s consolidated financial statements. MBL and its Subsidiary have expensed and accrued as a liability the present value of future benefits under each applicable MBL Employee Plan for financial reporting purposes as required by generally accepted accounting principles. Neither any Pension Plan nor any ERISA Affiliate Plan has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. None of MBL, any of its

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Subsidiaries or any ERISA Affiliate (x) has provided, or would reasonably be expected to be required to provide, security to any Pension Plan or to any ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, or (y) has taken any action, or omitted to take any action, that has resulted, or would reasonably be expected to result, in the imposition of a lien under Section 412(n) of the Code or pursuant to ERISA.

(e) Except as set forth on Schedule 3.11, (i) neither MBL nor any MBL Subsidiary has any obligations to provide retiree health, life insurance, disability insurance, or other retiree death benefits under any MBL Employee Plan, other than benefits mandated by Section 4980B of the Code; and (ii) there has been no communication to employees by MBL or any MBL Subsidiary that would reasonably be expected to promise or guarantee such employees retiree health, life insurance, disability insurance, or other retiree death benefits.

(f) MBL and its Subsidiaries do not maintain any MBL Employee Plans covering foreign employees.

(g) With respect to each MBL Employee Plan, if applicable, MBL has provided or made available to HSB copies of the: (i) trust instruments and insurance contracts; (ii) two most recent Forms 5500 filed with the IRS; (iii) most recent actuarial report and financial statement; (iv) the most recent summary plan description; (v) most recent determination letter issued by the IRS; (vi) any Form 5310 or Form 5330 filed with the IRS; and (vii) most recent nondiscrimination tests performed under ERISA and the Code (including 401(k) and 401(m) tests).

(h) The consummation of the Merger will not, directly or indirectly (including, without limitation, as a result of any termination of employment or service at any time prior to or following the Merger Effective Date) (i) entitle any employee, consultant or director to any payment or benefit (including severance pay, change in control benefit, or similar compensation) or any increase in compensation, (ii) result in the vesting or acceleration of any benefits under any MBL Employee Plan or (iii) result in any material increase in benefits payable under any MBL Employee Plan.

(i) Except as required by the continuation coverage requirements of Section 601 et. seq. of ERISA and Section 4980B of the Code or as is disclosed, MBL has no liability to provide post-retirement health or lifetime benefits to any employee or former employee of MBL.

Section 3.12 Brokers, Finders and Financial Advisors. Neither MBL, nor any of its officers, directors, employees or agents, has engaged or retained any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement.

Section 3.13 Environmental Matters.

(a) There is no suit, claim, action, notice, demand, executive or administrative order, directive, investigation or proceeding pending or, to the knowledge of MBL or the MBL Subsidiaries, threatened before any court, governmental agency or board or other forum against any of them (i) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (ii) relating to the presence of or release (as defined in the Comprehensive Environmental Response, Compensation and Liability Act) into the environment

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of any Hazardous Material, whether or not occurring at or on a site owned, leased or operated by any of them.

(b) There is no suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending or, to the knowledge of MBL or its Subsidiary, threatened before any court, governmental agency or board or other forum relating to or against any Loan Property (or MBL its MBL Subsidiary in respect of such Loan Property) (i) relating to alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (ii) relating to the presence of or release into the environment of any Hazardous Material.

(c) To the best knowledge of MBL, the properties currently owned or operated by MBL and its Subsidiary (including, without limitation, soil, groundwater or surface water on, under or adjacent to the properties, and buildings thereon) are not contaminated with and do not otherwise contain any Hazardous Material other than as permitted under any applicable Environmental Law.

(d) Neither MBL nor its Subsidiary have received any notice, demand letter, executive or administrative order, directive or request for information from any federal, state, local or foreign governmental entity or any third party indicating that they may be in violation of, or liable under, any Environmental Law.

(e) Except as set forth on Schedule 3.13, there are no underground storage tanks on, in or under any properties owned or operated by MBL or its Subsidiary and no underground storage tanks have been closed or removed from any properties owned or operated by MBL or its Subsidiary.

(f) During the period of ownership or operation by MBL of any of its current properties, there has been no contamination by or release of Hazardous Materials in, on, under or affecting such properties, except in compliance with Environmental Laws.

(g) Neither MBL nor its Subsidiary have conducted any environmental studies during the past five years with respect to any properties owned or leased by them.

(h) As used in this section the term “Loan Property” means any property in which the applicable party (or a Subsidiary of it) holds a security interest, and, where required by the context, includes the owner or operator of such property, but only with respect to such property.

Section 3.14 Loan Portfolio.

(a) With respect to each loan owned by MBL in whole or in part (each, a “Loan”):

(i) the mortgage and the related security documents are each legal, valid and binding obligations of the maker or obligor thereof, enforceable against such maker or obligor in accordance with their terms subject to bankruptcy, insolvency, fraudulent conveyance

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and other laws of general applicability relating to or affective creditors’ rights and to general equity principles;

(ii) neither MBL nor any prior holder of a Loan, has modified the note or any of the related security documents in any material respect or satisfied, canceled or subordinated the mortgage or any of the related security documents except as otherwise disclosed by documents in the applicable Loan file;

(iii) MBL is the sole holder of legal and beneficial title to each Loan (or any applicable participation interest, as appropriate), except as otherwise referenced on the books and records of MBL;

(iv) to the best knowledge of MBL, the mortgage and the related security documents, copies of which are included in the Loan files, are true and correct copies of the documents they purport to be and have not been suspended, amended, modified, canceled or otherwise changed except as otherwise disclosed by documents in the applicable Loan file;

(v) there is no pending or, to the knowledge of MBL, threatened condemnation proceeding or similar proceeding affecting the property that serves as security for a Loan, except as otherwise referenced on the books and records of MBL;

(vi) there is no litigation or proceeding pending or, to the knowledge of MBL, threatened relating to the property that serves as security for a Loan that would have a Material Adverse Effect upon the related Loan, except as otherwise disclosed by documents in the applicable Loan file;

(vii) with respect to a Loan held in the form of a participation, the participation documentation is legal, valid, binding and enforceable, except as otherwise disclosed by documents in the applicable Loan file subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affective creditors’ rights and to general equity principles; and

(viii) no representation or warranty set forth in this Section 3.14(a) shall be deemed to be breached unless such breach, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on MBL.

(b) The allowance for possible losses reflected in MBL’s audited statement of condition at December 31, 2006 was, and the allowance for possible losses shown on the MBL Regulatory Reports for periods ending after March 31, 2007, in the opinion of management, have been and will be, adequate, as of the dates thereof, under GAAP.

(c) The other real estate owned (“OREO”) included in any non-performing assets of MBL is carried net of reserves at the lower of cost or fair value, less estimated selling costs, based on current independent appraisals or evaluations or current management appraisals or evaluations; provided, however, that “current” shall mean within the past twelve months. To the best knowledge of MBL, the information with respect to the Loans furnished to HSB by MBL is true and complete in all material respects.

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Section 3.15 Related Party Transactions. MBL is not a party to any transaction (including any loan or other credit accommodation) with an Affiliate except, however, as to any existing Loan to MBL directors securing their personal residences. All such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features. No loan or credit accommodation to an Affiliate is presently in default or, during the three-year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. MBL has not been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation is inappropriate.

Section 3.16 Deposits. None of the deposits of MBL is a “brokered” deposit as defined in 12 U.S.C. Section 1831f(g).

Section 3.17 Derivative Transactions. MBL has not entered into any futures contract, option contract, interest rate caps, interest rate floors, interest rate exchange agreement or other derivative instruments.

Section 3.18 Information to be Supplied. The information supplied, or to be supplied, by MBL and the MBL Subsidiaries for inclusion in the Applications will, at the time such documents are filed with any Regulatory Authority, be accurate in all material respects.

Section 3.19 Schedule of Termination Benefits. MLB Disclosure Schedule 3.19 includes a schedule of all termination benefits and related payments that would be payable to the individuals identified thereon, under any and all employment agreements, special termination agreements, supplemental executive retirement plans, deferred compensation or deferred bonus plans, salary continuation plans or any compensation arrangement or other pension benefit or welfare benefit plan maintained by MLB for the benefit of officers or directors of MLB other than MLB’s tax-qualified plans (the “Benefits Schedule”), if their employment or service is terminated as of December 31, 2007, assuming the Closing Date occurs as of such date.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF HSB

HSB represents and warrants to MBL that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date was substituted for the date of this Agreement throughout this Article IV), except as set forth in the HSB Disclosure Schedules delivered by HSB on the date hereof and except as to any representation or warranty which specifically relates to an earlier date. HSB has made a good faith effort to ensure that the disclosure on each schedule of the HSB Disclosure Schedules corresponds to the section referenced herein. The mere inclusion of a fact, circumstance or event in a Disclosure Schedule shall not be deemed an admission by a party that such item represents a material exception or that such item is reasonably likely to result in a Material Adverse Effect. For purposes of the HSB Disclosure Schedules, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant.

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Section 4.01 Organization.

(a) HSB is an Illinois stock savings bank duly organized, validly existing and in good standing under the laws of Illinois and has all requisite authority and power to own, lease and operate its properties and to conduct the business currently conducted by it. The deposits of HSB are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due by HSB. Each HSB Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority and power to own, lease and operate its properties and to conduct the business currently conducted by it.

(b) HSB is a member in good standing of the FHLB and owns the requisite amount of stock therein.

(c) The respective minute books of HSB and each HSB Subsidiary accurately record, in all material respects, all material corporate actions of their respective members, stockholders and boards of directors (including committees), as applicable, through the date of this Agreement.

Section 4.02 Authority; No Violation.

(a) HSB has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by HSB and the completion by HSB of the transactions contemplated hereby have been duly and validly approved by the requisite vote of the Board of Directors of HSB, and no other corporate proceedings on the part of HSB, other than stockholder approval, are necessary to complete the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by HSB; and the Bank Merger has been duly and validly approved by the Board of Directors of HSB and, subject to receipt of the required approvals of the Regulatory Authorities, constitutes the valid and binding obligations of HSB, enforceable against HSB in accordance with its terms, subject to applicable bankruptcy, insolvency, the conservatorship or receivership provisions of the FDIA and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.

(b) Subject to the receipt of approvals from the Regulatory Authorities referred to in Section 5.03 hereof and the compliance by MBL and HSB with any conditions contained therein,

(i) the execution and delivery of this Agreement by HSB,

(ii) the consummation of the transactions contemplated hereby, and

(iii) compliance by HSB with any of the terms or provisions hereof,

will not (x) conflict with or result in a breach of any provision of the charter, articles of incorporation or bylaws of HSB or any HSB Subsidiary; (y) to the best knowledge of HSB, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction

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applicable to HSB or any HSB Subsidiary or any of their respective properties or assets; or (z) violate, conflict with, result in a breach of any provisions of, constitute a default under (or an event which, with notice or lapse of time, or both, would constitute a default under), result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of HSB under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which HSB is a party, or by which it or any of its properties or assets may be bound or affected, except for violations which, individually or in the aggregate, would not have a Material Adverse Effect on HSB.

Section 4.03 Consents. Except for consents, approvals, filings and registrations from or with the Regulatory Authorities and compliance with any conditions contained therein and the appropriate filings to be made with the Regulatory Authorities, no consents, waivers or approvals of, or filings or registrations with, any governmental authority are necessary, and no consents, waivers or approvals of or any filings or registrations with, any third parties are necessary, or will be, in connection with (a) the execution and delivery of this Agreement by HSB, and (b) the completion by HSB of the transactions described in or contemplated hereby.

HSB has no reason to believe that (a) any required consents or approvals will not be received or will be received with conditions, limitations or restrictions unacceptable to it or which would materially adversely impact the parties’ ability to complete the transactions described in this Agreement or that would be inconsistent with the terms set forth in this Agreement, or (b) any public body or authority, the consent or approval of which is not required or any filing which is not required, will object to the completion of the transactions described in this Agreement.

Section 4.04 Financial Statements.

(a) The HSB Regulatory Reports have been, or will be, prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements, and fairly present, or will fairly present in all material respects, the consolidated financial position, results of operations and equity of HSB, as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles applied on a consistent basis.

(b) The HSB Financials have been prepared from the books and records of HSB in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments), the consolidated financial condition, results of operations and cash flows of HSB and its Subsidiaries as of and for the respective periods ending on the dates thereof, in accordance with GAAP applied on a consistent basis during the periods involved.

(c) At the date of each statement of financial condition included in the HSB Financials or the HSB Regulatory Reports, HSB did not have, and will not have, any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such HSB Financials or HSB Regulatory Reports

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or in the footnotes thereto which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which are not material individually or in the aggregate or which are incurred in the ordinary course of business, consistent with past practice.

Section 4.05 Absence of Certain Changes. Except as provided for or contemplated in this Agreement, HSB has not suffered any Material Adverse Effect since March 31, 2007 and no event has occurred or circumstance arisen since that date which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on HSB.

Section 4.06 Legal Proceedings. HSB is not a party to any, and there are no pending or, to the best of HSB’s knowledge, threatened legal, administrative, arbitration or other proceedings, actions or governmental investigations of any nature (a) against HSB, (b) to which HSB’s assets are or may be subject, (c) challenging the validity or propriety of any of the transactions contemplated by this Agreement or (d) which could adversely affect the ability of HSB to perform under this Agreement, except for any proceedings, claims, actions, investigations or inquiries referred to in clauses (a) or (b) which, if adversely determined, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on HSB.

Section 4.07 Compliance With Applicable Law.

(a) HSB and the HSB Subsidiaries hold all licenses, franchises, permits and authorizations necessary for the lawful conduct of their businesses under, and have complied in all material respects with, applicable laws, statutes, orders, rules or regulations of any federal, state or local governmental authority relating to them, other than where such failure to hold or such noncompliance will neither result in a limitation in any material respect on the conduct of their businesses nor otherwise have a Material Adverse Effect on HSB and its Subsidiaries taken as a whole.

(b) Neither HSB nor any HSB Subsidiary has received any notification or communication from any Regulatory Authority: (i) asserting that HSB or any HSB Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Regulatory Authority enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to HSB or any HSB Subsidiary; (iii) requiring or threatening to require HSB or any HSB Subsidiary, or indicating that HSB or any HSB Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority which is charged with the supervision or regulation of banks or engages in the insurance of bank deposits restricting or limiting, or purporting to restrict or limit, in any manner the operations of HSB or any HSB Subsidiary, including without limitation any restriction or payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any material manner the operations of HSB (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither HSB nor any HSB Subsidiary is a party to, nor has consented to any Regulatory Agreement.

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(c) CRA, Anti-Money Laundering, OFAC and Customer Information Security. HSB has received a rating of “Satisfactory” or better in its most recent examination or interim review with respect to the Community Reinvestment Act (“CRA”). HSB is not aware of, and has not been advised of, any facts or circumstances exist that would cause it: (i) to be deemed not to be in satisfactory compliance in any material respect with the CRA, and the regulations promulgated thereunder, or assigned a rating for CRA purposes by federal or state bank regulators of lower than “satisfactory”; or (ii) to be deemed to be operating in violation in any material respect of the Bank Secrecy act, the Patriot Act, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance in any material respect with the applicable privacy of customer information requirements contained in any federal and state privacy laws and regulations, including without limitation, in Title V of the Gramm-Leach Bliley Act of 1999 and the regulations promulgated thereunder, as well as the provisions of the information security program adopted by it. HSB is not aware of any facts or circumstances that would cause it to believe that any non-public customer information has been disclosed to or accessed by an unauthorized third party in a manner which would cause either HSB or its Subsidiary to undertake any remedial action. The Board of Directors of HSB has adopted, and it has implemented, an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with Section 326 of the Patriot Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the Patriot Act and the regulations thereunder, and it has complied in all material respects with any requirements to file reports and other necessary documents as required by the Patriot Act and the regulations thereunder.

Section 4.08 Information to be Supplied. The information supplied, or to be supplied, by HSB for inclusion in the Applications will, at the time such documents are filed with any Regulatory Authority, be accurate in all material respects.

ARTICLE V

COVENANTS OF THE PARTIES

Section 5.01 Conduct of MBL’s Business.

(a) From the date of this Agreement to the Closing Date, MBL will conduct its business and engage in transactions, including extensions of credit, only in the ordinary course, consistent with past practice and policies in existence on the date hereof, except as otherwise required or contemplated by this Agreement or with the written consent of HSB. MBL will use its reasonable good faith efforts, to (i) preserve its business organizations intact, (ii) maintain good relationships with its employees, and (iii) preserve the goodwill of its customers and others with whom business relationships exist.

(b) From the date hereof to the Closing Date, except as otherwise consented to or approved by HSB, in writing (which approval will not be unreasonably delayed or withheld) or as contemplated or required by this Agreement, MBL will not:

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(i) amend or change any provision of its Articles of Incorporation or bylaws;

(ii) grant or agree to pay any bonus, severance or termination to, enter into or amend, or take any action (other than executing this Agreement) that would trigger obligations under any employment agreement, severance agreement, supplemental executive agreement, or similar agreement or arrangement with any of its directors, officers or employees, or increase in any manner the compensation or fringe benefits of any employee, officer or director or hire any new employees other than tellers in the normal course of operations, appoint or elect any new directors or retain any new consultants or independent contractors;

(iii) enter into or, except as may be required by law or by the terms of this Agreement, modify any pension, retirement, stock option, savings, profit sharing, deferred compensation, supplemental retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related thereto, in respect of any of its directors, officers or employees; or make any contributions to any defined contribution or defined benefit plan not in the ordinary course of business consistent with past practice; or materially amend any MBL Employee Plan;

(iv) merge or consolidate with any other corporation; sell or lease all or any substantial portion of its assets; make any acquisition of all or any substantial portion of the business or assets of any other person, firm, association, corporation or business organization other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between MBL and any other person; enter into a purchase and assumption transaction with respect to deposits and liabilities; file an application for the relocation or termination of any existing branch office, or file an application to establish a new branch office;

(v) sell or otherwise dispose of any asset of MBL, other than in the ordinary course of business consistent with past practice; subject any MBL asset to any lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, and FHLB advances established in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money);

(vi) take any action which would result in any of the representations and warranties of MBL set forth in Article III becoming untrue at any time prior to the Closing Date or in any of the conditions set forth in Article VI hereof not being satisfied or result in a violation of any provision of this Agreement;

(vii) change any method, practice or principle of accounting, except as may be required from time to time by GAAP or any Regulatory Authority responsible for regulating MBL;

(viii) waive, release, grant or transfer any material rights or item of value or modify or change in any material respect any existing material agreement or indebtedness to

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which MBL is a party, other than in the ordinary course of business, consistent with past practice;

(ix) restructure or materially change its investment securities portfolio or its interest rate risk position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;

(x) make, increase, compromise, extend, renew or modify any existing loan or commitment or credit facility other than residential loans conforming to Fannie Mae standards and consumer loans in amounts of $10,000 or less (or $40,000 in the case of automobile loans), in all cases consistent with past practices and lending policies as in effect on the date of this Agreement;

(xi) enter into, renew, extend or modify any other transaction with any Affiliate;

(xii) enter into any futures contract, option, interest rate caps, interest rate floors, interest rate exchange agreement or other agreement or, except in the ordinary course of business and consistent with past practice, take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to changes in market rates of interest;

(xiii) make any change in policies with regard to the extension of credit, the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon, investment, asset/liability management or other material banking policies in any material respect except as may be required by changes in applicable law or regulations or in GAAP or by applicable Regulatory Authorities;

(xiv) make any capital expenditures, other than pursuant to binding commitments existing on the date hereof and other than expenditures necessary to maintain existing assets in good repair;

(xv) purchase or otherwise acquire, or sell or otherwise dispose of, any assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;

(xvi) incur any non-deposit liability in excess of $10,000 other than in the ordinary course of business consistent with past practices;

(xvii) undertake or enter into any lease, contract or other commitment for its account, other than in the normal course of providing credit to its customers as part of its banking business, involving a payment of more than $10,000 annually, or containing a material financial commitment and extending beyond twelve months from the date hereof;

(xviii) settle any claim, action or proceeding or impose any material restriction on its operations or the operations of any of its Subsidiaries;

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(xix) make any sale, assignment, transfer, pledge, hypothecation or other disposition of any assets, other than pledges of assets to secure government deposits, sales of assets received in satisfaction of debts previously contracted in the normal course of business, transactions in the investment securities portfolio by MBL, sales of residential loans in the secondary market in the ordinary course of business and consistent with past practice, or repurchase agreements made in the ordinary course of business, consistent with past practice;

(xx) make any investment in any security, including mortgage-backed and mortgage-related securities, other than U.S. government and U.S. government agency securities with final maturities not greater than one year;

(xxi) materially increase or decrease the rate of interest paid on its deposits, except in a manner consistent with past practices and pursuant to policies in effect on the date hereof; or

(xxii) take any action that would cause the Merger to fail to qualify for “pooling of interest” accounting treatment under GAAP;

(xxiii) foreclose upon or otherwise take title to or possession or control of any real property without first obtaining a phase one environmental report thereon indicating that there is no apparent violation of or liability under the Environmental Laws, provided, however, that it shall not be required to obtain such a report with respect to one- to four-family, non-agricultural residential property of five (5) acres or less to be foreclosed upon unless it has reason to believe that such property might be in violation of or require remediation under Environmental Laws; or

(xxiv) agree to take any action prohibited by this Section.

Section 5.02 Access; Confidentiality.

(a) MBL shall permit HSB and its representatives reasonable access to its properties and make available to them all books, papers and records relating to the assets, properties, operations, obligations and liabilities of MBL, including, but not limited to, all books of account (including the general ledger), tax records, minute books of meetings of boards of directors (and any committees thereof), and members, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, accountants’ work papers, litigation files, plans affecting employees, and any other business activities or prospects in which HSB may have a reasonable interest (provided that MBL shall not be required to provide access to any information that would violate its attorney-client privilege or any employee or customer privacy policies, laws or regulations). MBL shall make its respective officers, employees and agents and authorized representatives (including counsel and independent public accountants) available to confer with HSB and its representatives. In addition, from the date of this Agreement through the Closing Date, MBL shall permit employees of HSB reasonable access to information relating to problem loans, loan restructurings and loan workouts of MBL. The parties will hold all such information delivered in confidence, shall not disclose such information to any other party and shall not use such

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information for any purpose unrelated to this Agreement and the transactions contemplated herein.

(b) MBL shall permit HSB, at its expense, to cause a “phase I” and a “phase II” environmental audit to be performed at any physical location owned or occupied by MBL or on which it has a security interest, provided that the initial phase I audit is contracted for within fifteen days of the date of this agreement and commenced as soon as practicable thereafter and that any phase II audit is contracted for within fifteen days of HSB’s receipt of the final phase I report and commenced as soon as practicable thereafter.

(c) HSB agrees to conduct such investigations and discussions hereunder in a manner so as not to interfere unreasonably with normal operations and customer and employee relationships of the other party.

(d) In addition to the access permitted by subparagraph (a) above, from the date of this Agreement through the Closing Date, MBL shall permit employees of HSB reasonable access to information relating to problem loans, loan restructurings and loan work-outs of MBL.

(e) HSB’s executive officers shall be invited and entitled to attend all meetings of the board of directors of MBL; provided, however, that no more than two such officers may attend any particular meeting and such individuals may be excluded from any portions of MBL Board meetings involving discussions relating to HSB’s compliance with this Agreement. Board packages and notices shall be submitted by MBL to the Chief Executive Officer of HSB simultaneously with their submission to MBL’s board members.

Section 5.03 Regulatory Matters and Consents.

(a) HSB will, in consultation with MBL, prepare all Applications and make all filings for, and use its best efforts to obtain as promptly as practicable after the date hereof, all necessary permits, consents, approvals, waivers and authorizations of all Regulatory Authorities necessary or advisable to consummate the transactions contemplated by this Agreement. The parties together will prepare the proxy materials with respect to the MBL members meeting and MBL’s Board shall recommend approval of this Agreement to MBL’s members in the proxy materials and not withdraw such recommendation. HSB and MBL shall file the Applications (including the proposed MBL proxy materials) within forty-five (45) days of the date of this Agreement, or as soon thereafter as is practicable.

(b) MBL will furnish HSB with all information concerning MBL as may be necessary or advisable in connection with any Application or filing made by or on behalf of HSB to any Regulatory Authority in connection with the transactions contemplated by this Agreement.

(c) HSB and MBL will promptly furnish the other with copies of all material written communications to, or received by them, from any Regulatory Authority in respect of the transactions contemplated hereby, except information which is filed by either party which is designated as confidential.

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(d) HSB will use its best efforts to obtain all necessary regulatory approvals to effectuate the transactions contemplated by this Agreement and related exhibits and appendices.

(e) MBL will use its best efforts to obtain all necessary regulatory approvals to effectuate the transactions contemplated by this Agreement and related exhibits and appendices.

(f) MBL shall hold a meeting of members no later than sixty (60) days after the date of regulatory approval of its proxy materials to consider this Agreement and shall recommend approval of the Agreement by MBL members at that meeting.

(g) The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Regulatory Authorities. Each party will furnish the other party with copies of all Applications prior to filing with any Regulatory Authority and provide the other party a reasonable opportunity to comment upon changes to such Applications, and copies of all Applications filed by each party.

(h) MBL and HSB will cooperate with each other in the foregoing matters and will furnish the responsible party with all information concerning it and its Subsidiaries as may be necessary or advisable in connection with any Application or filing made by or on behalf of HSB or MBL to any Regulatory Authority in connection with the transactions contemplated by this Agreement, and such information will be accurate and complete in all material respects. In connection therewith, each party will provide certificates and other documents reasonably requested by the other.

Section 5.04 Taking of Necessary Action. HSB and MBL shall each use its best efforts in good faith to (a) furnish such information as may be required in connection with the preparation of the documents referred to in Section 5.03 of this Agreement, and (b) take or cause to be taken all action necessary or desirable on its part using its best efforts so as to permit completion of the Merger and the transactions contemplated by this Agreement including any commercially reasonable bylaw amendments as may be suggested by HSB to facilitate the special meeting of members.

Section 5.05 Certain Agreements.

(a) HSB shall maintain in effect for three years from the Merger Effective Date the current directors’ and officers’ liability insurance policy maintained by MBL or provide a policy providing comparable coverage and amounts on terms and conditions no less favorable for the officers and directors currently covered by MBL’s existing policy with respect to matters occurring prior to the Closing Date; provided however, that in no event shall HSB be obligated to expend, to maintain or provide insurance coverage pursuant to this Section 5.05(a), an amount in aggregate in excess of 150% of the amount of annual premium paid by MBL as of the date hereof for such insurance (“Maximum Insurance Amount”); provided, further; that if the aggregate amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Insurance Amount, HSB shall obtain the most advantageous coverage obtainable for an appropriate premium equal to the Maximum Insurance Amount. In

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connection with the foregoing, MBL agrees to provide such insurer or substitute insurer with such representations as such insurer may request with respect to the reporting of any prior claims.

(b) For a period of six years from the Merger Effective Date, HSB and HSB MHC agree to indemnify, defend and hold harmless each present and former director and officer of MBL and the MBL Subsidiaries determined as of the Closing Date (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses (including reasonable attorneys’ fees and expenses), liabilities, judgments or amounts paid in settlement (with the approval of HSB and HSB MHC, which approval shall not be unreasonably withheld or delayed) or in connection with any claim, action, suit, proceeding or investigation arising out of matters existing or occurring at or prior to the Merger Effective Date (a “Claim”) in which an Indemnified Party is, or is threatened to be made, a party or a witness based in whole or in part on, or arising in whole or in part out of, the fact that such person is or was a director or officer of MBL, regardless of whether such Claim is asserted or claimed prior to, at or after the Closing Date, to the fullest extent to which directors and officers of MBL are entitled under applicable law, MBL’s articles and bylaws, (and HSB shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the extent permissible to an Illinois savings bank, or MBL’s articles and bylaws; provided, that the person to whom expenses are advanced provides an undertaking to repay such expenses if it is ultimately determined that such person is not entitled to indemnification). All rights to indemnification in respect of a Claim asserted or made within the period described in the preceding sentence shall continue until the final disposition of such Claim.

(c) Any Indemnified Party wishing to claim indemnification under Section 5.05(b), upon learning of any Claim, shall promptly notify HSB, but the failure to so notify shall not relieve HSB of any liability it may have to such Indemnified Party except to the extent that such failure materially prejudices HSB. In the event of any Claim, (i) HSB shall have the right to assume the defense thereof (with counsel reasonably satisfactory to the Indemnified Party) and shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that, if HSB elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between HSB and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and HSB shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received, provided further that HSB shall in all cases be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified Parties, (ii) the Indemnified Parties will cooperate in the defense of any such Claim and (iii) HSB shall not be liable for any settlement effected without its prior written consent (which consent shall not unreasonably be withheld or delayed).

(d) In the event HSB or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not continue or survive such consolidation or merger, or (ii) liquidates, dissolves, transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of HSB assume the obligations set forth in this Section 5.05.

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(e) The provisions of this Section 5.05 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and personal representatives.

Section 5.06 Duty to Advise; Duty to Update the MBL Disclosure Schedules. MBL shall promptly advise HSB of any change or event having a Material Adverse Effect on MBL or which MBL believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants set forth herein. MBL shall update the MBL Disclosure Schedules as promptly as practicable after the occurrence of an event or fact which, if such event or fact had occurred prior to the date of this Agreement, would have been disclosed in the MBL Disclosure Schedules. The delivery of such updated MBL Disclosure Schedules shall not relieve MBL from any breach or violation of this Agreement and shall not have any effect for the purposes of determining the satisfaction of the condition set forth in Sections 6.02(c) hereof.

Section 5.07 Conduct of HSB’s Business. From the date of this Agreement to the Closing Date, HSB will use its best efforts to (a) preserve its business organizations intact, (b) maintain good relationships with employees, and (c) preserve for itself the goodwill of customers of HSB. From the date of this Agreement to the Closing Date, HSB will not (i) amend its articles or bylaws in any manner inconsistent with the prompt and timely consummation of the transactions contemplated by this Agreement; (ii) take any action which would result in any of the representations and warranties of HSB set forth in Article IV of this Agreement becoming untrue as of any date after the date hereof or in any of the conditions set forth in Article VI hereof not being satisfied, except in each case as may be required by applicable law; (iii) take any action which would or is reasonably likely to adversely effect or materially delay the receipt of the necessary approvals from the Regulatory Authorities; (iv) take action which would or is reasonably likely to materially and adversely affect HSB’s ability to perform its covenants and agreements under this Agreement; (v) take any action that would result in any of the conditions to the transactions contemplated by this Agreement not being satisfied; or (vi) agree to do any of the foregoing.

Section 5.08 Board and Committee Minutes. MBL shall provide to HSB, within five (5) days after Board approval of the minutes of any meeting of its Board of Directors, or any committee thereof, or any senior management committee, a copy of the minutes of such meeting, except that with respect to any meeting held within twenty-five (25) days of the Closing Date, such minutes shall be provided prior to the Closing Date. MBL may exclude from the minutes matters (a) relating to merger negotiations or (b) relating to MBL’s discussions of possible breaches of this Agreement by HSB.

Section 5.09 Undertakings by the Parties.

(a) From and after the date of this Agreement:

(i) List of Nonperforming Assets. MBL shall provide HSB, within ten (10) days of the end of each calendar month, a written list of nonperforming assets (the term “nonperforming assets,” for purposes of this subsection, means (a) a loan that represents a “troubled debt restructuring” as defined in Statement of Financial Accounting Standards No. 15,

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“Accounting by Debtors and Creditors for Troubled Debt Restructuring,” (b) loans on nonaccrual, (c) real estate owned, (d) all loans ninety (90) days or more past due as of the end of such month and (e) and impaired loans.

(ii) Reserves and Merger-Related Costs. On or no more than fifteen (15) days before the Merger Effective Date, and at the request of HSB, MBL shall establish such additional accruals and reserves as may be necessary to conform the accounting reserve practices and methods (including credit loss practices and methods) of MBL to those of HSB (as such practices and methods are to be applied to HSB from and after the Closing Date) and HSB’s plans with respect to the conduct of the business of MBL following the Merger and otherwise to reflect Merger-related expenses and costs incurred by MBL; provided, however, that no accrual or reserve made by MBL or any MBL Subsidiary pursuant to this subsection, or any litigation or regulatory proceeding arising out of any such accrual or reserve, shall constitute or be deemed to be a breach or violation of any representation, warranty, covenant, condition or other provision of this Agreement or constitute a termination event within the meaning of Section 7.01(b) hereof. No action shall be required to be taken by MBL pursuant to this Section 5.08(ii) if, in the opinion of MBL’s independent auditors, such action would contravene GAAP or any regulations or guidance of the Regulatory Authorities with oversight responsibility for MBL.

(iii) Systems Conversions. MBL and HSB shall meet on a regular basis to discuss and plan for the conversion of MBL’s data processing and related electronic informational systems to those used by HSB, which planning shall include, but not be limited to, discussion of the possible termination by MBL of third-party service provider arrangements effective at the Merger Effective Date or at a date thereafter, non-renewal of personal property leases and software licenses used by MBL in connection with its systems operations, retention of outside consultants and additional employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services it being understood that unless MBL otherwise agrees, no conversion shall take place prior to the Merger Effective Date. MBL shall take, at the request of HSB, any action HSB requests to facilitate the systems conversions including the payment or prepayment of any applicable termination fees, expenses or charges, provided that HSB shall indemnify MBL against any such fees, expenses and charges, (including the cost of reversing the conversion processes) if the Merger is not consummated primarily due to the fault of HSB.

(iv) Financial Statements. From the date of this Agreement through the Merger Effective Date, MBL shall provide HSB, within twenty (20) days of the end of the month, a copy of MBL’s monthly financial statements and Board reports.

(b) From and after the date of this Agreement, HSB and MBL shall each:

(i) Filings and Approvals. Cooperate with the other in the preparation and filing, as soon as practicable, of (A) the Applications, (B) all other documents necessary to obtain any other approvals and consents required to effect the completion of the Merger, and the transactions contemplated by this Agreement, and (C) all other documents contemplated by this Agreement;

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(ii) Public Announcements. Cooperate and cause their respective officers, directors, employees and agents to cooperate in good faith, consistent with their respective legal obligations, in the preparation and distribution of, and agree upon the form and substance of, any press release related to this Agreement and the transactions contemplated hereby, and any other public disclosures related thereto, including without limitation communications to members, internal announcements and customer disclosures, but nothing contained herein shall prohibit either party from making any disclosure which its counsel deems necessary, provided that the disclosing party notifies the other party reasonably in advance of the timing and contents of such disclosure;

(iii) Maintenance of Insurance. Maintain insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of its properties and the nature of its business;

(iv) Maintenance of Books and Records. Maintain books of account and records in accordance with GAAP applied on a basis consistent with those principles used in preparing the financial statements heretofore delivered; and

(v) Taxes. File all Federal, state, and local tax returns required to be filed by them on or before the date such returns are due (including any extensions) and pay all taxes shown to be due on such returns on or before the date such payment is due.

Section 5.10 Employee and Termination Benefits; Directors and Management.

(a) HSB shall endeavor to offer employment to all employees of MBL (except for Marion Morin, Kathy Daugherty, Roberta Skelton, and Beth Hatteburg) as of the Merger Effective Date, subject to due diligence and review of its staffing needs (“Continuing Employees”). Offers of employment shall be on such terms and conditions as HSB determines in its sole discretion. All full time MBL employees who remain employed with MBL through a date selected by HSB within 30 days following the Closing Date will be entitled to a one thousand dollar ($1,000) bonus, payable by MBL within five business days of such date. Continuing Employees will become subject to HSB’s employment policies (including applicable to compensation, bonuses and vacation), effective as of the Closing Date. Continuing Employees will receive credit for service with MBL for purposes of eligibility and vesting with respect to HSB’s employee benefit plans, policies and programs, including HSB’s 401(k) Plan, sick policy and vacation policy, except as specifically noted to the contrary herein.

(b) In the sole discretion of HSB, MBL’s 401(k) Plan shall be frozen, terminated or merged into HSB’s 401(k) Plan. With respect to HSB’s 401(k) plan, Continuing Employees will receive credit for service with MBL for purposes of vesting and determination of eligibility to participate. It is expected that Continuing Employees who satisfy the conditions for eligibility as of the Closing Date shall be entitled to participate in the HSB 401(k) Plan from the later of January 1, 2008 or the Closing Date, provided, however, that such participation shall be coordinated with the termination or freeze or merger of the MBL 401(k) Plan so that no gap in coverage under a 401(k) plan will occur for Continuing Employees. It is expected that the HSB 401(k) Plan matching contribution for 2008 will be equal to 50% of the first six percent of compensation contributed by employees who participate in the HSB 401(k) Plan. With respect

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to HSB’s tax-qualified defined benefit pension plan, it is anticipated that such plan will be frozen prior to the Closing Date and no new employees will be eligible for participation. If such plan is not frozen prior to the Closing Date, Continuing Employees will be considered new employees for purposes of eligibility, vesting and benefit accrual under HSB’s tax-qualified defined benefit pension plan.

(c) In the event of the termination of any MBL health, disability or life insurance plan, or the consolidation of any MBL health, disability or life insurance plan with any HSB health, disability or life insurance plan, HSB shall, as soon as practicable, make available to Continuing Employees and their dependents employer-provided health, disability or life insurance coverage on the same basis as it provides such coverage to employees of HSB. Unless a Continuing Employee affirmatively terminates coverage under a MBL health, disability or life insurance plan prior to the time that such Continuing Employee becomes eligible to participate in the HSB health, disability or life insurance plan, no coverage of any of the Continuing Employees or their dependents shall terminate under any of the MBL health, disability or life insurance plans prior to the time such Continuing Employees and their dependents become eligible to participate in such plans, programs and benefits common to all employees of HSB and their dependents. Terminated MBL employees and qualified beneficiaries will have the right to continue coverage under group health plans of HSB in accordance with Code Section 4980B(f). Continuing Employees who become covered under a HSB health plan shall be required to satisfy the deductible limitations or coinsurance requirements of the HSB health plan for the plan year in which the coverage commences, with offset for deductibles or coinsurance amounts satisfied under the MBL health plan. In the event of any termination of any MBL health plan, or consolidation of any MBL health plan with any health plan of HSB, any pre-existing condition, limitation or exclusion in the health plan of HSB shall not apply to Continuing Employees or their covered dependents who have satisfied such pre-existing condition exclusion waiting period under a MBL health plan with respect to such pre-existing condition on the Effective Time and who then change that coverage to the health plan of HSB at the time such Continuing Employee is first given the option to enroll in such health plan. HSB generally intends to increase the compensation of Continuing Employees (other than Mr. Harseim) at the Closing Date, to compensate such persons for the lower level in employer paid premiums under the HSB health plan as compared to the MBL health plan.

(d) Promptly following the Closing Date, HSB shall offer to appoint two members of the MBL board to the board of directors of HSB and HSB MHC shall offer to appoint such persons to the Board of HSB MHC and its subsidiary, Harvard Illinois Financial Corporation. All MBL outside directors and directors emeritus, other than those persons appointed to the HSB board of directors, shall be appointed to an advisory board of HSB for a one-year term. Thereafter, continuation of the advisory board for an additional year shall be considered annually, and if continued, all such members shall be re-appointed, subject to an advisory board member’s removal by the HSB board for cause or due to attainment of the mandatory retirement age of 70. Advisory board fees will be paid based on attendance at rates currently paid to regular and emeritus MBL directors. The names of the Advisory board members will appear in HSB’s statement of condition provided to customers or posted in its offices. Advisory board members will not have a vote with respect to any matters presented to the Board. MBL’s existing directors’ emeritus retirement and deferred compensation plans shall continue to be maintained by HSB but shall be frozen to new participants. In addition, no further

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deferrals shall be permitted under any such deferred compensation plan commencing January 2008, unless specifically authorized by a resolution of the board of directors of HSB prior to December 15, 2007. In the event that any such plan is required to be amended to comply with Code Section 409A, such amendments shall be permitted to be made by MBL prior to the Closing Date, provided, however, that no new elections with respect to the form or timing of distributions shall be permitted except as specifically authorized in writing by HSB.

(e) With respect to any full time MBL employee who is informed by HSB that his or her employment will not be continued by HSB, or who is terminated by HSB within one year of the Closing Date (other than due to termination for cause), HSB shall pay, or shall cause MBL if such termination occurs prior to the Closing Date to pay, such persons a severance benefit equal to six (6) months’ base salary.

(f) Henry Harseim shall be offered the position of President of the Morris Building and Loan Division of HSB and Sandy Bednarik shall be offered the position of Assistant Vice President-Controller of HSB, effective as of the Closing Date. In the event Mr. Harseim accepts the position of President of the Morris Building and Loan Division of HSB, he shall receive, in addition to a base salary at least as high as his current salary and other employee benefits generally available to employees of HSB, an automobile allowance of $300 per month until his retirement or other termination of employment. In addition, HSB will continue to pay Mr. Harseim’s country club dues until his retirement or other termination of service. HSB will continue the Salary Continuation Plan for the benefit of Mr. Harseim until his retirement, in accordance with the terms of said plan. In addition, HSB shall pay all health insurance premiums for Mr. Harseim and his spouse until Mr. Harseim’s retirement or termination of employment.

Section 5.11 Duty to Advise; Duty to Update HSB’s Disclosure Schedules. HSB shall promptly advise MBL of any change or event having a Material Adverse Effect on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants set forth herein. HSB shall update HSB’s Disclosure Schedules as promptly as practicable after the occurrence of an event or fact which, if such event or fact had occurred prior to the date of this Agreement, would have been disclosed in the HSB Disclosure Schedule. The delivery of such updated Schedules shall not relieve HSB from any breach or violation of this Agreement and shall not have any effect for the purposes of determining the satisfaction of the condition set forth in Section 6.01(c) hereof.

Section 5.12 Merger Proposals.

(a) Except as permitted by this Agreement, MBL shall not, and shall not authorize or permit any of its Subsidiaries or any of their respective officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by MBL to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing any public and/or non-public information), or take any other action to facilitate, any inquiries, discussions or the making of any proposal that constitutes or could reasonably be expected to lead to a Merger Proposal, (ii) participate in any discussions or negotiations, or otherwise communicate in any way with any person (other than communication with HSB), regarding a Merger Proposal, or (iii) enter into or consummate any agreement,

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arrangement or understanding requiring it to abandon, terminate or fail to consummate the transactions contemplated hereby. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of MBL or any investment banker, financial advisor, attorney, accountant or other representative retained by such party shall be deemed to be a breach of this Section 5.12 by MBL.

(b) MBL will notify HSB immediately orally (within one day) and in writing (within three days) of any Merger Proposal, any request for public and/or non-public information that could reasonably be expected to lead to a Merger Proposal, or any inquiry with respect to or that could reasonably be expected to lead to a Merger Proposal, including, in each case, the identity of the person making such Merger Proposal, request or inquiry and the terms and conditions thereof, and shall provide to HSB written materials received by MBL in connection therewith. MBL will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. MBL will take the necessary steps to inform the appropriate individuals or entities referred to in the first sentence of Section 5.12(a) of the obligations undertaken under Section 5.12. MBL will promptly request each person (other than HSB) that has executed a confidentiality agreement prior to the date hereof in connection with its consideration of a business combination to return or destroy all confidential information previously furnished to such person by or on behalf of MBL. MBL shall not release any third party from, or waive any provisions of, any confidentiality agreements to which it is a party.

Section 5.13 Classified Loan Update. MBL shall promptly inform HSB in writing of any Loan the original principal balance of which exceeds $10,000 that becomes classified in the manner described in Section 3.14(c) hereof, or any Loan the classification of which is changed at any time after the date of this Agreement.

Section 5.14 Operation of Premises. It is the current intention of HSB to operate from the facility located at 211 East Jefferson Street, Morris, Illinois for a period of at least three (3) years from and after the closing of the transactions contemplated by this Agreement.

ARTICLE VI

CONDITIONS

Section 6.01 Conditions to Obligations of MBL Under this Agreement. The obligations of MBL under this Agreement shall be subject to satisfaction at or prior to the Closing Date of each of the following conditions, unless waived by MBL pursuant to Section 8.03 hereof:

(a) Corporate Proceedings. All action required to be taken by, or on the part of HSB to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated by this Agreement, shall have been duly and validly taken by HSB and MBL shall have received certified copies of the resolutions evidencing such authorizations.

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(b) Covenants. The obligations and covenants of HSB required by this Agreement to be performed by HSB at or prior to the Closing Date shall have been duly performed and complied with in all material respects.

(c) Representations and Warranties. Each of the representations and warranties of HSB in this Agreement that is qualified as to materiality shall be true and correct, and each such representation or warranty that is not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement, and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date, except where the failure to be so true and correct, individually or in the aggregate, has, or is reasonably likely to have a Material Adverse Effect on HSB.

(d) Approvals of Regulatory Authorities. The Merger shall have received all required approvals of Regulatory Authorities and all notice and waiting periods required thereunder shall have expired or been terminated.

(e) No Injunction. There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby. No administrative agency or commission or other governmental authority or instrumentality shall have instituted any proceeding for the purpose for enjoining or prohibiting the consummation of the transactions contemplated by this Agreement. No statute, rule or regulation shall have been enacted or promulgated by any administrative agency or commission or other governmental authority or instrumentality, which prohibits or makes illegal the consummation of the Merger.

(f) Officer’s Certificate. HSB shall have delivered to MBL a certificate, dated the Closing Date and signed, without personal liability, by its president and chief financial officer, to the effect that the conditions set forth in subsections (b) and (c) of this Section 6.01 have been satisfied.

(g) Good Standing Certificate. MBL shall have received certificates (such certificates to be dated as of a day as close as practicable to the Closing Date) from appropriate authorities as to the corporate existence of HSB.

(h) Member Approval. This Agreement shall have been approved by the requisite vote of MBL’s members in accordance with applicable laws and regulations. If required, HSB MHC’s members shall have approved an amendment to its charter to grandfather MBL’s borrower members following the completion of the Merger.

Section 6.02 Conditions to the Obligations of HSB Under this Agreement. The obligations of HSB hereunder shall be subject to satisfaction at or prior to the Closing Date of each of the following conditions, unless waived by HSB pursuant to Section 8.03 hereof:

(a) Corporate Proceedings. All action required to be taken by, or on the part of, MBL to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated by this Agreement, shall have been duly and validly taken by MBL; and HSB shall have received certified copies of the resolutions evidencing such authorizations.

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(b) Covenants. The obligations and covenants of MBL required by this Agreement to be performed at or prior to the Closing Date shall have been duly performed and complied with in all material respects.

(c) Representations and Warranties. Each of the representations and warranties of MBL in this Agreement that is qualified as to materiality shall be true and correct, and each such representation or warranty that is not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement, and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date, except where the failure to be so true and correct, individually or in the aggregate, has, or is reasonably likely to have a Material Adverse Effect on MBL.

(d) Approvals of Regulatory Authorities. The Merger shall have received all required approvals of Regulatory Authorities (without the imposition of any material conditions that are in HSB’s reasonable judgment unduly burdensome, excluding standard conditions that are normally imposed by the Regulatory Authorities in merger transactions); and all notice and waiting periods required thereunder shall have expired or been terminated.

(e) No Injunction. There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby. No administrative agency or commission or other governmental authority or instrumentality shall have instituted any proceeding for the purpose for enjoining or prohibiting the consummation of the transactions contemplated by this Agreement. No statute, rule or regulation shall have been enacted or promulgated by any administrative agency or commission or other governmental authority or instrumentality, which prohibits or makes illegal the consummation of the Merger.

(f) Officer’s Certificate. MBL shall have delivered to HSB a certificate, dated the Closing Date and signed, without personal liability, by its chief executive officer and chief financial officer, to the effect that the conditions set forth in subsections (b) and (c) of this Section 6.02 have been satisfied.

(g) Good Standing Certificate. HSB shall have received certificates (such certificates to be dated as of a day as close as practicable to the Closing Date) from appropriate authorities as to the corporate existence of MBL.

(h) Member Approval. This Agreement shall have been approved by the requisite vote of MBL’s members in accordance with applicable laws and regulations. If required, HSB MHC’s members shall have approved an amendment to its charter to grandfather MBL’s borrower members following the completion of the Merger.

(i) Stockholder Approval. This Agreement shall have been approved by the requisite vote of HSB’s stockholders. HSB MHC currently owns all of the shares of the corporate parent of HSB and agrees to cause such corporate parent to vote its shares in favor of the Merger.

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ARTICLE VII

TERMINATION, WAIVER AND AMENDMENT

Section 7.01 Termination. This Agreement may be terminated, and the Merger contemplated hereby abandoned, on or at any time prior to the Closing Date:

(a) By the mutual written consent of the parties hereto; or

(b) (b) By either HSB or MBL:

(i) if there shall have been a material breach of any representation, warranty, covenant or other obligation of the other party and the breach cannot be, or shall not have been, remedied within 30 days after receipt by such other party of notice in writing specifying the nature of such breach and requesting that it be remedied;

(ii) if the Closing Date shall not have occurred on or before June 30, 2008, unless the failure of such occurrence shall be due to the failure of the party seeking to terminate this Agreement to perform or observe its obligations set forth in this Agreement required to be performed or observed by such party on or before the Closing Date; or

(iii) if either party has been informed in writing by a Regulatory Authority whose approval or consent has been requested that such approval or consent is denied, or is granted subject to any material change in the terms of the Agreement, unless the failure of such occurrence shall be due to the failure of the party seeking to terminate this Agreement to perform or observe its agreements set forth herein required to be performed or observed by such party on or before the Closing Date.

(c) By either HSB or MBL, in the event of the failure of MBL’s members to approve the Agreement at a special meeting called for that purpose; provided, however, that MBL shall only be entitled to terminate the Agreement pursuant to this clause if it has complied in all material respects with its obligations under Section 5.03(f).

Section 7.02 Effect of Termination.

(a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VII, no party to this Agreement shall have any liability or further obligation to the other party hereunder, except as set forth in this Section 7.02.

(b) In the event that either Financial Institution Party terminates this Agreement pursuant to 7.01(b)(i), then, provided that such terminating Financial Institution Party is not then in a material breach of any representation, warranty or other obligation under this Agreement, the other Financial Institution Party shall reimburse the terminating Financial Institution Party all of its documented fees and expenses incurred in connection with the merger not to exceed $250,000.

(c) In the event that this Agreement is terminated pursuant to Article VII hereof on account of a willful and material breach by a Financial Institution Party, then the non-breaching

35

Financial Institution Party shall be entitled to such remedies and relief against the breaching Financial Institution Party as are available in law or in equity.

(d) The parties agree that, in the event of any breach or threatened breach, whether or not willful or material, by a Financial Institution Party of any covenant, obligation or other term or provision set forth in this Agreement for the benefit of any other party, the non breaching Financial Institution Party shall be entitled to (i) a decree or order of specific performance to enforce the observance and performance of such covenant, obligation or other term or provision or (ii) an injunction restraining such breach or threatened breach.

(e) Any amount that becomes payable pursuant to this Section 7.02 shall be paid by wire transfer of immediately available funds to an account designated by the receiving party.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Expenses. Except as provided in Sections 5.09 and 7.02, each party hereto shall bear and pay all costs and expenses incurred by it prior to the Merger Effective Date in connection with the transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel.

Section 8.02 Non-Survival of Representations, Warranties and Covenants. All representations, warranties and, except to the extent specifically provided otherwise herein, agreements and covenants, other than those covenants set forth in Sections 5.05, 5.09 and 5.10, which will survive the Merger, shall terminate on the Closing Date.

Section 8.03 Amendment, Extension and Waiver. Subject to applicable law, at any time prior to the consummation of the transactions contemplated by this Agreement, the parties may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of either party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained in Articles V and VI hereof or otherwise. This Agreement may not be amended except by an instrument in writing authorized by the respective Boards of Directors and signed, by duly authorized officers, on behalf of the parties hereto. Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed by a duly authorized officer on behalf of such party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

Section 8.04 Entire Agreement. Except as set forth in this Agreement and the confidentiality agreement entered into between HSB and MBL, this Agreement, including the documents and other writings referred to herein or delivered pursuant hereto, contains the entire agreement and understanding of the parties with respect to its subject matter. Except as set forth in this Agreement, this Agreement supersedes all prior arrangements and understandings between the parties, both written or oral with respect to its subject matter. This Agreement shall

36

inure to the benefit of and be binding upon the parties hereto and their respective successors; provided, however, that nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto and their respective successors, any rights, remedies, obligations or liabilities provided however that Section 5.06 may be enforced by former directors and officers of MBL and Section 5.10 may be enforced by Henry D. Harseim to the extent of his direct benefits thereunder.

Section 8.05 No Assignment. Neither party hereto may assign any of its rights or obligations hereunder to any other person, without the prior written consent of the other party hereto.

Section 8.06 Notices. All notices or other communications hereunder shall be in writing and shall be deemed given if delivered personally, mailed by prepaid registered or certified mail (return receipt requested), or sent by telecopy, addressed as follows:

(a) If to HSB to:

Harvard Savings Bank

58 North Ayer Street

Harvard, Illinois 60033

Facsimile: (815) 943-7844

Attention: Duffield J. Seyller, III

with a copy to:

Luse Gorman Pomerenk & Schick, P.C.

5335 Wisconsin Avenue, NW

Suite 400

Washington, DC 20015

Facsimile: (202) 362-2902

Attention: Kip A. Weissman, Esq.

(b) If to MBL to:

Morris Building & Loan, S.B.

211 E. Jefferson Street

Morris, IL 60450

Facsimile: (815) 942-6109

Attention: Henry D. Harseim

with a copy to:

Robert J. Russo

211 E. Jefferson Street

Morris, IL 60450

Facsimile: (815) 942-8563

37

Section 8.07 Captions. The captions contained in this Agreement are for reference purposes only and are not part of this Agreement.

Section 8.08 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

Section 8.09 Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. If however, any provision of this Agreement is held invalid by a court of competent jurisdiction, then the parties hereto shall in good faith amend this Agreement to include an alternative provision that accomplishes a result that is as substantially similar to the result originally intended as possible.

Section 8.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois (without reference to principles of conflicts of law) to the extent not pre-empted by federal law.

Section 8.11 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions thereof in any state or federal court located in Illinois and having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

[SIGNATURE PAGE FOLLOWS]

38

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written.

HARVARD SAVINGS BANK, MHC
By:	/s/ Duffield J. Seyller, III
	Duffield J. Seyller, III
	President, and Chief Executive Officer
HARVARD SAVINGS BANK
By:	/s/ Duffield J. Seyller, III
	Duffield J. Seyller, III
	President, and Chief Executive Officer
MORRIS BUILDING & LOAN, S.B.
By:	/s/ Henry D. Harseim
	Henry D. Harseim
	President and Chief Executive Officer

39

AMENDMENT TO AGREEMENT AND PLAN OF MERGER

Dated December 18, 2007

by and among

HARVARD SAVINGS BANK,

HARVARD SAVINGS, MHC

and

MORRIS BUILDING & LOAN, S.B.

WHEREAS, Harvard Savings Bank (“HSB”), Harvard Savings Bank, MHC (“HS MHC”) and Morris Building & Loan, S.B. (“MBL”) (collectively, the “Parties”) executed an Agreement and Plan of Merger (the “Agreement”) on July 24, 2007 providing for the merger of MBL into HSB (the “Merger”); and

WHEREAS, HSB, HS MHC and MBL would like to change the structure of the Merger to ensure that such transaction qualifies as a tax free reorganization under the IRC; and

WHEREAS, except for the desired change of the tax structure of the Merger, the Parties do not wish to change the relative rights of, and benefits of the Merger to, the Parties; and

WHEREAS, in order to make the desired change to the tax structure of the Merger, the parties wish to amend the Agreement (the “Amendment”) as follows:

General

All references to the Agreement in that document, or in any related document, shall mean Agreement as amended by this Amendment. Except as provided in this Amendment, the execution and delivery of this Amendment does not and will not amend, modify or supplement any provision or constitute a consent or waiver of any non-compliance with the provisions of the Agreement, and except to the extent specifically provided in the Amendment or to the extent the Agreement is inconsistent with the Amendment, the Agreement as originally executed shall remain in full force and effect.

Unless otherwise defined herein, the terms used in this Amendment which are defined in the Agreement shall have the same meaning herein as therein.

ARTICLE IX

Definitions

This Article shall be amended by adding the following:

“Bank Merger” means the merger, following the completion of the Interim Merger, of MBL with and into HSB with HSB as the surviving institution.

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“Bank Merger Effective Date” means the date upon which the Bank Merger certificate of merger is issued and filed in accordance with the regulations of the IDFPR.

“HS MHC” means Harvard Savings MHC, a federally chartered mutual holding company.

“Interim” means the federally chartered interim thrift institution subsidiary of its MHC which will merge into MBL in the Interim Merger

“Interim Merger” means the merger of Interim with and into MBL with the result that MBL becomes the wholly owned subsidiary of HS MHC and MBL’s members become members of HS MHC.

“Interim Merger Effective Time” means the time upon which the Interim Merger certificate of merger is issued and filed in accordance with the regulations of the IDFPR.

“Merger” means the Interim Merger, Bank Merger and any other mergers by interim corporate entities necessary to effectuate the transactions contemplated by this Agreement.

“Merger Effective Date” means the date on which, following the completion of the Interim Merger, the certificate of merger for the Bank Merger is issued and filed in accordance with the regulations of the IDFPR.

ARTICLE X

The Merger and Related Matters

2.01 Interim Merger. Upon the terms and conditions set forth in this Agreement, on the Interim Merger Effective Time, Interim shall merge with and into MBL, with MBL being the surviving institution (the “Interim Merger”). The Interim Merger shall be effected pursuant to the Plan of Interim Merger substantially in the form of Exhibit A hereto. As a result of the Interim Merger; (i) the separate corporate existence of Interim shall cease and MBL shall be the surviving institution and continue its name and separate corporate existence as a savings bank under the laws of the United States, with all its rights, privileges, immunities, powers and franchises unaffected by the Interim Merger, (ii) MBL shall become a wholly owned subsidiary of HS MHC and (iii) each borrower member of MBL and each holder of a deposit account in MBL as of the Interim Merger Effective Time shall have the same membership rights and privileges in HSB and HS MHC as if such borrowing and/or deposit account had been established at HSB, provided however that, persons establishing borrowing relationships after the completion of the Interim Merger shall not be afforded membership rights in HS MHC.

2.02 Bank Merger. Upon the terms and conditions set forth in this Agreement, on the Bank Merger Effective Date, which shall occur immediately following the Interim Merger Effective Time, MBL shall merge with and into HSB with HSB being the surviving institution. The Bank Merger shall be effective pursuant to a Plan of Bank Merger substantially in the form of Exhibit B hereto. As a result of the Bank Merger, the separate corporate existence of MBL and HSB shall cease and HSB shall be the surviving institution and continue its name and

41

separate corporate existence as a savings bank under the laws of the State of Illinois with all of its rights, privileges, immunities, powers and franchises unaffected by the Bank Merger

2.03 Closing. The Closing of the Merger shall take place at the offices of HSB in Harvard, Illinois, or at such other location as shall be mutually agreeable by the parties, on the Closing Date.

2.04 Alternative Structure. Notwithstanding anything in this Agreement to the contrary, HSB or HS MHC may specify (subject to MBL’s approval, which shall not be unreasonably withheld) that they, or any of their direct or indirect subsidiaries, and MBL and any of its direct or indirect subsidiaries shall enter into transactions other than those described in this Agreement, in order to effect the purposes of this Agreement, and the Parties shall take all action necessary or appropriate to effect, or cause to be affected, such transactions; provided, however, that (i) other than a change in structure required by a regulatory agency having jurisdiction over the transactions contemplated by this Agreement, no such specification shall materially and adversely affect the timing of the consummation of the transactions contemplated herein; or (ii) no such specifications shall materially and adversely affect the tax treatment or economic benefits of the Merger to the members of MBL or HS MHC or their Subsidiaries.

EXHIBITS

Exhibit A and Exhibit B attached hereto shall supersede in all respects the Exhibit attached to the Agreement as originally executed.

[SIGNATURE PAGE FOLLOWS]

42

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers as of the day and year first above written.

HARVARD SAVINGS, MHC
By:	/s/ Duffield J. Seyller, III
	Duffield J. Seyller, III
	President, and Chief Executive Officer
HARVARD SAVINGS BANK
By:	/s/ Duffield J. Seyller, III
	Duffield J. Seyller, III
	President, and Chief Executive Officer
MORRIS BUILDING & LOAN, S.B.
By:	/s/ Henry D. Harseim
	Henry D. Harseim
	President and Chief Executive Officer

43

EX-8

Exhibit 8

[Letterhead of Luse Gorman Pomerenk & Schick, P.C.]

(202) 274-2000

November 20, 2009

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

58 North Ayer

Harvard, Illinois 60033

Gentlemen:

You have requested our opinion regarding certain federal income tax consequences of the proposed conversion and reorganization of Harvard Savings, MHC from a mutual holding company structure to a capital stock form of organization, pursuant to the Plan of Conversion and Reorganization (the “Plan”) of Harvard Savings, MHC, an federally-chartered mutual holding company (“Mutual Holding Company”), dated as of July 23, 2009. Unless otherwise defined, all terms used in this letter have the meanings given to them in the Plan.

In providing our opinions expressed below, we have examined the Plan and certain other documents as we deemed necessary in order to provide our opinions. In our examination, we assumed that original documents were authentic, copies were accurate and signatures were genuine. We assumed that all parties will comply with the terms and conditions of the Plan, and that the various representations and warranties which have been provided to us are accurate, complete, true and correct. Accordingly, we express no opinion concerning the effect, if any, of variations from the foregoing. We specifically express no opinion concerning tax matters relating to the Plan under state and local tax laws. In addition, we have assumed that (i) the factual statements and representations made by the Mutual Holding Company, Harvard Illinois Financial Corporation (the “Mid-Tier Holding Company”) and Harvard Savings Bank in their certificate delivered to us for purposes of this opinion are true, complete and correct and will remain true, complete and correct at all times up to and including the consummation of the Conversion and Reorganization, and (ii) the Mid-Tier Merger and the MHC Merger (as defined below) will be completed in accordance with applicable federal and state laws. If any of the above described assumptions are untrue for any reason or if the Conversion and Reorganization is consummated in a manner that is different from the manner described in the Plan, our opinion as expressed below may be adversely affected.

Our opinion is based on current provisions of the Code, Treasury regulations promulgated thereunder, published pronouncements of the Internal Revenue Service (the

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 2

“Service”) and case law, any of which may be changed at any time with retroactive effect. Any change in applicable laws or the facts and circumstances surrounding the Conversion and Reorganization, or any inaccuracy in the statements, facts, assumptions or representations upon which we have relied, may affect the continuing validity of our opinion as set forth herein. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof.

We are furnishing this opinion in connection with the transactions contemplated by the Plan. We emphasize that the outcome of litigation cannot be predicted with certainty and, although we have attempted in good faith to opine as to the probable outcome of the merits of each tax issue with respect to which an opinion was requested, there can be no assurance that our conclusions are correct or that they would be adopted by the Internal Revenue Service or a court.

Description of Proposed Transactions

Based upon our review of the documents described above, and in reliance upon such documents, we understand that the relevant facts are as follows. In 2005, the Bank reorganized into the two-tier mutual holding company form of organization. Following the reorganization, the Mutual Holding Company owned 100% of the outstanding shares of the Mid-Tier Holding Company, and the Mid-Tier Holding Company owned 100% of the outstanding shares of the Bank.

On July 23, 2009, the Boards of Directors of the Mutual Holding Company adopted the Plan providing for the conversion of the Mutual Holding Company from a federally-chartered mutual holding company into the capital stock form of organization. A new stock holding company, the Holding Company, will be established as part of the Conversion and will succeed to all the rights and obligations of the Mutual Holding Company and the Mid-Tier Holding Company and issue Common Stock in the Conversion.

For valid business reasons, the present corporate structure of the Mutual Holding Company, Mid-Tier Holding Company and the Bank will be changed pursuant to two mergers referred to as the “MHC Merger” and the “Mid-Tier Merger.” Pursuant to the Plan, the Conversion will be effected in the following steps, each of which will be completed contemporaneously:

(i) The Bank will establish the Holding Company as a stock corporation.

(ii) The Mid-Tier Holding Company will convert to an interim stock savings bank and merge with and into the Bank with the Bank as the resulting entity (the “Mid-Tier

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 3

Merger”), whereby the Mutual Holding Company will receive shares of Bank common stock in exchange for its Mid-Tier Holding Company common stock.

(iii) Immediately after the Mid-Tier Merger, the Mutual Holding Company will convert to an interim stock savings bank and will merge with and into the Bank with the Bank as the resulting entity (the “MHC Merger”), whereby the shares of Bank common stock held by the Mutual Holding Company will be canceled and each Eligible Account Holder and Supplemental Eligible Account Holder will receive an interest in a Liquidation Account of the Bank in exchange for such person’s interest in the Mutual Holding Company.

(iv) Immediately after the MHC Merger, the Holding Company will offer for sale its Common Stock in the Offering.

(v) Immediately after the MHC Merger and contemporaneously with the closing of the Offering, the Bank will issue [one hundred (100)] shares of its common stock to the Holding Company in exchange for at least fifty percent (50%) of the net proceeds raised in the offering, and as a result the Bank will become a wholly-owned subsidiary of the Holding Company.

At the time of the MHC Merger, a liquidation account will be established by the Bank for the benefit of Eligible Account Holders and Supplemental Account Holders who continue to maintain their deposit accounts with the Bank. Pursuant to Section 19 of the Plan, the liquidation account will be equal to the Mutual Holding Company’s total equity as reflected in the latest statement of financial condition contained in the final Prospectus used in the Offering.

After the Mid-Tier Merger, the MHC Merger and the Offering, the Holding Company will (i) be a publicly held corporation, (ii) register the Holding Company Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iii) become subject to the rules and regulations thereunder and file periodic reports and proxy statements with the SEC. The Bank will become a wholly owned subsidiary of the Holding Company and will continue to carry on its business and activities as conducted immediately prior to the Conversion.

The initial stockholders of the Holding Company will be those persons who purchase shares of Holding Company Common Stock in the Offering. Nontransferable rights to subscribe for the Holding Company Common Stock have been granted, in order of priority, to depositors of the Bank who have account balances of $50.00 or more as of the close of business on June 30, 2008 (“Eligible Account Holders”), the Bank’s tax-qualified employee plans (“Employee Plans”), depositors of the Bank who have account balances of $50.00 or more as of the close of business on December 31, 2009 (“Supplemental Eligible Account Holders”), depositors of the

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 4

Bank as of the Voting Record Date (other than Eligible Account Holders and Supplemental Eligible Account Holders) and to the former borrowers of Morris Building & Loan, s.b. as of April 18, 2008 whose borrowings remained outstanding as of the Voting Record Date (“Other Members”). Subscription rights are nontransferable. The Holding Company will also offer shares of Holding Company Common Stock not subscribed for in the subscription offering, if any, for sale in a community offering to certain members of the general public.

Opinions

Based on the foregoing description of the MHC Merger and the Mid-Tier Merger, and subject to the qualifications and limitations set forth in this letter, we are of the opinion that:

1. The conversion of the Mid-Tier Holding Company to an interim stock savings bank (which we shall continue to refer to as “Mid-Tier Holding Company”) and the conversion of the Mutual Holding Company to an interim stock savings bank (which we shall continue to refer to as “Mutual Holding Company”) will each constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code.

2. The Mid-Tier Merger and the MHC Merger each qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code. (Section 368(a)(1)(A) of the Code).

3. The Mid-Tier Holding Company will not recognize any gain or loss on the transfer of its assets to the Bank and the Bank’s assumption of its liabilities in exchange for shares of common stock in the Bank or on the constructive distribution of such stock to the Mutual Holding Company. (Sections 361(a), 361(c) and 357(a) of the Code).

4. No gain or loss will be recognized by the Bank upon the receipt of the assets of Mid-Tier Holding Company and the Mutual Holding Company in the Mid-Tier Merger and the MHC Merger, respectively. (Section 1032(a) of the Code).

5. The basis of the assets of the Mid-Tier Holding Company and the Mutual Holding Company to be received by Bank (other than stock in the Bank) will be the same as the basis of such assets in the hands of Mid-Tier Holding Company and the Mutual Holding Company, respectively, immediately prior to the transfer. (Section 362(b) of the Code).

6. The holding period of the assets of Mid-Tier Holding Company and the Mutual Holding Company to be received by Bank (other than stock in the Bank) will include the holding

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 5

period of those assets in the hands of Mid-Tier Holding Company and the Mutual Holding Company, respectively, immediately prior to the transfer. (Section 1223(2) of the Code).

7. The Mutual Holding Company will not recognize any gain or loss upon its constructive exchange of Mid-Tier Holding Company common stock for Bank common stock. (Section 354(a)).

8. The exchange of the members’ equity interests in the Mutual Holding Company for interests in a Liquidation Account established in the Bank in the MHC Merger will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Income Tax Regulations (cf. Rev. Rul. 69-3, 1969-1 C.B. 103, and Rev. Rul. 69-646, 1969-2 C.B. 54).

9. The Mutual Holding Company will not recognize any gain or loss on the transfer of its assets to the Bank and the Bank’s assumption of its liabilities, if any, in exchange for an interest in a Liquidation Account in the Bank or on the constructive distribution of such Liquidation Account to the Mutual Holding Company’s members who remain depositors of the Bank. (Section 361(a), 361(c) and 357(a) of the Code).

10. No gain or loss will be recognized by the Bank upon the receipt of the assets of the Mutual Holding Company in the MHC Merger in exchange for the transfer to the members of the Mutual Holding Company of an interest in the Liquidation Account in the Bank. (Section 1032(a) of the Code.)

11. Persons who have an interest in the Mutual Holding Company will recognize no gain or loss upon the receipt of an interest in the Liquidation Account in the Bank in exchange for their voting and liquidation rights in the Mutual Holding Company. (Section 354(a) of the Code).

12. It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Holding Company Common Stock is zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members upon distribution to them of nontransferable subscription rights to purchase shares of Holding Company Common Stock. (Section 356(a) of the Code). Eligible Account Holders, Supplemental Eligible Account Holders and Other Members will not realize any taxable income as the result of the exercise by them of the nontransferable subscriptions rights. (Rev. Rul. 56-572, 1956-2 C.B.182).

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 6

13. The basis of the Holding Company Common Stock purchased in the Offering by the exercise of the nontransferable subscription rights will be the purchase price thereof. (Section 1012 of the Code).

14. The holding period of the Holding Company Common Stock purchased pursuant to the exercise of subscriptions rights shall commence on the date on which the right to acquire such stock was exercised. (Section 1223(6) of the Code).

15. No gain or loss will be recognized by Holding Company on the receipt of money in exchange for Holding Company Common Stock sold in the Offering. (Section 1032(a) of the Code).

16. Neither the Holding Company nor the Bank will recognize any gain or loss upon the transfer of a portion of the offering proceeds from the Holding Company to the Bank in exchange for shares of common stock of the Bank (Section 1032(a) of the Code).

We base our opinion under paragraph 12 above, in part, on the fact that no person shall receive any payment, whether in money or property, in lieu of the issuance of subscription rights. With respect to our opinions under paragraphs 12 and 13, we note that the subscription rights will be granted at no cost to the recipients, will be legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of Common Stock at the same price to be paid by members of the general public in any Community Offering. We also note that RP Financial, LC. has issued a letter dated September 10, 2009 stating that the subscription rights will have no ascertainable market value. We also note that the Internal Revenue Service has not in the past concluded that subscription rights have value.

If the subscription rights are subsequently found to have a fair market value, income may be recognized by various recipients of the subscription rights (in certain cases, whether or not the rights are exercised) and the Holding Company may be taxable on the distribution of the subscription rights.

Boards of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Illinois Bancorp, Inc.

Harvard Savings Bank

November 20, 2009

Page 7

Consent

We hereby consent to the filing of the opinion as an exhibit to the MHC’s Application for Conversion filed on Form AC with the Office of Thrift Supervision and to the Holding Company’s Registration Statement on Form S-1 as filed with the SEC. We also consent to the references to our firm in the Prospectus contained in the Application for Conversion and Form S-1 under the captions “The Conversion- Material Income Tax Consequences” and “Legal Matters.”

Very truly yours,

/s/ Luse Gorman Pomerenk & Schick, P.C.

LUSE GORMAN POMERENK & SCHICK,

A PROFESSIONAL CORPORATION

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Harvard Savings, MHC

Harvard, Illinois

We hereby consent to the use in this Registration Statement on Form S-1 and the Application for Conversion of our report dated May 26, 2009, relating to the financial statements of Harvard Savings, MHC, and to the reference to our Firm under the caption “Experts” in the Prospectus.

/sig/ BKD, LLP

Decatur, Illinois

December 23, 2009

EX-99.3

Exhibit 99.3

PRO FORMA VALUATION REPORT

HARVARD ILLINOIS BANCORP, INC.

Harvard, Illinois

PROPOSED HOLDING COMPANY FOR:

HARVARD SAVINGS BANK

Harvard, Illinois

Dated As Of:

November 27, 2009

Prepared By:

RP^® Financial, LC.

1700 North Moore Street

Suite 2210

Arlington, Virginia 22209

RP® Financial, LC.	TABLE OF CONTENTS
	i

TABLE OF CONTENTS

HARVARD ILLINOIS BANCORP, INC.

HARVARD SAVINGS BANK

Harvard, Illinois

DESCRIPTION	PAGE NUMBER
CHAPTER  ONE        OVERVIEW AND FINANCIAL ANALYSIS
Introduction	I.1
Plan of Conversion and Reorganization	I.1
Strategic Overview	I.2
Balance Sheet Trends	I.5
Income and Expense Trends	I.10
Interest Rate Risk Management	I.14
Lending Activities and Strategy	I.15
Asset Quality	I.19
Funding Composition and Strategy	I.20
Subsidiaries and Affiliations	I.21
Legal Proceedings	I.21
CHAPTER  TWO        MARKET AREA
Introduction	II.1
National Economic Factors	II.1
Market Area Demographics	II.7
Local Economy	II.9
Unemployment Trends	II.11
Market Area Deposit Characteristics and Trends	II.11
Competition	II.12
CHAPTER  THREE        PEER GROUP ANALYSIS
Peer Group Selection	III.1
Financial Condition	III.5
Income and Expense Components	III.9
Loan Composition	III.12
Interest Rate Risk	III.14
Credit Risk	III.16
Summary	III.16

RP® Financial, LC.	TABLE OF CONTENTS
	ii

TABLE OF CONTENTS

HARVARD ILLINOIS BANCORP, INC.

HARVARS SAVINGS BANK

Harvard, Illinois

(continued)

DESCRIPTION	PAGE NUMBER
CHAPTER  FOUR        VALUATIONANALYSIS
Introduction	IV.1
Appraisal Guidelines	IV.1
RP Financial Approach to the Valuation	IV.1
Valuation Analysis	IV.2
1.    Financial Condition	IV.3
2.    Profitability, Growth and Viability of Earnings	IV.4
3.    Asset Growth	IV.7
4.    Primary Market Area	IV.7
5.    Dividends	IV.8
6.    Liquidity of the Shares	IV.9
7.    Marketing of the Issue	IV.10
A.    The Public Market	IV.10
B.    The New Issue Market	IV.16
C.    The Acquisition Market	IV.18
8.    Management	IV.19
9.    Effect of Government Regulation and Regulatory Reform	IV.19
Summary of Adjustments	IV.19
Valuation Approaches:	IV.20
1.    Price-to-Earnings (“P/E”)	IV.21
2.    Price-to-Book (“P/B”)	IV.22
3.    Price-to-Assets (“P/A”)	IV.24
Comparison to Recent Offerings	IV.24
Valuation Conclusion	IV.25

RP® Financial, LC.	LIST OF TABLES
	iii

LIST OF TABLES

HAVARD IILINOIS BANCORP, INC.

HARVARD SAVINGS BANK

Harvard, Illinois

TABLE NUMBER	DESCRIPTION	PAGE
1.1	Historical Balance Sheet Data	I.6
1.2	Historical Income Statements	I.11
2.1	Summary Demographic Data	II.8
2.2	Primary Market Area Employment Sectors	II.10
2.3	Unemployment Trends	II.11
2.4	Deposit Summary	II.12
2.5	Market Area Deposit Competitors	II.13
3.1	Peer Group of Publicly-Traded Thrifts	III.3
3.2	Balance Sheet Composition and Growth Rates	III.6
3.3	Income as a Pct. of Avg. Assets and Yields, Costs, Spreads	III.10
3.4	Loan Portfolio Composition and Related Information	III.13
3.5	Interest Rate Risk Measures and Net Interest Income Volatility	III.15
3.6	Credit Risk Measures and Related Information	III.17
4.1	Market Area Unemployment Rates	IV.8
4.2	Pricing Characteristics and After-Market Trends	IV.17
4.3	Public Market Pricing	IV.23

RP^® FINANCIAL, LC.

Financial Services Industry Consultants

November 27, 2009

Board of Directors

Harvard Savings, MHC

Harvard Illinois Financial Corporation

Harvard Savings Bank

58 North Ayer Street

Harvard, Illinois 60033

Members of the Boards of Directors:

At your request, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of the common stock which is to be issued in connection with the mutual-to-stock conversion transaction described below.

This Appraisal is furnished pursuant to the conversion regulations promulgated by the Office of Thrift Supervision (“OTS”). Specifically, this Appraisal has been prepared in accordance with the “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization” as set forth by the OTS, and applicable regulatory interpretations thereof. Such Valuation Guidelines are relied upon by the Federal Deposit Insurance Corporation (“FDIC”) and the Illinois Department of Financial and Professional Regulation (the “IDFPR”) in the absence of separate written valuation guidelines.

Description of Plan of Conversion and Reorganization

On July 23, 2009, the Board of Directors of Harvard Savings, MHC, Harvard, Illinois (the “MHC”), a mutual holding company that owns all of the outstanding shares of common stock of Harvard Illinois Financial Corporation (“Harvard Illinois Financial”), adopted the plan of conversion and reorganization, whereby the MHC will convert to stock form. As a result of the conversion, Harvard Illinois, which currently owns all of the issued and outstanding common stock of Harvard Savings will be succeed by a Maryland corporation with the name of Harvard Illinois Bancorp, Inc. (“Harvard Illinois” or the “Company”) Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will hereinafter be referred to as Harvard Illinois or the Company.

Harvard Illinois will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans including Harvard Savings’ employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Members, as such terms are defined for purposes of applicable

Washington Headquarters
Rosslyn Center	Telephone: (703) 528-1700
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Boards of Directors

November 27, 2009

Page 2

federal regulatory guidelines governing mutual-to-stock conversions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a direct community offering and/or a syndicated community offering. A portion of the net proceeds received from the sale of the common stock will be used to purchase all of the then to be issued and outstanding capital stock of Harvard Savings and the balance of the net proceeds will be retained by the Company.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, a loan to the newly-formed ESOP and reinvestment of the proceeds that are retained by the Company. In the future, Harvard Illinois may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

RP^® Financial, LC.

RP^® Financial, LC. (“RP Financial”) is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. For its appraisal services, RP Financial is being compensated on a fixed fee basis for the original appraisal and for any subsequent updates, and such fees are payable regardless of the valuation conclusion or the completion of the conversion offering transaction. We believe that we are independent of the Company, Harvard Savings, the MHC and the other parties engaged by Harvard Savings or the Company to assist in the stock conversion process.

Valuation Methodology

In preparing our Appraisal, we have reviewed the regulatory applications of Harvard Illinois, Harvard Savings and the MHC, including the prospectus as filed with the OTS, FDIC, IDFPR and the Securities and Exchange Commission (“SEC”). We have conducted a financial analysis of the Company that has included due diligence related discussions with Harvard Illinois’ management; BKD, LLP, Harvard Illinois’ independent auditor; Luse Gorman Pomerenk & Schick, P.C., Harvard Illinois’ conversion counsel; and Keefe, Bruyette & Woods, Inc., which has been retained as the financial and marketing advisor in connection with the Company’s stock offering. All conclusions set forth in the Appraisal were reached independently from such discussions. In addition, where appropriate, we have considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information.

Boards of Directors

November 27, 2009

Page 3

We have investigated the competitive environment within which Harvard Illinois operates and have assessed the Company’s relative strengths and weaknesses. We have monitored all material regulatory and legislative actions affecting financial institutions generally and analyzed the potential impact of such developments on Harvard Illinois and the industry as a whole to the extent we were aware of such matters. We have analyzed the potential effects of the stock conversion on the Company’s operating characteristics and financial performance as they relate to the pro forma market value of Harvard Illinois. We have reviewed the economy and demographic characteristics of the primary market area in which the Company currently operates. We have compared Harvard Illinois’ financial performance and condition with publicly-traded thrift institutions evaluated and selected in accordance with the Valuation Guidelines, as well as all publicly-traded thrifts and thrift holding companies. We have reviewed conditions in the securities markets in general and the market for thrifts and thrift holding companies, including the market for new issues.

The Appraisal is based on Harvard Illinois’ representation that the information contained in the regulatory applications and additional information furnished to us by the Company and its independent auditors, legal counsel, investment bankers and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by the Company, or its independent auditors, legal counsel, investment bankers and other authorized agents nor did we independently value the assets or liabilities of Harvard Illinois. The valuation considers Harvard Illinois only as a going concern and should not be considered as an indication of the Company’s liquidation value.

Our appraised value is predicated on a continuation of the current operating environment for the Company and for all thrifts and their holding companies. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the value of thrift stocks as a whole or the Company’s value alone. It is our understanding that Harvard Illinois intends to remain an independent institution and there are no current plans for selling control of the Company as a converted institution. To the extent that such factors can be foreseen, they have been factored into our analysis.

The estimated pro forma market value is defined as the price at which the Company’s stock, immediately upon completion of the offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Boards of Directors

November 27, 2009

Page 4

Valuation Conclusion

It is our opinion that, as of November 27, 2009, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, equaled $9,000,000 at the midpoint, equal to 900,000 shares offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $7,650,000 and a maximum value of $10,350,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 765,000 at the minimum and 1,035,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a supermaximum value of $11,902,500 without a resolicitation. Based on the $10.00 per share offering price, the supermaximum value would result in total shares outstanding of 1,190,250.

Limiting Factors and Considerations

The valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is determined in accordance with applicable OTS regulatory guidelines and is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the conversion will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. The appraisal reflects only a valuation range as of this date for the pro forma market value of Harvard Illinois immediately upon issuance of the stock and does not take into account any trading activity with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the public stock offering.

The valuation prepared by RP Financial in accordance with applicable OTS regulatory guidelines was based on the financial condition and operations of Harvard Illinois as of September 30, 2009, the date of the financial data included in the prospectus.

RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its financial institution clients.

The valuation will be updated as provided for in the OTS conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the financial performance and condition of Harvard Illinois, management

Boards of Directors

November 27, 2009

Page 5

policies, and current conditions in the equity markets for thrift stocks, both existing issues and new issues. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the federal and state legislative and regulatory environments for financial institutions, the stock market inclusive of the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in the update at the date of the release of the update.

Respectfully submitted,

RP^® FINANCIAL, LC.

Ronald S. Riggins

President and Managing Director

Gregory E. Dunn

Director

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.1

I. OVERVIEW AND FINANCIAL ANALYSIS

Introduction

Harvard Savings Bank (“Harvard Savings” or the “Bank”), chartered in 1934, is an Illinois stock savings bank headquartered in Harvard, Illinois. In 2005, the Bank converted to a stock savings bank with a mid-tier stock holding company, Harvard Illinois Financial Corporation (“Harvard Illinois Financial”), wholly-owned by a mutual holding company, Harvard Savings, MHC (the “MHC”). Harvard Savings maintains the main office and one branch in Harvard and one other branch office in Morris, Illinois. A map of Harvard Savings’ office locations is provided in Exhibit I-1. Harvard Savings is a member of the Federal Home Loan Bank (“FHLB”) system and its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (“FDIC”). As of September 30, 2009, the MHC had consolidated total assets of $157.2 million, total deposits of $122.6 million and total equity of $12.2 million equal to 7.75% of total assets. The MHC’s audited financial statements are included by reference as Exhibit I-2.

Plan of Conversion and Reorganization

On July 23, 2009, the Board of Directors of Harvard Savings, MHC, a mutual holding company that owns all of the outstanding shares of common stock of Harvard Illinois Financial, adopted the plan of conversion and reorganization, whereby the MHC will convert to stock form. As a result of the conversion, Harvard Illinois Financial, which currently owns all of the issued and outstanding common stock of Harvard Savings will be succeed by a Maryland corporation with the name of Harvard Bancorp, Inc. (“Harvard Illinois” or the “Company”). Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will hereinafter be referred to as Harvard Illinois or the Company.

Harvard Illinois will offer 100% of its common stock to qualifying depositors of Harvard Savings in a subscription offering and, if necessary, to members of the general public through a community offering and/or a syndicated community offering. Going

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.2

forward, Harvard Illinois will own 100% of Harvard Savings’ stock, and Harvard Savings will initially be Harvard Illinois’ sole subsidiary. A portion of the net proceeds received from the sale of common stock will be used to purchase all of the then to be issued and outstanding capital stock of the Bank and the balance of the net proceeds will be retained by the Company.

At this time, the only activities that are contemplated for the Company include the ownership of the Bank, extending a loan to the newly-formed employee stock ownership plan (the “ESOP”), and redeployment of the proceeds that are retained by the Company. In the future, Harvard Illinois may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

Strategic Overview

Harvard Illinois maintains a local community banking emphasis, with a primary strategic objective of meeting the borrowing and savings needs of its local customer base. On April 18, 2008, the MHC completed a merger with Morris Building & Loan, s.b. (“Morris Building”) which was a mutual association based in Morris, Illinois. Morris is approximately 80 miles south of Harvard. The merger was accounted for as a pooling of interests, which added approximately $33 million to the Company’s assets. Morris Building’s sole office facility is now operated as one of the Bank’s branches, but has retained the Morris Building name. Except for the merger with Morris Building, the Company has had limited asset growth in recent years to preserve capital ratios and has repositioned the balance sheet through increasing liquidity funded in part by loan shrinkage.

Historically, Harvard Illinois’ operating strategy has been fairly reflective of a traditional thrift operating strategy in which 1-4 family residential mortgage loans and retail deposits have constituted the principal components of the Company’s assets and liabilities, respectively. Over the years, the Company has pursued a strategy of placing more of an emphasis on diversifying into other types of loans that generally earn higher

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.3

yields and are more rate sensitive than 1-4 family permanent mortgage loans. Beyond 1-4 family permanent mortgage loans, commercial real estate/multi-family loans and indirect automobile loans constitute the most significant areas of lending diversification for the Company. The Company’s current strategic plan is to pursue further lending diversification, in which commercial real estate and commercial business loans will be emphasized as the primary sources of loan growth. In the current credit environment, construction and land loans and indirect automobile loans, which are purchased loans, are currently being de-emphasized as areas of lending diversification for the Company. Pursuant to targeting growth of commercial real estate and commercial business loans, the Company is also placing an emphasis on growing commercial deposit accounts through establishing full service banking relationships with its commercial borrowers.

Investments serve as a supplement to the Company’s lending activities and in recent periods the Company has incurred losses on its investment portfolio. Losses on the investment portfolio have been mostly related to other than temporary impairment (“OTTI”) losses recorded on investments in Fannie Mae and Freddie Mac stock and mutual funds. For the year ended December 31, 2008 and for the twelve months ended September 30, 2009, the Company recorded OTTI losses of $1.2 million and $219,000, respectively. Accordingly, as the result of the OTTI losses, the Company’s investment in mutual funds and equity securities currently constitute a minor portion of the investment portfolio. Mortgage-backed securities comprise the largest concentration of the investment portfolio, with other investments consisting of U.S. Government and agency securities, municipal bonds and FHLB stock. Harvard Illinois’ investments also include interest-earning deposits maintained at other financial institutions.

The Company has experienced some credit quality deterioration in recent periods, related to both its investment and loan portfolios. Exposure to future credit related losses on the investment portfolio has been diminished by the OTTI losses that have already been recorded on the equity securities portfolio and the small balance of equity securities that are currently held by the Company. As of September 30, 2009, the Company’s investment in equity securities totaled $524,000. Credit quality deterioration in the loan portfolio has been mostly related to an increase in non-

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.4

performing loans secured by 1-4 family properties, reflecting the impact of the recession on the Company’s lending markets.

Retail deposits have consistently served as the primary interest-bearing funding source for the Company. Certificates of deposit (“CDs”) constitute the largest portion of the Company’s deposit composition, with CDs comprising approximately 58% of total deposits at September 30, 2009. The Company has targeted growth of lower costing transaction account deposits as an area of strategic emphasis, pursuant to which the Company will be seeking to establish full service banking relationships with its retail and commercial loan customers. The Company utilizes borrowings as a supplemental funding source to facilitate management of funding costs and interest rate risk, with FHLB advances generally serving as the source of borrowings utilized by the Company.

Harvard Illinois’ earnings base is largely dependent upon net interest income and operating expense levels. Overall, Harvard Illinois’ operating strategy has provided for relatively low levels of net interest income, due to narrow interest rate spreads. The Company’s narrow interest rate spreads reflect a funding composition that is concentrated in CDs and borrowings, as opposed to lower costing core deposits. Limited asset growth and off-balance sheet loan servicing has tended to put upward pressure on the Company’s operating expense ratio. Revenues derived from non-interest income sources have been a fairly stable, but somewhat limited contributor to the Company’s core earnings base.

The Company’s Board of Directors has elected to complete a mutual-to-stock conversion to improve the competitive position of Harvard Illinois. The capital realized from the stock offering will increase the operating flexibility and overall financial strength of Harvard Illinois. Notably, the Company’s strengthened capital position will support growth strategies, which should facilitate leveraging of operating expenses. The additional capital realized from stock proceeds will increase liquidity to support funding of future loan growth and other interest-earning assets. Harvard Illinois’ higher capital position resulting from the infusion of stock proceeds will also serve to reduce interest rate risk, particularly through enhancing the Company’s interest-earning-assets-to-interest-bearing-liabilities ("IEA/IBL") ratio. The additional funds realized from the stock

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.5

offering will provide an alternative funding source to deposits and borrowings in meeting the Company’s future funding needs, which may facilitate a reduction in Harvard Illinois’ funding costs. Additionally, Harvard Illinois’ higher equity-to-assets ratio will also better position the Company to take advantage of expansion opportunities as they arise. Such expansion would most likely occur through the establishment or acquisition of additional banking offices or customer facilities that would provide for further penetration in the markets currently served by the Company or nearby surrounding markets. The Company will also be better positioned to pursue growth through acquisition of other financial service providers following the stock offering, given its strengthened capital position and its ability to offer stock as consideration. At this time, the Company has no specific plans for expansion. The projected uses of proceeds are highlighted below.

• Harvard Illinois Bancorp, Inc. The Company is expected to retain up to 50% of the net offering proceeds. At present, funds at the Company level, net of the loan to the ESOP, are expected to be primarily invested initially into short-term investment grade securities. Over time, the funds may be utilized for various corporate purposes, possibly including acquisitions, infusing additional equity into the Bank, repurchases of common stock, and the payment of regular and/or special cash dividends.

• Harvard Savings Bank. At least 50% of the net stock proceeds will be infused into the Bank in exchange for all of the Bank's stock, such that Harvard Savings will maintain a minimum Tier 1 capital ratio of 10.0%. Cash proceeds (i.e., net proceeds less deposits withdrawn to fund stock purchases) infused into the Bank are anticipated to become part of general operating funds, and are expected to be primarily utilized to fund loan growth.

Overall, it is the Company’s objective to pursue growth that will serve to increase returns, while, at the same time, growth will not be pursued that could potentially compromise the overall risk associated with Harvard Illinois’ operations.

Balance Sheet Trends

Table 1.1 shows the Company’s balance sheet data for the past five and three-quarter years. From year end 2004 through September 30, 2009, Harvard Illinois’ assets decreased at a 0.1% annual rate. The relatively stable asset balance reflected growth in loans and cash and cash equivalents, which was offset by a decrease in

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.7

investment securities. Funding composition trends over the five and three-quarter year period shown in Table 1 reflected deposit growth which funded a reduction in borrowings. A summary of Harvard Illinois’ key operating ratios for the past five and three-quarter years is presented in Exhibit I-3.

Harvard Illinois’ loans receivable portfolio increased at a 1.8% annual rate from year end 2004 through September 30, 2009, with the loan portfolio trending higher from year end 2004 through year end 2008 followed by a decline in the first nine months of 2009. Overall, the Company’s ratio of loans-to-assets increased from 64.2% at year end 2004 to 70.1% at September 30, 2009. While 1-4 family permanent mortgage loans represent the largest concentration in the Company’s loan portfolio, Harvard Illinois’ loan portfolio composition is reflective of a diversified lending strategy. Trends in the Company’s loan portfolio composition over the past two and three-quarter years showed a decreasing concentration of consumer loans, as the Company is currently not active in purchasing indirect automobile loans, and slightly higher concentrations of 1-4 family permanent mortgage loans, home equity and second mortgage loans, commercial real estate/multi-family loans, construction and land development loans and commercial business loans. Consumer loans decreased from 20.2% of total loans at year end 2007 to 11.8% of total loans at September 30, 2009. The decrease in concentration of consumer loans in the Company’s loan portfolio was attributable to a reduction in the balance of indirect automobile loans in the consumer loan portfolio, as indirect automobile loans decreased from $23.2 million or 19.3% of total loans at year end 2007 to $12.6 million or 11.3% of total loans at September 30, 2009. From year end 2007 through September 30, 2009, in addition to consumer loans, the 1-4 family loan portfolio also declined slightly with other lending areas for the Company increasing slightly during the past two and three-quarter years. As of September 30, 2009, the Company’s loan portfolio composition consisted of $55.9 million or 49.9% of 1-4 family loans, $11.7 million or 10.4% of home equity and second mortgage loans, $19.8 million or 17.7% of commercial real estate/multi-family loans, $5.6 million or 5.0% of construction and land loans, $5.9 million or 5.2% of commercial business loans and $13.2 million or 11.8% of consumer loans.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.8

The intent of the Company’s investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting Harvard Illinois’ overall credit and interest rate risk objectives. It is anticipated that proceeds retained at the holding company level will primarily be invested into investments with short-term maturities. Over the past five and three-quarter years, the Company’s level of cash and investment securities (inclusive of FHLB stock) ranged from a low of 17.4% of assets at year end 2008 to a high of 29.1% of assets at year end 2004. Cash and investments equaled 23.3% of total assets at September 30, 2009. General trends in the Company’s composition of cash and investments reflect an increase in cash and cash equivalents and a decrease in investment securities. Mortgage-backed securities comprise the most significant component of the Company’s investments, with the portfolio consisting primarily of privately issued collateralized mortgage obligations and, to a lesser extent, mortgage-pass-through certificates that are guaranteed or insured by Government Sponsored Enterprises (“GSEs”). As of September 30, 2009, the mortgage-backed securities portfolio totaled $5.0 million or 3.2% of assets. Beyond the mortgage-backed securities portfolio, investment securities held by the Company at September 30, 2009 consisted of U.S. Government and agency securities ($1.6 million), equity securities ($524,000) and municipal bonds ($683,000). As of September 30, 2009, the Company maintained $3.6 million of investments as available for sale and $4.2 million of investments as held to maturity. The Company maintained a net unrealized gain on the available for sale securities of $128,000, as of September 30, 2009. Exhibit I-4 provides historical detail of the Company’s investment securities portfolios. Other investments held by Company at September 30, 2009 consisted of $6.5 million of FHLB stock. The Company also held cash and cash equivalents amounting to $22.2 million or 14.1% of assets at September 30, 2009, which included $7.2 million of CDs that were opened at other financial institutions during the nine month period ended September 30, 2009.

The Company also maintains an investment in bank-owned life insurance (“BOLI”) policies, which cover the lives of the Company’s directors and certain members of the Company’s senior management. The Company’s investment in BOLI also covers the lives of the former directors of Morris Building as well as Morris Building’s middle

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.9

and senior management. The life insurance policies earn tax-exempt income through cash value accumulation and death proceeds. As of September 30, 2009, the cash surrender value of the Company’s BOLI equaled $4.0 million.

Over the past five and three-quarter years, Harvard Illinois’ funding needs have been largely addressed through retail deposits and internal cash flows, with supplemental funding provided by borrowings and retained earnings. From year end 2004 through September 30, 2009, the Company’s deposits increased at an annual rate of 1.8%. Following a decrease in deposits during 2005, positive deposit growth was sustained from year end 2005 through September 30, 2009. The most significant deposit growth occurred during the nine month period ended September 30, 2009, which was primarily realized through growth of money market deposits. Deposits as a percent of assets ranged from a low of 69.5% at year end 2005 to a high of 78.0% at September 30, 2009. CDs have consistently accounted for the majority of the Company’s deposit composition and equaled 57.9% of total deposits at September 30, 2009. However, since year end 2007 the concentration of CDs comprising total deposits has trended lower, as the result growth of core deposits and a slight decrease in CDs.

Borrowings serve as an alternative funding source for the Company to address funding needs for growth and to support management of deposit costs and interest rate risk. From year end 2004 to September 30, 2009, borrowings decreased at an annual rate of 7.8%. Deposit growth funded the reduction in borrowings. Borrowings declined from a peak balance of $30.3 million or 19.6% of assets at year end 2005 to a low of $19.8 million or 12.6% of assets at September 30, 2009. Borrowings held by the Company at September 30, 2009 consisted entirely of FHLB advances.

The Company’s equity declined at a 2.9% annual rate from year end 2004 through September 30, 2009, as the Company recorded net losses in 2007, 2008 and for the nine months ended September 30, 2009. Nominal asset shrinkage combined with the reduction in equity resulted in a decrease in the Company’s equity-to-assets ratio from 8.9% at year end 2004 to 7.8% at September 30, 2009. All of the Company’s capital is tangible capital, and the Bank maintained capital surpluses relative to all of its

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.10

regulatory capital requirements at September 30, 2009. The addition of stock proceeds will serve to strengthen the Company’s capital position, as well as support growth opportunities. At the same time, Harvard Illinois’ ROE will initially be depressed following its stock conversion as the result of the significant increase that will be realized in the Company’s pro forma capital position.

Income and Expense Trends

Table 1.2 shows the Company’s historical income statements for the past five and three-quarter years. The Company’s reported earnings over the past five and three-quarter years, ranged from a net loss of $3.1 million or 1.92% of average assets in 2004 to net income of $851,000 or 0.54% of average assets in 2005. For the twelve months ended September 30, 2009, the Company reported a net loss of $864,000 or 0.54% of average assets. The net loss recorded in 2004 was attributable to significant loan loss provisions that were established during that period, as the result of fraud losses incurred on commercial loan participations. The net loss for the most recent twelve month period was mostly related to an increase in the amount of loan loss provisions established. OTTI losses on equity securities and losses on foreclosed assets also contributed to the net loss recorded during the most recent twelve month period. Net interest income and operating expenses represent the primary components of the Company’s earnings. Non-interest operating income has been somewhat of a limited but stable source of earnings for the Company. Loan loss provisions and gains and losses from the sale of loans, investments and foreclosed assets have had a varied impact on the Company’s earnings over the past five and three-quarter years.

Over the past five and three-quarter years, the Company’s net interest income to average assets ratio ranged from a low of 2.24% during 2008 to a high of 2.66% during 2005. For the twelve months ended September 30, 2009, the Company’s net interest income to average asset ratio equaled 2.44%. For the 2004 through 2006 period, the Company maintained a relatively stable net interest income to average assets ratio, which was followed by notably lower net interest income ratios in 2007 and 2008. The decrease in the Company’s net interest income ratios for 2007 and 2008 reflects the

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	I.12

unfavorable impact that the flat yield curve had on the Company’s interest rate spreads. For 2007 and 2008, the Company maintained interest rate spreads of 2.14% and 2.22%, respectively. Comparatively, the increase in the Company’s net interest income ratio during the most recent twelve month period reflects the favorable impact of declining short-term interest rates and resulting steeper yield curve on the Company’s interest rate spread. The Company’s interest rate spread increased from 2.19% during the nine months ended September 30, 2008 to 2.51% during the nine months ended September 30, 2009. The Company’s net interest rate spreads and yields and costs for the past two and three-quarter years are set forth in Exhibits I-3 and I-5.

Non-interest operating income has been a fairly stable contributor to the Company’s earnings over the past five and three-quarter years, ranging from a low of 0.31% of average assets during 2004 to a high of 0.46% of average assets during 2005. For the twelve months ended September 30, 2009, non-interest operating income equaled 0.40% of average assets. Customer service fees, loan servicing fees, brokerage commission income and BOLI income constitute the largest sources of non-interest operating income for the Company.

Operating expenses represent the other major component of the Company’s earnings, ranging from a low of 2.47% of average assets during 2006 to a high of 2.71% of average assets during 2008. For the twelve months ended September 30, 2009, operating expenses equaled 2.62% of average assets. Limited asset growth and higher operating expenses put upward pressure on the Company’s operating expense ratios in 2007 and 2008, while lower operating expenses supported a reduction in the operating expense ratio during the most recent twelve month period. Lower operating expenses during the most recent twelve month period reflect some synergies that have been realized from the merger with Morris Building. Upward pressure will be placed on the Company’s operating expense ratio following the stock offering, due to expenses associated with operating as a publicly-traded company, including expenses related to the stock benefit plans. At the same time, the increase in capital realized from the stock offering will increase the Company’s capacity to leverage operating expenses through pursuing a more aggressive growth strategy.

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	I.13

Overall, the general trends in the Company’s net interest margin and operating expense ratio since 2004 reflect a slight decrease in core earnings, as indicated by the Company’s expense coverage ratio (net interest income divided by operating expenses). Harvard Illinois’ expense coverage ratio equaled 1.01 times during 2004, versus a ratio of 0.93 times during the twelve months ended September 30, 2009. The decrease in the expense coverage ratio primarily resulted from a decrease in the net interest income ratio and, to a lesser extent, an increase in the operating expense ratio. Similarly, Harvard Illinois’ efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of net interest income and other operating income) of 88.2% during 2004 was more favorable than the 92.3% efficiency ratio recorded for the twelve months ended September 30, 2009.

Over the past five and three-quarter years, loan loss provisions established by the Company ranged from a low of 0.11% of average assets during 2007 to a high of 4.17% of average assets during 2004. For the twelve months ended September 30, 2009, loan loss provisions equaled 0.90% of average assets. As noted previously, the significant loan loss provisions established during 2004 were substantially related to fraud losses incurred on commercial loan participations purchased from and serviced by one unregulated loan company that committed the fraud and subsequently filed for bankruptcy. An increase in non-performing loans and the impact of the recession on local economy were factors that contributed to the higher loan loss provisions established during 2008 and for the most recent twelve month period. As of September 30, 2009, the Company maintained valuation allowances of $1.3 million, equal to 1.16% of net loans receivable and 48.11% of non-accruing loans and accruing loans past due 90 days or more. Exhibit I-6 sets forth the Company’s loan loss allowance activity during the past two and three-quarter years.

Non-operating income over the past five and three-quarter years includes gains on sale of loans, gains and losses on sale of investment securities, OTTI losses on equity securities, losses on foreclosed assets and merger expenses resulting from the merger with Morris Building. Overall, the net earnings impact of non-operating income ranged from a loss of $1.5 million or 0.95% of average assets in 2008 to income of $1.5

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	I.14

million or 0.95% of average assets in 2004. For the twelve months ended September 30, 2009, the Company recorded a net non-operating loss of $220,000 or 0.14% of average assets. A $1.4 million gain on securities accounted for most of the Company’s non-operating income in 2004, while OTTI losses on equity securities accounted for most of the Company’s non-operating loss in 2008. The non-operating loss recorded during the most recent twelve month period consisted of a $7,000 loss on sale of investment securities, a $219,000 loss on OTTI of equity securities, a $230,000 loss on foreclosed assets, net of loan sale gains of $236,000. Loan sale gains reflect the sale of fixed rate loan originations for purposes of interest rate risk management and, therefore, represent an ongoing activity for the Company. Comparatively, the other components of the Company’s non-operating income are viewed as non-recurring income items. However, gains realized through secondary market activities are subject to a certain degree of volatility as well, given the dependence of such gains on the interest rate environment and the strength of the regional housing market.

The Company’s effective tax rate ranged from a low of 0.60% during 2007 to a high of 47.21% during 2008. As set forth in the prospectus, the Company’s marginal effective statutory tax rate is 39.0%.

Interest Rate Risk Management

The Company’s balance sheet is liability-sensitive in the short-term (less than one year) and, thus, the net interest margin will typically be adversely affected during periods of rising and higher interest rates, as well as in the interest rate environment that generally prevailed during 2006 and 2007, in which the yield curve was flat or inverted. Comparatively, the Company’s net interest margin has benefited from recent interest rate trends, which has provided for a steeper yield curve as the result of a decline in short-term interest rates. As of September 30, 2009, Harvard Illinois’ net portfolio value ("NPV") under a 200 basis point instantaneous and sustained rise in interest rates reflected an increase of 3.9%.

The Company pursues a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate

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	I.15

sensitive assets and liabilities. The Company manages interest rate risk from the asset side of the balance sheet through selling originations of fixed rate loans to the secondary market, maintaining certain investment securities as available for sale and maintaining a diversified loan portfolio which consists primarily of shorter term fixed rate loans or adjustable rate loans. As of December 31, 2008, of the Company’s total loans due after December 31, 2009, ARM loans comprised 18.6% of those loans (see Exhibit I-8). On the liability side of the balance sheet, management of interest rate risk has been pursued through utilizing fixed rate FHLB advances with terms generally out to five years, extending CD maturities through offering attractive rates on certain longer term CDs and through emphasizing growth of lower costing and less interest rate sensitive transaction and savings accounts. Transaction and savings accounts comprised 42.1% of the Company’s deposits at September 30, 2009.

The infusion of stock proceeds will serve to further limit the Company’s interest rate risk exposure, as most of the net proceeds will be redeployed into interest-earning assets and the increase in the Company’s capital position will lessen the proportion of interest rate sensitive liabilities funding assets.

Lending Activities and Strategy

Harvard Illinois’ lending activities have traditionally emphasized 1-4 family permanent mortgage loans and such loans continue to comprise the largest component of the Company’s loan portfolio. Beyond 1-4 family loans, lending diversification by the Company has emphasized commercial real estate/multi-family loans followed by consumer loans. Other areas of lending diversification for the Company include construction, land, home equity/second mortgage and commercial business loans. Going forward, the Company’s lending strategy is to continue to emphasize diversification of the loan portfolio, particularly with respect to growth of commercial real estate and commercial business loans. The origination of 1-4 family permanent mortgage loans is expected to remain an active area of lending for the Company, although growth of the 1-4 family loan portfolio will be limited as new loan production will be offset by loan sales of most fixed rate originations and repayments on the existing portfolio. Exhibit I-9 provides historical detail of Harvard Illinois’ loan portfolio

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	I.16

composition over the past two and three-quarter years and Exhibit I-10 provides the contractual maturity of the Company’s loan portfolio by loan type as of September 30, 2009.

Harvard Illinois offers both fixed rate and adjustable rate 1-4 family permanent mortgage loans. Loans are underwritten to secondary market guidelines, as the Company’s current philosophy has been to sell all originations of conforming fixed rate loans. Loans are sold on a servicing retained basis. ARM loans offered by the Company have initial repricing terms of one, three or five years and are indexed to the one year rate for U.S. Treasury notes. After the initial repricing period, ARM loans convert to a one-year ARM loan for the balance of the mortgage term. Fixed rate loans are offered for terms of 10 to 30 years. The Company also offers a seven year balloon loan, which is amortized over a 30 year term. Residential loans are generated through the Company’s in-house lending staff and are substantially secured by properties in the Company’s primary lending area. As of September 30, 2009, the Company’s outstanding balance of 1-4 family loans equaled $55.9 million or 49.9% of total loans outstanding.

The Company’s 1-4 family lending activities include second mortgage loans and home equity lines of credit. Second mortgage loans are offered with fixed rate terms of five, ten or fifteen years. Home equity lines of credit are tied to the prime rate as reported in The Wall Street Journal and are offered for terms of up to ten years. The Company will originate second mortgage loans and lines of credit up to a maximum loan-to value (“LTV”) ratio of 80.0%, inclusive of other liens on the property. As of September 30, 2009, the Company’s outstanding balance of second mortgage loans and home equity lines of credit equaled $11.7 million or 10.4% of total loans outstanding.

Construction loans originated by the Company consist substantially of loans to finance the construction of 1-4 family residences. The Company’s 1-4 family construction lending activities consist of loans that are extended to individuals for construction of their homes. Construction loans are interest only loans offered for terms of up to seven months and up to a LTV ratio of 80.0%. Commercial real estate

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	I.17

construction loans are originated as construction/permanent loans. Commercial real estate construction loans require payment of interest only during the construction period, which is typically a six to twelve month term. Land loans consist substantially of properties that will be used for residential development. Land loans also include loans secured by farm land and land purchased for investment purposes. Land loans are offered for terms of up to 30 years with a five year balloon provision and are extended up to a LTV ratio of 65.0%. As of September 30, 2009, Harvard Illinois’ outstanding balance of construction and land loans equaled $5.6 million or 5.0% of total loans outstanding.

The balance of the mortgage loan portfolio consists of commercial real estate and multi-family loans, which are collateralized by properties in the Company’s regional market area. Harvard Illinois originates commercial real estate and multi-family loans up to a maximum LTV ratio of 75.0% and requires a minimum debt-coverage ratio of 1.25 times. Commercial real estate and multi-family loans are offered as fixed rate loans with five or seven year balloon provisions, with amortization terms of up to 25 years. Properties securing the commercial real estate and multi-family loan portfolio include strip shopping centers, manufacturing facilities, nursing homes, churches and apartment buildings. The commercial real estate loan portfolio includes purchased loans participations, which are subject to the Company’s underwriting criteria and are secured by local properties. As of September 30, 2009, the Company’s outstanding balance of commercial real estate and multi-family loans totaled $19.8 million equal to 17.7% of total loans outstanding.

Harvard Illinois’ diversification into non-mortgage loans consists primarily of consumer loans and, to a lesser extent, commercial business loans. Beyond second mortgage and home equity lines of credit, the Company’s consumer lending activities have consisted substantially of purchased indirect automobile loans. As of September 30, 2009, the indirect automobile loan portfolio accounted for $12.6 million or 95.8% of the consumer loan portfolio. The purchase of indirect automobile loans is currently not an active lending area for the Company, as the Company is allowing that portfolio to pay down for purposes of credit risk management. Harvard Illinois’ consumer lending

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	I.18

activities other than indirect automobile loans have been very limited, with such loans consisting of loans secured by deposits and various types of installment loans. As of September 30, 2009, the Company’s outstanding balance of consumer loans equaled $13.2 million or 11.8% of total loans outstanding.

The commercial business loan portfolio is generated through extending loans to companies operating in the local market area. Commercial business loans offered by the Company consist of fixed rate term loans and floating rate lines of credit indexed to the prime rate as reported in The Wall Street Journal and generally have terms of five years or less. The commercial business loan portfolio consists substantially of secured loans and, to a lesser extent, unsecured loans for purposes of providing working capital for general business purposes Expansion of commercial business lending activities is an area of lending emphasis for the Company, pursuant to which the Company is seeking to become a full service community bank to its commercial loan customers through offering a full range of commercial loan products that can be packaged with lower cost commercial deposit products. As of September 30, 2009, Harvard Illinois’ outstanding balance of commercial business loans equaled $5.9 million or 5.2% of total loans outstanding.

Exhibit I-11 provides a summary of the Company’s lending activities over the past two and three-quarter years. Total loans originated reflected an increase in 2008 compared to 2007, as well as for the nine months ended September 30, 2009 compared to the year ago period. Originations of 1-4 family loans accounted for most of the Company’s lending volume over the past two and three-quarter years, with 1-4 family loan originations totaling $65.6 million or 62.6% of total loans originated. Originations of home equity lines of credit and second mortgages were the second most active lending area for the Company over the past two and three-quarter years ($15.2 million of originations or 14.5% of total loans originated), followed by commercial real estate loans ($9.2 million of originations or 8.8% of total loans originated) and commercial business loans ($7.3 million of originations or 7.0% of total loans originated). Loan originations were supplemented with loan purchases totaling $23.3 million during the two and three-quarter year period, consisting of $16.8 million of indirect automobile loans, $6.0 million

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	I.19

of commercial real estate loans and $481,000 of commercial business loans. Originations of 1-4 family loans were somewhat offset by 1-4 family loans sold during the two and three-quarter year period, as sales of 1-4 family loans totaled $37.1 million or 56.5% of 1-4 family loans originated. Overall, after factoring in loan repayments, net loan charge-offs and loan loss provisions, net loans receivable increased from $117.8 million at year end 2007 to $120.7 million at year end 2008 followed by a decrease to $110.2 million at September 30, 2009.

Asset Quality

The Company’s historical 1-4 family lending emphasis, as well as relatively stable real estate market conditions in the Company’s lending area, has generally supported the maintenance of relatively favorable credit quality measures. However, in recent periods, the Company has experienced some credit quality deterioration, which is viewed to be largely related to the recession and the rise in unemployment in the Company’s lending area. Over the past two and three-quarter years, Harvard Illinois’ balance of non-performing assets ranged from a low of $1.3 million or 0.81% of assets at year end 2007 to a high of $3.5 million or 2.19% of assets at year end 2008. As of September 30, 2009, non-performing assets totaled $2.9 million or 1.82% of assets. As shown in Exhibit I-12, the Company’s non-performing assets at September 30, 2009 consisted of $2.6 million of non-accruing loans, $34,000 of accruing loans past due 90 days or more and $216,000 of repossessed assets. As of September 30, 2009, 1-4 family loans accounted for $2.2 million of the non-accruing loan balance and 1-4 family properties accounted for $180,00 of the repossessed assets balance. The Company also maintained $794,000 of troubled debt restructurings at September 30, 2009.

To track the Company’s asset quality and the adequacy of valuation allowances, Harvard Illinois has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. Detailed asset classifications are reviewed monthly by senior management and quarterly by the Board. Pursuant to these procedures, when needed, the Company establishes additional valuation allowances to cover anticipated losses in classified or non-classified assets. As of September 30,

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	I.20

2009, the Company maintained valuation allowances of $1.3 million, equal to 1.16% of net loans receivable and 48.11% of non-accruing loans and accruing loans past due 90 days or more.

Funding Composition and Strategy

Deposits have consistently served as the Company’s primary funding source and at September 30, 2009 deposits accounted for 86.1% of Harvard Illinois’ interest-bearing funding composition. Exhibit I-13 sets forth the Company’s deposit composition for the past two and three-quarter years and Exhibit I-14 provides the interest rate and maturity composition of the CD portfolio at September 30, 2009. CDs constitute the largest component of the Company’s deposit composition, although the concentration of CDs comprising total deposits has declined slightly in recent years as deposit growth has been sustained by growth of transaction and savings account deposits. As of September 30, 2009, the CD portfolio totaled $71.0 million or 57.9% of total deposits, versus comparable measures of $72.1 million and 63.3% of total deposits at year end 2007. CDs with scheduled maturities of one year or less comprised 42.5% of the Company’s CDs at September 30, 2009. As of September 30, 2009, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $22.3 million or 31.5% of total CDs. The Company held $2.8 million of brokered CDs at September 30, 2009.

The Company maintained $51.6 million of savings and transaction account deposits at September 30, 2009, which equaled 42.1% of total deposits. Comparatively, core deposits equaled $41.7 million or 36.7% of total deposits at year end 2007. Since year end 2007, money market accounts have been the primary source of core deposit growth and money market accounts comprise the largest concentration of the Company’s core deposits. As of September 30, 2009, money market accounts totaled $22.2 million or 43.0% of core deposits.

Borrowings serve as an alternative funding source for the Company to facilitate management of funding costs and interest rate risk. The Company maintained $19.8 million of FHLB advances at September 30, 2009 with a weighted average rate of 4.07%. FHLB advances held by the Company at September 30, 2009 consisted of a

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	I.21

mix of short- and long-term borrowings, with maturities on long-term borrowings extending out to five years.

Subsidiaries and Affiliations

Other than the Bank, the Company does not maintain any subsidiaries. Harvard Illinois offers financial services through a third party affiliation with Financial Network Investment Corporation (“FNIC”). Through its affiliation with FNIC, the Bank employs a broker who is engaged in the sale of annuities, mutual funds, life insurance, equities and bonds to both the Bank’s customers and the general public.

Legal Proceedings

Harvard Illinois is not currently party to any pending legal proceedings that the Company’s management believes would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

RP® Financial, LC.	MARKET AREA
	II.1

II. MARKET AREA

Introduction

The Company is headquartered in the city of Harvard, Illinois. The headquarters office and a branch office are located in Harvard, McHenry County, Illinois, northwest of the Chicago Metropolitan Statistical Area (the “Chicago MSA”). One additional branch is located in the town of Morris, Grundy County, Illinois, located approximately 75 miles to the south of Harvard. McHenry County is located northeast of Chicago, with the eastern portion of the county containing a majority of the population base as part of the Chicago MSA. The city of Harvard, containing a population of approximately 9,000, is located in the rural western portion of the county outside of the Chicago MSA. Exhibit II-1 provides information on the Company’s office properties.

Future growth opportunities for the Company depend on the future growth and stability of the local and regional economy, demographic growth trends, and the nature and intensity of the competitive environment. These factors have been briefly examined to help determine the growth potential that exists for the Company, the relative economic health of the Company’s market area, and the resultant impact on value.

National Economic Factors

The future success of the Company’s operations is partially dependent upon national economic factors and trends. In assessing economic trends over past few quarters, Indications of a deepening recession were evident at the start of 2009 with December 2008 data showing a sharp drop in retail sales, a drop in durable-goods orders and rising unemployment. Lower retail sales and durable-goods orders reflected a cutback in consumer spending, as consumer spending declined for a fifth consecutive month in December 2008. The unemployment rate for December 2008 jumped to 7.2%, reflecting a loss of 524,000 jobs. New home construction dropped in December 2008 to the slowest pace since monthly records began in 1959 and new home sales fell to a record low as well. The broader economy continued to struggle in January, with the loss of 598,000 jobs pushing the January unemployment rate to 7.6%. The reading for

RP® Financial, LC.	MARKET AREA
	II.2

consumer confidence hit a new low in January, as more homeowners struggled to avoid foreclosure. While U.S. manufacturing activity contracted at a slower rate in January and January retail sales were up from December, there was no evidence of a near term economic turnaround. Despite another sharp decline in home prices, existing home sales fell in January. The revised fourth quarter GDP showed the economy shrinking at the fastest pace in 26 years, contracting at an annualized rate of 6.3% compared to an initial estimate of a 3.8% decline.

Grim economic news continued to prevail in early-March 2009, as manufacturing activity contracted for the 13^th month in a row in February and U.S. car sales fell 41% in February. The unemployment rate jumped to 8.1% in February, which was the highest level of unemployment since 1983 as employers cut 651,000 jobs in February. The Federal Reserve’s “beige book” survey found that the recession grew deeper and wider in January and February, reflecting cutbacks by consumers and companies. Comparatively, February economic data also showed some positive signs, as new home construction unexpectedly rose 22% in February and the 1.4% decline in February industrial production was the smallest drop in four months. Retail sales fell 0.1% in February, providing a potential sign that last year’s sharp declines in spending were easing. Lower prices supported increases in new and existing home sales in February, while the March employment report continued to paint a dismal picture of the national economy. The national unemployment rate for March jumped to 8.5%, as employers eliminated 663,000 jobs. Retail sales fell 1.1% in March, while March existing home sales showed a 3% decline. At the same time there were some encouraging signs for the economy in March, as pending home sales and construction spending rose in March. Overall, the U.S. economy contracted at a 6.1% annual rate in the first quarter (subsequently revised to 5.7%), but inventories and consumer spending rebounded.

The pace of layoffs slowed in April as U.S. employers cut 539,000 jobs, the fewest in six months, but the unemployment rate climbed to 8.9%. Retail sales fell 0.4% in April from March and housing starts hit a low in April, falling 12.8% from March. However, single-family home construction rose 2.8%. Durable-goods orders rose 1.9%

RP® Financial, LC.	MARKET AREA
	II.3

in April, offering some evidence that the manufacturing slump was ending. Some other positive signs that the recovery was gaining strength included a 2.9% increase in existing home sales and consumer confidence shot higher in May to its highest level in eight months. May employment data showed job losses slowed for the fourth straight month, with employers cutting 345,000 jobs. However, the May unemployment rate jumped to 9.4%. Retail sales rose 0.5% in May on higher gas prices. Durable-goods orders rose and new home prices firmed in May, providing the latest evidence the U.S. economy’s free fall was ending.

Signs that the U.S. economy was pulling out of the recession became more evident at the start of the third quarter of 2009; however, overall economic conditions remained weak. The decline in manufacturing activity slowed in June, while June employment data showed more job losses than expected and an increase in the unemployment rate to 9.5%. Service sector activity improved in June and retail sales rose in June, but excluding gasoline and auto, sales fell for the fourth straight month. The index of leading economic indicators was up in June and the housing market showed some signs of recovery, as sales of new and existing homes rose in June. Notably, home prices in major U.S. cities registered the first monthly gain in a nearly a year for the three month period ending in May compared with the three months ending in April. The July employment report showed the fewest job losses in a year and the unemployment rate dipped to 9.4%, its first decline in nine months. Retail sales were down slightly in July, raising concerns over the durability of the recovery. However, sales of existing homes jumped 7.2% in July, the fastest pace in nearly two years. July new home sales were up sharply as well, which supported a 4.9% in July durable-goods orders.

August economic data generally indicated that the recession was nearing an end, as manufacturing output grew for the first time since January 2008 and the “cash for clunkers” program fueled a rebound in August retail sales. August employment data showed fewer than expected job losses, while the unemployment rate rose to a 26 year high of 9.7%. The index of leading indicators rose for the fifth straight month in August, providing another sign of recovery. Second quarter GDP declined at a 0.7% annualized

RP® Financial, LC.	MARKET AREA
	II.4

rate, which was better than the 1% decline previously estimated. Other economic data suggested an uneven recovery, as existing home sales slid in August and consumer confidence fell in September. Manufacturing and service sector activity both grew in September, while the U.S. unemployment rate rose to 9.8% in September as employers cut more jobs than expected. As job losses continued to mount, vacancy rates for office space continued to increase during the third quarter. Retail sales fell in September from August as the “cash for clunkers’ program ended, however, excluding autos, retail sales increased slightly in September. New home sales fell in September, while orders for durable goods increased in September. Third quarter GDP increased at a 3.5% annual rate (subsequently revised to 2.8%), marking an apparent end to the recession. Notably, a large portion of GDP growth in the third quarter was generated through federal stimulus programs, bringing into question the sustainability of the recovery without government support.

October 2009 showed further signs of an economic recovery, even as the labor market continued to struggle. U.S. manufacturing activity expanded for the third month in a row in October, while a net loss of 190,000 in October pushed the October unemployment rate up to 10.2%. Retail sales and the index of leading economic indicators both rose in October, while housing data was mixed raising doubts about the strength of the sector’s recovery. New home starts tumbled in October, while sales of existing home showed a strong increase in October.

In terms of interest rate trends during 2009, interest rates remained at historically low levels during the first half of January 2009 based on concerns that deflation was creeping into the economy. Long-term Treasury yields edged higher in the second half of January and into early-February, with the yield on the 10-year Treasury note moving above 3.0% for the first time since late-November. News that the government was selling $67 billion of new Treasury securities and the pending stimulus package contributed to the decline in Treasury prices. Treasury prices moved higher in mid-February, as investors sought the safe haven of Treasury bonds amid falling stock prices and more economic worries. Interest rates stabilized in the second half of February, as U.S. consumer confidence fell in February to its lowest level in at least 41

RP® Financial, LC.	MARKET AREA
	II.5

years. U.S. consumer confidence did, however, rise slightly in March, but remained weak overall due to worries about job losses, a moribund housing sector and ailing banks. After their March meeting, the Federal Reserve decided to leave interest rates unchanged at a record low of between zero and 0.25%. The Fed also announced that it would spend up to $300 billion to buy long-term government bonds and an additional $750 billion would be used to purchase mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. The Fed also said its intent with these measures was to boost mortgage lending and the struggling housing market by lowering interest rates on mortgages and other forms of consumer debt.

Treasury yields remained at historically low levels through most of April 2009, with the yield on the 10-year Treasury note dipping to 2.76% in mid-April as Treasury bonds rallied on more troublesome economic data. The yield on the 10-year Treasury note edged above 3.0% in late-April and trended higher into mid-May on some positive economic data. In late-May, Treasury yields and mortgage rates surged to their highest level since November 2008, reflecting investor worries that deficit spending to fund stimulus programs could lead to inflation. The yield on the 10-year Treasury note jumped to 3.70% in late-May, providing for a steeper yield curve as the gap between two-year and 10-year Treasury notes widened to 2.75%. Interest rates stabilized in late-May and into the first half of June. The late-June meeting of the Federal Reserve concluded with keeping its target rate near zero.

Interest rates eased lower at the start of the third quarter of 2009, as investors shunned risk ahead of second quarter earnings reports. Some economic data showing an improving economy and growing belief that the recession was nearing an end pushed long-term Treasury yields up slightly heading into late-July. The upward trend in interest rates continued into the first week of August, as interest rates edged higher following the better-than-expected employment report for July. Long-term Treasury yields eased lower going into the second half of August, as the Federal Reserve concluded its mid-August meeting leaving its key short-term rate near zero and indicated it would stay there for the foreseeable future. Weaker than expected retail sales for July and a decline in July wholesale prices further contributed to the pull back

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	II.6

in interest rates. Long-term Treasury yields reversed course after mid-August on the stronger than expected report for July existing home sales and then stabilized in late-August and remained relatively stable through most of September as inflation worries remained low amid high unemployment and slack in the economy. News that consumer confidence fell in September pushed Treasury yields lower at the end of the third quarter.

Mixed economic data and no apparent threat of inflationary pressures supported a stable interest rate environment at the beginning of the fourth quarter, providing for the continuation a relatively steep yield curve. Interest rates remained stable through the balance of October, reflecting uncertainty over the sustainability of the economic recovery with consumer confidence declining for the second month in a row. The Federal Reserve concluded its early-November meeting by keeping its target interest rate near zero, which along with the weaker than expected employment report for October sustained a stable interest rate environment into mid-November. Long-term Treasury yields eased lower heading into the second half of November, following comments by the Federal Reserve Chairman that unemployment and troubles in commercial real estate would weigh on the recovery. Interest rates stabilized into late-November, as wholesale and retail prices for October reflected limited inflationary pressures. Long-term Treasury yields dipped in late-November following news of the credit crisis in Dubai. As of November 27, 2009, the bond equivalent yields for U.S. Treasury bonds with terms of one and ten years equaled 0.26% and 3.21%, respectively, versus comparable year ago yields of 0.93% and 2.99%. Exhibit II-2 provides historical interest rate trends.

The consensus outlook among economists surveyed by the Wall Street Journal in early-October 2009 was for the economy to resume growing in the third quarter of 2009 at a 3.1% annual rate with economic growth continuing through the first half of 2010 though at a slower rate. The surveyed economists anticipate a slower recovery for the labor market, with the unemployment rate expected to peak at 10.2% in February 2010. On average, the economists didn’t expect unemployment to fall below 6% until 2013.

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	II.7

In June 2009, the Mortgage Bankers Association (the “MBA”) lowered its forecast of mortgage originations for 2009 to $2.03 trillion, a reduction of more than $700 billion from its earlier forecast in March 2009. Most of the decrease was due to a reduction in refinancings. The MBA now projects that total existing home sales for 2009 will be 4.8 million units, a drop of 1.2% from 2008. The MBA forecast calls for new home sales of 352,000 units, a decline of 27% from 2008. Median home prices for new and existing home were projected to continue to fall through 2009, dropping by about 10% from 2008 and then leveling off in 2010 as the economy improves.

Market Area Demographics

Harvard Illinois’ future growth opportunities and financial strength depend in part on the growth in the local market area served. The Company conducts operations from its two offices in Harvard, McHenry County, Illinois, and a single office in the town of Morris, Grundy County located 75 miles south of McHenry County. The branch office in Morris was acquired in 2008 pursuant to a mutual-to-mutual merger, whereby the Morris Building merged into the Bank. Currently, the Company considers McHenry and Grundy counties to be the primary market areas for lending and depository activities. The city of Harvard is a rural area with a population of approximately 9,000. The city of Morris contains approximately 12,000 residents, and is also located in a rural area.

Table 2.1 presents information regarding demographic trends for the Company’s market area counties from 2000 to 2009 and projected through 2014. Data for the nation and the state of Illinois is included for comparative purposes. The data indicates that McHenry County has a total population of approximately 331,000. However, most of the population base resides in the eastern portion of the county, which extends into the Chicago MSA. The city of Harvard is located in the western, rural portion of McHenry County and, thus, the Company operates in a primarily rural area containing a number of small communities. McHenry County reported an annual population growth rate of 2.7% from 2000 to 2009, a rate higher than the statewide and national rates of 0.6% and 1.1%, respectively, which was supported by growth in the eastern portion of the county. The population base in the city of Harvard and the immediate surrounding area is relatively small, and, therefore, the Harvard market area is viewed as somewhat

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	II.8

Table 2.1

Harvard Illinois Bancorp, Inc.

Summary Demographic Data

	Year									Growth Rate
	2000			2009			2014			2000-2009		2009-2014
Population (000)
United States		281,422			309,732			324,063		1.1	%	0.9	%
Illinois		12,419			13,115			13,412		0.6	%	0.4	%
McHenry County		260			331			363		2.7	%	1.9	%
Grundy County		38			49			56		3.0	%	2.7	%
Households (000)
United States		105,480			116,523			122,109		1.1	%	0.9	%
Illinois		4,592			4,844			4,951		0.6	%	0.4	%
McHenry County		89			113			125		2.6	%	2.0	%
Grundy County		14			19			22		3.0	%	3.3	%
Median Household Income ($)
United States	$	42,164		$	54,719		$	56,938		2.9	%	0.8	%
Illinois		46,635			60,823			63,631		3.0	%	0.9	%
McHenry County		64,272			83,224			88,187		2.9	%	1.2	%
Grundy County		52,007			66,608			70,184		2.8	%	1.1	%
Per Capita Income ($)
United States	$	21,587		$	27,277		$	28,494		2.6	%	0.9	%
Illinois		23,104			28,587			29,827		2.4	%	0.9	%
McHenry County		26,476			34,218			35,302		2.9	%	0.6	%
Grundy County		22,591			27,938			28,752		2.4	%	0.6	%
2009 HH Income Dist. (%)	Less Than $25,000			$25,000 to 50,000			$50,000 to 100,000			$100,000 +
United States		20.9	%		24.5	%		35.3	%	19.3	%
Illinois		18.2	%		22.2	%		39.3	%	20.3	%
McHenry County		8.1	%		14.8	%		38.2	%	39.0	%
Grundy County		14.1	%		20.4	%		48.0	%	17.5	%

Source: SNL Financial.

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	II.9

limited in terms of providing growth opportunities for the Company. Similar to the state and the nation, the population growth rate for McHenry County is projected to decrease over the next five years through 2014. Grundy County, the location of the Company’s third office, is a rural county located outside of the Chicago MSA. This county recorded the highest population growth rate of all comparative areas between 2000 and 2009, although the absolute increase in residents approximated only 9,000. As can be expected, household growth trends paralleled population growth trends, with McHenry and Grundy Counties showing household growth rates that exceeded the comparable U.S. and Illinois growth rates.

Examination of median household income and per capita income measures, reveal that the primary market area counties generally had higher income levels in comparison to the state and the nation. The higher income levels, particularly with respect to McHenry County, reflect the location of McHenry County in proximity to metropolitan areas including Chicago, Rockford and Milwaukee. However, given the rural characteristics of the Harvard market area and geographic location outside of the Chicago MSA, the income measures for the communities served by the Company’s two offices in Harvard are believed to be below the income measures for all of McHenry County.

Local Economy

The local economy has been impacted by the recession, particularly with job losses experienced in the manufacturing sector which is a significant source of employment in McHenry County. The Company’s primary market area has a fairly diversified local economy, with employment in services, wholesale/retail trade, manufacturing and government serving as the basis of the McHenry and Grundy County economies. Service jobs were by far the largest employment sector in the primary market area counties and the state of Illinois, with jobs in the wholesale/retail trade constituting the second largest employment sector in both counties and the state of Illinois. Manufacturing jobs, which tend to be higher paying jobs, provided the third largest source of jobs in McHenry County and accounted for a much larger percentage of McHenry County’s employment base relative to Grundy County and the state of

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	II.10

Illinois. Government jobs provided the third largest source of jobs in Grundy County, approximating the percentage of government jobs in McHenry County and the state of Illinois. Table 2.2 provides an overview of employment by sector, for the state of Illinois and the primary market area counties.

The city of Harvard is located in northeast Illinois approximately seven miles south of the Illinois/Wisconsin border. Harvard is also located in close proximity to the Lake Geneva/Fontana recreational and resort area. McHenry County’s largest employers include the Centegra Memorial Health System (3,450 employees), McHenry County Government (1,400 employees), Follett Library Resources Inc. (1,378 employees) and Catalent Pharma Solutions (830 employees). Major employers in Grundy County include Exelon (1,550 employees), Grundy Public Schools (1,500 employees), and Newburg/Perini (1,130 employees).

Table 2.2

Harvard Illinois Bancorp, Inc.

Primary Market Area Employment Sectors

(Percent of Labor Force)(1)

	Location
Employment Sector	Illinois		McHenry Co.		Grundy Co.
	(% of Total Employment)
Services	38.4	%	32.9	%	27.2	%
Wholesale/Retail Trade	14.5	%	16.8	%	14.6	%
Manufacturing	9.2	%	15.2	%	7.5	%
Government	11.8	%	11.6	%	12.0	%
Construction	5.4	%	9.4	%	7.9	%
Finance/Insurance/Real Esate	9.7	%	6.7	%	8.2	%
Arts/Entertainment/Rec.	2.0	%	1.8	%	2.1	%
Agriculture	1.2	%	1.1	%	2.5	%
Transportation/Utility	4.4	%	NA		12.6	%
Other	3.4	%	4.4	%	5.3	%
Total	100.0	%	100.0	%	100.0	%

(1) As of 2006

Source: REIS DataSource.

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	II.11

Unemployment Trends

Comparative unemployment rates for the primary market area counties, as well as for the U.S. and Illinois, are shown in Table 2.3. September 2009 unemployment rates for McHenry and Grundy were 9.3% and 11.4%, respectively, which were below and above the comparable U.S. and Illinois unemployment rates. Evidence of the recession impacting the regional economy is reflected in the significantly higher unemployment rates for September 2009 compared to a year ago, which is consistent with the state and national trends.

Table 2.3

Harvard Illinois Bancorp, Inc.

Unemployment Trends (1)

Region	September 2008 Unemployment		September 2009 Unemployment
United States	6.0	%	9.5	%
Illinois	6.4	%	10.2	%
McHenry County	5.5	%	9.3	%
Grundy County	6.1	%	11.4	%

(1) Unemployment rates have not been seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

Market Area Deposit Characteristics and Trends

Table 2.4 displays deposit market trends from June 30, 2006 through June 30, 2009 for the Company, as well as for the state of Illinois. Consistent with the state of Illinois, commercial banks maintained a larger market share of deposits than savings institutions in the Company’s primary market area counties. For the three year period covered in Table 2.4, savings institutions experienced a decrease in deposit market share in both primary market area counties.

Harvard Illinois maintains the majority of its deposits in McHenry County, although the Company maintained a larger deposit market share in Grundy County reflecting less competition in a smaller market area. The Company’s $93.0 million of deposits at the main office and one branch location in McHenry County represented a 1.4% market share of thrift and bank deposits at June 30, 2009. Comparatively, the

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Grundy County branch had $32.0 million in deposits and a 3.1% market share of total bank and thrift deposits at June 30, 2009. The Company’s deposit market share in McHenry County did not change during the three year period covered in Table 2.4, while a slightly lower deposit growth rate at the Grundy County branch compared to the overall deposit growth rate for bank and thrift deposits translated into a modest reduction in the Company’s deposit market share.

Table 2.4

Harvard Illinois Bancorp, Inc.

Deposit Summary

	As of June 30,											Deposit Growth Rate 2006-2009
	2006					2009
	Deposits		Market Share		Number of Branches	Deposits		Market Share			No. of Branches
	(Dollars In Thousands)											(%)
Deposit Summary
State of Illinois	$	329,723,945	100.0	%	4,830	$	360,684,791		100.0	%	4,988	3.0	%
Commercial Banks		293,030,181	88.9	%	4,248		336,478,836		93.3	%	4,702	4.7	%
Savings Institutions		36,693,764	11.1	%	582		24,205,955		6.7	%	286	-12.9	%
McHenry County	$	5,714,219	100.0	%	124	$	6,447,114		100.0	%	130	4.1	%
Commercial Banks		5,151,655	90.2	%	105		6,077,833		94.3	%	120	5.7	%
Savings Institutions		562,564	9.8	%	19		369,281		5.7	%	10	-13.1	%
Harvard Illinois		81,007	1.4	%	2		93,013		1.4	%	2	4.7	%
Grundy County	$	801,529	100.0	%	25	$	1,037,310		100.0	%	26	9.0	%
Commercial Banks		731,712	91.3	%	22		964,300		93.0	%	23	9.6	%
Savings Institutions		69,817	8.7	%	3		73,010		7.0	%	3	1.5	%
Harvard Illinois		25,322	3.2	%	1		31,983		3.1	%	1	8.1	%
								$	0

Source: FDIC.

Competition

As implied by the Company’s low market shares of deposits, competition among financial institutions in the Company’s market area is significant. Among the Company’s competitors are much larger and more diversified institutions, which have greater resources than maintained by Harvard Illinois. Financial institution competitors in the Company’s primary market area include other locally based thrifts and banks, as well as regional, super regional and money center banks. From a competitive standpoint, Harvard Illinois has sought to emphasize its community orientation in the markets served by its branches. There are a total of 33 banking institutions operating in McHenry County with Harvard Illinois holding the 23^rd largest market share of deposits, and 14 institutions operating in Grundy County with Harvard Illinois holding the 9^th

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	II.13

largest market share of deposits. Table 2.5 lists the Company’s largest competitors in the two counties currently served by its branches, based on deposit market share as noted parenthetically.

Table 2.5

Harvard Illinois Bancorp, Inc.

Market Area Deposit Competitors

Location	Name
McHenry County	Harris, NA (15.23%)
	Home STB, NA (10.60%)
	Crystal Lake B&T (8.31%)
	Harvard Illinois (1.44%) Rank: 23 of 33
Grundy County	First Midwest Bank (22.51%)
	Standard B&T Co (21.17%)
	Grundy Bank (13.74%)
	Harvard Illinois (3.08%) Rank: 9 of 14
Source: FDIC

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	III.1

III. PEER GROUP ANALYSIS

This chapter presents an analysis of Harvard Illinois’ operations versus a group of comparable savings institutions (the “Peer Group”) selected from the universe of all publicly-traded savings institutions in a manner consistent with the regulatory valuation guidelines. The basis of the pro forma market valuation of Harvard Illinois is derived from the pricing ratios of the Peer Group institutions, incorporating valuation adjustments for key differences in relation to the Peer Group. Since no Peer Group can be exactly comparable to Harvard Illinois, key areas examined for differences are: financial condition; profitability, growth and viability of earnings; asset growth; primary market area; dividends; liquidity of the shares; marketing of the issue; management; and effect of government regulations and regulatory reform.

Peer Group Selection

The Peer Group selection process is governed by the general parameters set forth in the regulatory valuation guidelines. Accordingly, the Peer Group is comprised of only those publicly-traded savings institutions whose common stock is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed, since their stock trading activity is regularly reported and generally more frequent than non-publicly traded and closely-held institutions. Institutions that are not listed on a national exchange or NASDAQ are inappropriate, since the trading activity for thinly-traded or closely-held stocks is typically highly irregular in terms of frequency and price and thus may not be a reliable indicator of market value. We have also excluded from the Peer Group those companies under acquisition or subject to rumored acquisition, mutual holding companies and recent conversions, since their pricing ratios are subject to unusual distortion and/or have limited trading history. A recent listing of the universe of all publicly-traded savings institutions is included as Exhibit III-1.

Ideally, the Peer Group, which must have at least 10 members to comply with the regulatory valuation guidelines, should be comprised of locally- or regionally-based institutions with comparable resources, strategies and financial characteristics. There

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	III.2

are approximately 150 publicly-traded institutions nationally and, thus, it is typically the case that the Peer Group will be comprised of institutions with relatively comparable characteristics. To the extent that differences exist between the converting institution and the Peer Group, valuation adjustments will be applied to account for the differences. Since Harvard Illinois will be a full public company upon completion of the offering, we considered only full public companies to be viable candidates for inclusion in the Peer Group. From the universe of publicly-traded thrifts, we selected ten institutions with characteristics similar to those of Harvard Illinois. In the selection process, we applied two “screens” to the universe of all public companies that were eligible for consideration:

• Screen #1 Midwest institutions with assets between $150 million and $550 million, tangible equity-to-assets ratios of greater than 6.0% and positive core earnings. Seven companies met the criteria for Screen #1 and all seven were included in the Peer Group: Citizens Community Bancorp of Wisconsin, FFD Financial Corp. of Ohio, First Capital, Inc. of Indiana, LSB Financial Corp. of Indiana, Liberty Bancorp, Inc. of Missouri, River Valley Bancorp of Indiana and Wayne Savings Bancshares of Ohio. Exhibit III-2 provides financial and public market pricing characteristics of all publicly-traded Midwest thrifts.

• Screen #2 Mid-Atlantic institutions with assets between $150 million and $550 million, tangible equity-to-assets ratios of greater than 6.0% and positive core earnings. Three companies met the criteria for Screen #2 and all three were included in the Peer Group: Elmira Savings Bank of New York, Rome Bancorp, Inc. of New York and WVS Financial Corp. of Pennsylvania. Exhibit III-3 provides financial and public market pricing characteristics of all publicly-traded Mid-Atlantic thrifts.

Table 3.1 shows the general characteristics of each of the 10 Peer Group companies and Exhibit III-4 provides summary demographic and deposit market share data for the primary market areas served by each of the Peer Group companies. While there are expectedly some differences between the Peer Group companies and Harvard Illinois, we believe that the Peer Group companies, on average, provide a good basis for valuation subject to valuation adjustments. The following sections present a comparison of Harvard Illinois’ financial condition, income and expense trends, loan composition, interest rate risk and credit risk versus the Peer Group as of the most recent publicly available date.

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	III.4

In addition to the selection criteria used to identify the Peer Group companies, a summary description of the key comparable characteristics of each of the Peer Group companies relative to Harvard Illinois’ characteristics is detailed below.

• Citizens Community Bancorp, Inc of Wisconsin. Selected due to relatively limited earnings contribution from non-interest operating income, comparable level of operating expenses as a percent of average assets and lending diversification emphasis on consumer loans.

• Elmira Savings Bank of New York. Selected due to comparable concentration of mortgage-backed securities and 1-4 family loans as a percent of assets and comparable lending diversification emphasis on commercial real estate loans.

• FFD Financial Corp. of Ohio. Selected due to comparable asset size, similar size of branch network, comparable interest-bearing funding composition, relatively limited earnings contribution from non-interest operating income, comparable level of operating expenses as a percent of average assets and comparable concentration of 1-4 family loans as a percent of assets.

• First Capital, Inc. of Indiana. Selected due to comparable interest-earning asset composition, comparable interest-bearing funding composition, comparable level of operating expenses as a percent of average assets, comparable concentration of 1-4 family loans as a percent of assets, comparable lending diversification emphasis on commercial real estate loans and comparable level of non-performing assets as a percent of assets.

• LSB Financial Corp. of Indiana. Selected due to comparable interest-bearing funding composition, comparable level of operating expenses as a percent of average assets and comparable concentration of 1-4 family loans as a percent of assets.

• Liberty Bancorp, Inc. of Missouri. Selected due to relatively high equity-to-assets ratio and comparable interest-bearing funding composition.

• River Valley Bancorp of Indiana. Selected due to comparable interest-earning asset composition and comparable concentration of mortgage-backed securities and 1-4 family loans as a percent of assets.

• Rome Bancorp, Inc. of New York. Selected due to relatively high equity-to-assets ratio and comparable lending diversification emphasis on commercial real estate loans.

• WVS Financial Corp. of Pennsylvania. Selected due to relatively limited earnings contribution from non-interest operating income and comparable concentration of mortgage-backed securities and 1-4 family loans as a percent of assets.

• Wayne Savings Bancshares of Ohio. Selected due to comparable interest-bearing funding composition, comparable level of operating expenses as a percent of average assets and comparable concentration of 1-4 family loans as a percent of assets.

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	III.5

In aggregate, the Peer Group companies maintained a similar level of tangible equity as the industry average (9.75% of assets versus 9.95% for all public companies), generated higher earnings as a percent of average assets (0.46% core ROAA versus a net loss of 0.35% for all public companies), and earned a higher ROE (4.53% core ROE versus negative 2.20% for all public companies). Overall, the Peer Group’s average P/TB ratio and average core P/E multiple were slightly above the respective averages for all publicly-traded thrifts.

	All Publicly-Traded			Peer Group
Financial Characteristics (Averages)
Assets ($Mil)	$	2,908		$	394
Market capitalization ($Mil)	$	304		$	27
Tangible equity/assets (%)		9.95	%		9.75	%
Core return on average assets (%)		(0.35	)		0.46
Core return on average equity (%)		(2.20	)		4.53
Pricing Ratios (Averages)(1)
Core price/earnings (x)		16.80	x		17.01	x
Price/tangible book (%)		76.04	%		79.77	%
Price/assets (%)		7.48			7.26

(1) Based on market prices as of November 27, 2009.

Ideally, the Peer Group companies would be comparable to Harvard Illinois in terms of all of the selection criteria, but the universe of publicly-traded thrifts does not provide for an appropriate number of such companies. However, in general, the companies selected for the Peer Group were fairly comparable to Harvard Illinois, as will be highlighted in the following comparative analysis.

Financial Condition

Table 3.2 shows comparative balance sheet measures for Harvard Illinois and the Peer Group, reflecting the expected similarities and some differences given the selection procedures outlined above. The Company’s and the Peer Group’s ratios reflect balances as of September 30, 2009 unless indicated otherwise for the Peer Group companies. Harvard Illinois’ equity-to-assets ratio of 7.8% was below the Peer

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	III.7

Group’s average net worth ratio of 10.3%. However, the Company’s pro forma capital position will increase with the addition of stock proceeds, providing the Company with an equity-to-assets ratio that will be more comparable to the Peer Group’s ratio. Tangible equity-to-assets ratios for the Company and the Peer Group equaled 7.8% and 9.7%, respectively. The increase in Harvard Illinois’ pro forma capital position will be favorable from a risk perspective and in terms of future earnings potential that could be realized through leverage and lower funding costs. At the same time, the Company’s higher pro forma capitalization will initially depress return on equity. Both Harvard Savings’ and the Peer Group’s capital ratios reflected capital surpluses with respect to the regulatory capital requirements, with the Peer Group’s ratios currently exceeding the Bank’s ratios. On a pro forma basis, the Bank’s regulatory ratios can be expected to be more comparable to the Peer Group’s ratios.

The interest-earning asset compositions for the Company and the Peer Group were somewhat similar, with loans constituting the bulk of interest-earning assets for both Harvard Illinois and the Peer Group. The Company’s loans-to-assets ratio of 70.1% approximated the comparable Peer Group ratio of 69.7%. Comparatively, the Company’s cash and investments-to-assets ratio of 23.2% was slightly below the comparable ratio for the Peer Group of 25.2%. Overall, Harvard Illinois’ interest-earning assets amounted to 93.3% of assets, which was slightly below the comparable Peer Group ratio of 94.9%. The Peer Group’s non-interest earning assets included bank-owned life insurance (“BOLI”) equal to 1.3% of assets and goodwill/intangibles equal to 0.6% of assets, while the Company maintained BOLI equal to 2.5% of assets and a zero balance of goodwill and intangibles.

Harvard Illinois’ funding liabilities reflected a funding strategy that was somewhat similar to that of the Peer Group’s funding composition. The Company’s deposits equaled 78.0% of assets, which was above the Peer Group’s ratio of 69.7%. Comparatively, the Company maintained a lower level of borrowings than the Peer Group, as indicated by borrowings-to-assets ratios of 12.6% and 19.0% for Harvard Illinois and the Peer Group, respectively. Total interest-bearing liabilities maintained by the Company and the Peer Group, as a percent of assets, equaled 90.6% and 88.7%,

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	III.8

respectively, with the Peer Group’s lower ratio supported by maintenance of a higher capital position. Presently, the Company’s IEA/IBL ratio is lower than the Peer Group’s ratio, based on IEA/IBL ratios of 103.0% and 107.0%, respectively. The additional capital realized from stock proceeds should provide Harvard Illinois with an IEA/IBL ratio that is comparable to the Peer Group’s ratio, as the increase in capital provided by the infusion of stock proceeds will serve to lower the level of interest-bearing liabilities funding assets and will be primarily deployed into interest-earning assets.

The growth rate section of Table 3.2 shows annual growth rates for key balance sheet items. Harvard Illinois’ growth rates are annualized rates for the nine months ended September 30, 2009, while the Peer Group’s growth rates are based on annual growth for the twelve months ended September 30, 2009 or the most recent twelve month period available. Harvard Illinois recorded a 1.2% decrease in assets, versus asset growth of 4.9% for the Peer Group. Asset shrinkage for Harvard Illinois was mostly related to an 11.5% decrease in loans, which was largely offset by a 45.2% increase in cash and investments. Asset growth for the Peer Group was sustained by loans and cash and investments, which increased by 3.8% and 20.7%, respectively.

Asset shrinkage along with a 6.1% increase in deposits funded a 30.8% reduction in the Company’s borrowings. Comparatively, the Peer Group’s asset growth was largely funded by an 11.3% increase in deposits, which funded an 11.2% reduction in the Peer Group’s borrowings as well. The Company’s capital decreased by 3.7% during the twelve month period, reflecting the net loss recorded during the period partially offset by an increase in the equity adjustment for net unrealized gains on available for sale investments. Comparatively, the Peer Group’s capital increased by 1.9% during the twelve month period, suggesting that retention of earnings was largely offset by dividends, stock repurchases and the equity adjustment for net unrealized losses or gains on available for sale investments. The Company’s post-conversion capital growth rate will initially be constrained by maintenance of a higher pro forma capital position. Dividend payments and stock repurchases, pursuant to regulatory limitations and guidelines, could also potentially slow the Company’s capital growth rate in the longer term following the stock offering.

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	III.9

Income and Expense Components

Table 3.3 displays statements of operations for the Company and the Peer Group. The Company’s and the Peer Group’s ratios are based on earnings for the twelve months ended September 30, 2009, unless otherwise indicated for the Peer Group companies. Harvard Illinois reported a net loss equal to 0.54% of average assets, versus net income equal to 0.42% of average assets for the Peer Group. The net loss recorded by the Company was mostly attributable to loan loss provisions established during the period. In addition to lower loan loss provisions, higher levels of net interest income and non-interest operating income also represented earnings advantages for the Peer Group. Net gains and losses were a relatively minor factor in both the Company’s and the Peer Group’s earnings.

The Peer Group’s stronger net interest margin was realized through maintenance of a higher interest income ratio and a lower interest expense ratio. The Peer Group’s higher interest income ratio was supported by maintaining a higher concentration of assets in interest-earning assets, as well as a higher overall yield earned on interest-earning assets (5.48% versus 5.35% for the Company). Likewise, the Peer Group’s lower interest expense ratio was realized through maintaining a lower level of interest-bearing liabilities, as well as a lower cost of funds (2.47% versus 2.90% for the Company). The Company’s deposit composition, which consists of a relatively high concentration of CDs, was a factor that contributed to its higher cost of funds. Overall, Harvard Illinois and the Peer Group reported net interest income to average assets ratios of 2.44% and 3.00%, respectively.

In another key area of core earnings strength, the Company and the Peer Group maintained comparable levels of operating expenses as the Peer Group. For the period covered in Table 3.3, the Company and the Peer Group reported operating expense to average assets ratios of 2.62% and 2.64%, respectively. Notwithstanding the Company’s and the Peer Group’s comparable operating expense ratios, Harvard Illinois maintained a comparatively lower number of employees relative to its asset size. Assets per full time equivalent employee equaled $5.4 million for the Company, versus a comparable measure of $4.6 million for the Peer Group. On a post-offering basis, the

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	III.11

Company’s operating expenses can be expected to increase with the addition of stock benefit plans and certain expenses that result from being a publicly-traded company, with such expenses already impacting the Peer Group’s operating expenses. At the same time, Harvard Illinois’ capacity to leverage operating expenses will be similar or slightly greater than the Peer Group’s leverage capacity following the increase in capital realized from the infusion of net stock proceeds.

When viewed together, net interest income and operating expenses provide considerable insight into a thrift’s earnings strength, since those sources of income and expenses are typically the most prominent components of earnings and are generally more predictable than losses and gains realized from the sale of assets or other non-recurring activities. In this regard, as measured by their expense coverage ratios (net interest income divided by operating expenses), the Company’s earnings were less favorable than the Peer Group’s. Expense coverage ratios posted by Harvard Illinois and the Peer Group equaled 0.93x and 1.14x, respectively.

Sources of non-interest operating income provided a larger contribution to the Peer Group’s earnings, with such income amounting to 0.26% and 0.62% of Harvard Illinois’ and the Peer Group’s average assets, respectively. The Company’s comparatively lower earnings contribution realized from non-interest operating income implies more limited diversification into areas that generate revenues from non-interest sources relative to the Peer Group’s operations, as well as a relatively low concentration of deposits maintained in checking accounts that generate non-interest revenues in the form of fees and service charges. A larger loss on real estate operations was also a factor the contributed to the Company’s lower level of non-interest operating income. Taking non-interest operating income into account in comparing the Company’s and the Peer Group’s earnings, Harvard Illinois’ efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of non-interest operating income and net interest income) of 97.0% was less favorable than the Peer Group’s efficiency ratio of 72.4%.

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	III.12

Loan loss provisions had a larger impact on the Company’s earnings, with loan loss provisions established by the Company and the Peer Group equaling 0.90% and 0.35% of average assets, respectively.

Net gains and losses realized from the sale of assets and other non-operating items including OTTI losses on equity securities equaled a net gain of 0.01% of average assets for the Company and a net loss equal to 0.09% of average assets for the Peer Group. The nominal net gain recorded by the Company was realized through gains on the sale of loans, which was largely offset by OTTI losses on equity securities and a loss on sale of investment securities. The OTTI losses and loss on sale of investment securities are viewed as non-recurring earnings and are not considered to be part of an institution’s core operations. Comparatively, to the extent that gains have been derived through selling fixed rate loans into the secondary market, such gains may be considered to be an ongoing activity for an institution and, therefore, warrant some consideration as a core earnings factor for an institution. However, loan sale gains are still viewed as a more volatile source of income than income generated through the net interest margin and non-interest operating income. Extraordinary items were not a factor in either the Company’s or the Peer Group’s earnings.

As the result of the net loss recorded during the period, Harvard Illinois recorded a tax benefit equal to 32.92% of the pre-tax loss. Comparatively, the Peer Group posted an effective tax rate of 27.53%. As indicated in the prospectus, the Company’s effective marginal tax rate is equal to 39.0%.

Loan Composition

Table 3.4 presents data related to the Company’s and the Peer Group’s loan portfolio compositions (including the investment in mortgage-backed securities). The Company’s loan portfolio composition reflected a slightly lower concentration of 1-4 family permanent mortgage loans and mortgage-backed securities than maintained by the Peer Group (38.8% of assets versus 43.0% for the Peer Group). The Company’s lower ratio was attributable to maintaining a lower concentration of mortgage-backed securities, as the Company maintained a higher concentration of 1-4 family loans than

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	III.14

the Peer Group. Loans serviced for others equaled 38.8% and 12.5% of the Company’s and the Peer Group’s assets, respectively, thereby indicating a greater influence of loan servicing income on the Company’s earnings. Consistent with the Company’s higher ratio of loans serviced for others as a percent of assets, loan servicing intangibles were a slightly larger factor on the Company’s balance sheet (0.24% of assets versus 0.09% for the Peer Group).

Diversification into higher risk and higher yielding types of lending was fairly comparable for the Company and the Peer Group. Consumer loans represented the most significant area of lending diversification for the Company (15.8% of assets), followed by commercial real estate/multi-family loans (12.6% of assets) and commercial business loans (3.7% of assets). The Peer Group’s lending diversification consisted primarily of commercial real estate/multi-family loans (20.5% of assets), followed by commercial business loans (6.5% of assets) and consumer loans (6.5% of assets). Lending diversification for the Company and the Peer Group included comparable levels of construction/land loans (3.5% of assets versus 4.4% of assets for the Peer Group). The Company’s and the Peer Group’s similar concentrations of assets maintained in loans and comparable levels of diversification into higher risk types of loans translated into fairly similar risk weighted assets-to-assets ratios for the Company and the Peer Group (68.25% versus 73.21% for the Peer Group).

Interest Rate Risk

Table 3.5 reflects various key ratios highlighting the relative interest rate risk exposure of the Company versus the Peer Group. In terms of balance sheet composition, Harvard Illinois’ interest rate risk characteristics were considered to be less favorable than the Peer Group’s. Most notably, the Company’s tangible equity-to-assets ratio and IEA/IBL ratio were below the comparable Peer Group ratios. Additionally, the Company’s ratio of non-interest earning assets as a percent of assets was higher than the Peer Group’s ratio. On a pro forma basis, the infusion of stock proceeds should serve to provide the Company with balance sheet interest rate risk characteristics that are comparable to the Peer Group’s measures, particularly with

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respect to the increases that will be realized in the Company’s equity-to-assets and IEA/IBL ratios.

To analyze interest rate risk associated with the net interest margin, we reviewed quarterly changes in net interest income as a percent of average assets for Harvard Illinois and the Peer Group. In general, the more significant fluctuations in the Company’s ratios implied that the interest rate risk associated with the Company’s net interest income was greater compared to the Peer Group’s, based on the interest rate environment that prevailed during the period covered in Table 3.5. The stability of the Company’s net interest margin should be enhanced by the infusion of stock proceeds, as interest rate sensitive liabilities will be funding a lower portion of Harvard Illinois’ assets and the proceeds will be substantially deployed into interest-earning assets.

Credit Risk

Overall, based on a comparison of credit quality measures, the Company’s credit risk exposure was considered to be somewhat greater than the Peer Group’s. As shown in Table 3.6, the Company’s non-performing assets/assets and non-performing loans/loans ratios equaled 1.82% and 2.37%, respectively, versus comparable measures of 1.42% and 1.86% for the Peer Group. The Company’s and Peer Group’s loss reserves as a percent of non-performing loans equaled 48.74% and 137.32%, respectively. Loss reserves maintained as percent of net loans receivable equaled 1.16% for the Company, versus 1.04% for the Peer Group. Net loan charge-offs were more significant for the Company, as net loan charge-offs for the Company equaled 0.79% of loans versus 0.40% of loans for the Peer Group.

Summary

Based on the above analysis, RP Financial concluded that the Peer Group forms a reasonable basis for determining the pro forma market value of the Company. Such general characteristics as asset size, capital position, interest-earning asset composition, funding composition, core earnings measures, loan composition, credit

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	III.18

quality and exposure to interest rate risk all tend to support the reasonability of the Peer Group from a financial standpoint. Those areas where differences exist will be addressed in the form of valuation adjustments to the extent necessary.

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	IV.1

IV. VALUATION ANALYSIS

Introduction

This chapter presents the valuation analysis and methodology, prepared pursuant to the regulatory valuation guidelines, and valuation adjustments and assumptions used to determine the estimated pro forma market value of the common stock to be issued in conjunction with the Company’s conversion transaction.

Appraisal Guidelines

The OTS written appraisal guidelines, which have been adopted in practice by the FDIC and the Illinois Department of Financial and Professional Regulation, specify the market value methodology for estimating the pro forma market value of an institution pursuant to a mutual-to-stock conversion. Pursuant to this methodology: (1) a peer group of comparable publicly-traded institutions is selected; (2) a financial and operational comparison of the subject company to the peer group is conducted to discern key differences; and (3) a valuation analysis in which the pro forma market value of the subject company is determined based on the market pricing of the peer group as of the date of valuation, incorporating valuation adjustments for key differences. In addition, the pricing characteristics of recent conversions, both at conversion and in the aftermarket, must be considered.

RP Financial Approach to the Valuation

The valuation analysis herein complies with such regulatory approval guidelines. Accordingly, the valuation incorporates a detailed analysis based on the Peer Group, discussed in Chapter III, which constitutes “fundamental analysis” techniques. Additionally, the valuation incorporates a “technical analysis” of recently completed stock conversions, including closing pricing and aftermarket trading of such offerings. It should be noted that these valuation analyses cannot possibly fully account for all the

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market forces which impact trading activity and pricing characteristics of a particular stock on a given day.

The pro forma market value determined herein is a preliminary value for the Company’s to-be-issued stock. Throughout the conversion process, RP Financial will: (1) review changes in Harvard Illinois’ operations and financial condition; (2) monitor Harvard Illinois’ operations and financial condition relative to the Peer Group to identify any fundamental changes; (3) monitor the external factors affecting value including, but not limited to, local and national economic conditions, interest rates, and the stock market environment, including the market for thrift stocks; and (4) monitor pending conversion offerings (including those in the offering phase), both regionally and nationally. If material changes should occur during the conversion process, RP Financial will evaluate if updated valuation reports should be prepared reflecting such changes and their related impact on value, if any. RP Financial will also prepare a final valuation update at the closing of the offering to determine if the prepared valuation analysis and resulting range of value continues to be appropriate.

The appraised value determined herein is based on the current market and operating environment for the Company and for all thrifts. Subsequent changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or major world events), which may occur from time to time (often with great unpredictability) may materially impact the market value of all thrift stocks, including Harvard Illinois’ value, or Harvard Illinois’ value alone. To the extent a change in factors impacting the Company’s value can be reasonably anticipated and/or quantified, RP Financial has incorporated the estimated impact into the analysis.

Valuation Analysis

A fundamental analysis discussing similarities and differences relative to the Peer Group was presented in Chapter III. The following sections summarize the key differences between the Company and the Peer Group and how those differences affect the pro forma valuation. Emphasis is placed on the specific strengths and weaknesses

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of the Company relative to the Peer Group in such key areas as financial condition, profitability, growth and viability of earnings, asset growth, primary market area, dividends, liquidity of the shares, marketing of the issue, management, and the effect of government regulations and/or regulatory reform. We have also considered the market for thrift stocks, in particular new issues, to assess the impact on value of the Company coming to market at this time.

1. Financial Condition

The financial condition of an institution is an important determinant in pro forma market value because investors typically look to such factors as liquidity, capital, asset composition and quality, and funding sources in assessing investment attractiveness. The similarities and differences in the Company’s and the Peer Group’s financial strengths are noted as follows:

• Overall A/L Composition. In comparison to the Peer Group, the Company’s interest-earning asset composition showed a slightly lower concentration of cash and investments and a slightly higher concentration of loans. Diversification into higher risk and higher yielding types of loans was similar for the Company and the Peer Group. Overall, in comparison to the Peer Group, the Company’s interest-earning asset composition provided for a lower yield earned on interest-earning assets and a slightly lower risk weighted assets-to-assets ratio. While Harvard Illinois’ funding composition reflected a higher level of deposits and a lower level of borrowings than the comparable Peer Group ratios, the Peer Group’s funding costs were lower than the Company’s. Overall, as a percent of assets, the Company maintained a slightly lower level of interest-earning assets and a slightly higher level of interest-bearing liabilities compared to the Peer Group’s ratios, which resulted in a lower IEA/IBL ratio for the Company. After factoring in the impact of the net stock proceeds, the Company’s IEA/IBL ratio should more comparable to the Peer Group’s ratio. On balance, RP Financial concluded that asset/liability composition was a neutral factor in our adjustment for financial condition.

• Credit Quality. The Company’s ratios for non-performing assets and non-performing loans were slightly above the comparable ratios for the Peer Group. Loss reserves as a percent loans were slightly higher for the Company, while loss reserves as a percent of non-performing loans were significantly higher for the Peer Group. Net loan charge-offs as a percent of loans were higher for the Company. Overall, RP Financial concluded that credit quality was a slightly negative factor in our adjustment for financial condition.

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• Balance Sheet Liquidity. The Company operated with a slightly lower level of cash and investment securities relative to the Peer Group (23.2% of assets versus 25.2% for the Peer Group). Following the infusion of stock proceeds, the Company’s cash and investments ratio is expected to increase as the proceeds retained at the holding company level will be initially deployed into investments. The Company’s future borrowing capacity was considered to be slightly greater than the Peer Group’s, given the lower level of borrowings currently funding the Company’s assets. Overall, RP Financial concluded that balance sheet liquidity was a neutral factor in our adjustment for financial condition.

• Funding Liabilities. The Company’s interest-bearing funding composition reflected a higher concentration of deposits and a lower concentration of borrowings relative to the comparable Peer Group ratios. Overall, the Company’s funding composition provided for a higher cost of funds than maintained by the Peer Group. The Company’s higher cost of funds is reflective of the relatively high concentration of deposits that are maintained in CDs, versus lower costing savings and transaction accounts. Total interest-bearing liabilities as a percent of assets were higher for the Company compared to the Peer Group’s ratio, which was attributable to the Peer Group’s higher capital position. Following the stock offering, the increase in the Company’s capital position will reduce the level of interest-bearing liabilities funding the Company’s assets to a ratio that is more comparable to the Peer Group’s ratio. Overall, RP Financial concluded that funding liabilities were a neutral factor in our adjustment for financial condition.

• Capital. The Company currently operates with a lower equity-to-assets ratio than the Peer Group. However, following the stock offering, Harvard Illinois’ pro forma capital position can be expected to be comparable or slightly exceed the Peer Group’s equity-to-assets ratio. The Company’s pro forma capital position implies similar leverage capacity as the Peer Group, similar dependence on interest-bearing liabilities to fund assets and a similar level of capital to absorb unanticipated losses. On balance, RP Financial concluded that capital strength was a neutral factor in our adjustment for financial condition.

On balance, Harvard Illinois’ balance sheet strength was considered to be comparable to the Peer Group’s and, thus, no adjustment was applied for the Company’s financial condition.

2. Profitability, Growth and Viability of Earnings

Earnings are a key factor in determining pro forma market value, as the level and risk characteristics of an institution’s earnings stream and the prospects and ability to

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generate future earnings heavily influence the multiple that the investment community will pay for earnings. The major factors considered in the valuation are described below.

• Reported Earnings. The Company reported a net loss equal to 0.54% of average assets, versus net income equal to 0.42% of average assets for the Peer Group. The net loss recorded by the Company was mostly attributable to the level of loan loss provisions established during the period, which was well above the level of loss provisions established by the Peer Group. The Peer Group also maintained earnings advantages with respect to net interest income and non-interest operating income. Reinvestment and leveraging of stock proceeds into interest-earning assets will serve to increase the Company’s earnings, with the benefit of reinvesting proceeds expected to be somewhat offset by higher operating expenses associated with operating as a publicly-traded company and the implementation of stock benefit plans. On balance, RP Financial concluded that the Company’s reported earnings were a moderately negative factor in our adjustment for profitability, growth and viability of earnings.

• Core Earnings. Net interest income, operating expenses, non-interest operating income and loan loss provisions were reviewed in assessing the relative strengths and weaknesses of the Company’s and the Peer Group’s core earnings. In these measures, the Company operated with a lower net interest margin, a similar operating expense ratio and a lower level of non-interest operating income. The Company’s ratios for net interest income and operating expenses translated into a lower expense coverage ratio in comparison to the Peer Group’s ratio (equal to 0.93x versus 1.14X for the Peer Group). Similarly, the Company’s efficiency ratio of 97.0% was less favorable than the Peer Group’s efficiency ratio of 72.4%. Loan loss provisions had a notably larger impact on the Company’s earnings. Overall, these measures, as well as the expected earnings benefits the Company should realize from the redeployment of stock proceeds into interest-earning assets and leveraging of post-conversion capital, which will be somewhat negated by expenses associated with the stock benefit plans and operating as a publicly-traded company, indicate that the Company’s pro forma core earnings will be less favorable than the Peer Group’s. Therefore, RP Financial concluded that this was a moderately negative factor in our adjustment for profitability, growth and viability of earnings.

• Interest Rate Risk. Quarterly changes in the Company’s and the Peer Group’s net interest income to average assets ratios indicated that a greater degree of volatility was associated with the Company’s net interest margin. Other measures of interest rate risk, such as capital and IEA/IBL ratios were more favorable for the Peer Group. On a pro forma basis, the infusion of stock proceeds can be expected to provide the Company with equity-to-assets and IEA/ILB ratios that will be fairly comparable to the Peer Group

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ratios, as well as enhance the stability of the Company’s net interest margin through the reinvestment of stock proceeds into interest-earning assets. On balance, RP Financial concluded that interest rate risk was a neutral factor in our adjustment for profitability, growth and viability of earnings.

• Credit Risk. Loan loss provisions were a larger factor in the Company’s earnings (0.90% of average assets versus 0.35% of average assets for the Peer Group). In terms of future exposure to credit quality related losses, the Company and the Peer Group maintained similar concentrations of assets in loans. Lending diversification into higher risk types of loans was similar for the Company and the Peer Group, while the Company’s risk weighed assets-to-assets ratio was slightly lower than the Peer Group’s ratio. Credit quality measures for non-performing assets and loss reserves as a percent of loans and non-performing loans generally implied higher credit risk exposure for the Company. Overall, RP Financial concluded that credit risk was a slightly negative factor in our adjustment for profitability, growth and viability of earnings.

• Earnings Growth Potential. Several factors were considered in assessing earnings growth potential. First, the Company maintained a less favorable interest rate spread than the Peer Group, which would tend to support a stronger net interest margin going forward for the Peer Group. Second, the infusion of stock proceeds will provide the Company with comparable growth potential through leverage as currently maintained by the Peer Group. Third, the Peer Group’s higher ratio of non-interest operating income is viewed as an advantage to sustain earnings growth during periods when net interest margins come under pressure as the result of adverse changes in interest rates. Overall, earnings growth potential was considered to be a slightly negative factor in our adjustment for profitability, growth and viability of earnings.

• Return on Equity. Currently, the Company’ core ROE is less favorable than the Peer Group’s core ROE. Accordingly, as the result of the Company’s lower core earnings and the increase in capital that will be realized from the infusion of net stock proceeds into the Company’s equity, the Company’s pro forma return equity on a core earnings basis can be expected to initially remain lower than the Peer Group’s ROE. Therefore, this was a moderately negative factor in the adjustment for profitability, growth and viability of earnings.

On balance, Harvard Illinois’ pro forma earnings strength was considered to be less favorable than the Peer Group’s and, thus, a moderate downward adjustment was applied for profitability, growth and viability of earnings.

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3. Asset Growth

The Peer Group’s asset growth rate exceeded the Company’s growth rate during the period covered in our comparative analysis, based on asset growth of 4.9% for the Peer Group versus a decrease in assets of 1.2% for the Company. Asset growth for the Peer Group was sustained by a combination of loans and cash and investments, while the Company’s asset shrinkage was mostly due to a decrease in loans which was largely offset by an increase in cash and investments. On a pro forma basis, the Company’s tangible equity-to-assets ratio will be comparable or slightly exceed the Peer Group’s tangible equity-to-assets ratio, indicating comparable leverage capacity for the Company relative to the Peer Group’s leverage capacity. On balance, given the less favorable growth trends in the Company’s interest-earning asset composition, we concluded that a slight downward adjustment was warranted for asset growth.

4. Primary Market Area

The general condition of an institution’s market area has an impact on value, as future success is in part dependent upon opportunities for profitable activities in the local market served. Harvard, Illinois is located in McHenry County, which is a large, fast growing county supported by growth occurring in the part of the county that is in the Chicago MSA. However, Harvard is located outside of the Chicago MSA and is largely a rural area with slower growth characteristics than indicated for all of McHenry County. In Harvard, the Company primarily faces competition with other locally-based institutions and, to a lesser extent, institutions with a regional or national presence.

The Peer Group companies generally operate in a mix of suburban and rural markets, with the majority of the markets served by the Peer Group companies having comparable or smaller populations compared to McHenry County. The markets served by the Peer Group companies reflected slower population growth and lower per capita income compared to McHenry County, which is considered to be more comparable to the Company’s market area in Harvard. The average and median deposit market shares maintained by the Peer Group companies were above the Company’s market share of deposits in McHenry County. Summary demographic and deposit market

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share data for the Company and the Peer Group companies is provided in Exhibit III-4. As shown in Table 4.1, September 2009 unemployment rates for the markets served by the Peer Group companies were generally slightly lower than the unemployment rate for McHenry County. On balance, we concluded that no adjustment was appropriate for the Company’s market area.

Table 4.1

Market Area Unemployment Rates

Harvard Illinois Financial and the Peer Group Companies(1)

	County	September 2009 Unemployment
Harvard Illinois Financial — IL	McHenry	9.3	%
Peer Group Average		8.3	%
Citizens Community Bancorp — WI	Eau Claire	6.0	%
Elmira Savings Bank. — NY	Chemung	8.9
FFD Financial Corp. — OH	Tuscarawas	10.2
First Capital, Inc. — IN	Harrison	7.8
LSB Financial Corp. — IN	Tippecanoe	8.5
Liberty Bancorp, Inc. — MO	Clay	8.6
River Valley Bancorp — IN	Jefferson	9.5
Rome Bancorp, Inc. — NY	Oneida	7.3
WVS Financial Corp. — PA	Allegheny	7.2
Wayne Savings Bancshares — OH	Wayne	8.9

(1) Unemployment rates are not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

5. Dividends

At this time the Company has not established a dividend policy. Future declarations of dividends by the Board of Directors will depend upon a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, stock market characteristics and general economic conditions.

All ten of the Peer Group companies pay regular cash dividends, with implied dividend yields ranging from 1.24% to 6.46%. The average dividend yield on the stocks

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of the Peer Group institutions equaled 4.45% as of November 27, 2009. As of November 27, 2009, approximately 69% of all fully-converted publicly-traded thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield of 2.38%. The dividend paying thrifts generally maintain higher than average profitability ratios, facilitating their ability to pay cash dividends.

Based on the Company’s pro forma capital position and leverage capacity, which will be comparable to slightly greater than the Peer Group’s capital position and leverage capacity, the Company will have the capacity to pay a dividend comparable to the Peer Group’s average dividend yield. On balance, we concluded that no adjustment was warranted for this factor.

6. Liquidity of the Shares

The Peer Group is by definition composed of companies that are traded in the public markets. All ten of the Peer Group members trade on the NASDAQ. Typically, the number of shares outstanding and market capitalization provide an indication of how much liquidity there will be in a particular stock. The market capitalization of the Peer Group companies ranged from $15.6 million to $53.5 million as of November 27, 2009, with average and median market values of $27.4million and $24.4 million, respectively. The shares issued and outstanding to the public shareholders of the Peer Group members ranged from 1.0 million to 6.9 million, with average and median shares outstanding of 3.0 million and 2.4 million, respectively. The Company’s stock offering is expected to have a pro forma market value and shares outstanding that will be below or at the lower end of the range of market values and shares outstanding indicated for the Peer Group companies. It is anticipated that the Company’s stock will be listed for trading on the OTC Bulletin Board following the stock offering, which generally suggests lower liquidity compared to a stock listed on NASDAQ or an exchange. Overall, we anticipate that the Company’s public stock will have a less liquid trading market than the Peer Group companies on average and, therefore, concluded a slight downward adjustment was necessary for this factor.

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7. Marketing of the Issue

We believe that three separate markets exist for thrift stocks, including those coming to market such as Harvard Illinois: (1) the after-market for public companies, in which trading activity is regular and investment decisions are made based upon financial condition, earnings, capital, ROE, dividends and future prospects; (2) the new issue market in which converting thrifts are evaluated on the basis of the same factors, but on a pro forma basis without the benefit of prior operations as a fully-converted publicly-held company and stock trading history; and (3) the acquisition market for thrift franchises in Illinois. All three of these markets were considered in the valuation of the Company’s to-be-issued stock.

A. The Public Market

The value of publicly-traded thrift stocks is easily measurable, and is tracked by most investment houses and related organizations. Exhibit IV-1 provides pricing and financial data on all publicly-traded thrifts. In general, thrift stock values react to market stimuli such as interest rates, inflation, perceived industry health, projected rates of economic growth, regulatory issues and stock market conditions in general. Exhibit IV-2 displays historical stock market trends for various indices and includes historical stock price index values for thrifts and commercial banks. Exhibit IV-3 displays historical stock price indices for thrifts only.

In terms of assessing general stock market conditions, the performance of the overall stock market has been mixed in recent quarters. Stocks started 2009 on an upswing for the first two trading days, which was followed by a one day decline of 245 points in the Dow Jones Industrial Average (“DJIA”). Profit warnings and more evidence of rising unemployment were factors that contributed to the sell-off. Growing concern that the bear market wasn’t over and the start of an expected dismal fourth quarter earnings season accelerated the slide in the broader stock market going into mid-January. The downturn in stocks continued into the second half of January, led by a sell-off in bank stocks amid multi-billion dollar fourth quarter losses posted by some large banks both in the U.S. and Europe. Following a brief rebound in late-January,

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more weak economic data pushed stocks lower at the close of January providing for the worst January performance in the DJIA on record.

Stocks traded unevenly in early-February 2009 and then plunged to new bear market lows in mid-February, based on growing fears of a meltdown in the broader global economy. The negative sentiment in stocks generally continued to prevail through the balance of February and into the start of March, as investors around the globe bet on a prolonged recession and a sustained earnings downturn with the DJIA tumbling below 7000 in early-March for the first time in twelve years. With growing concerns of Citigroup becoming nationalized, the DJIA was down by 25% for the year through the first week of March. Stocks rebounded heading in mid-March on rekindled hopes that banks would weather the financial crisis and positive economic data showing a pick up in new home construction in February. The broader stock market advance strengthened in late-March, as stocks soared after the White House unveiled its plan to clean up banks’ balance sheets. Strong demand in an auction of seven year Treasury notes helped to push the DJIA into bull market territory in late-March, which was followed by a pullback as the U.S. Government threatened bankruptcy for GM and Chrysler. Overall, the first quarter was the sixth straight losing quarter for the DJIA, although the DJIA was up 7.7% in March.

A positive report on manufacturing activity in March and an easing of mark-to-market accounting rules on troubled assets fueled gains in the broader stock market at the start of the second quarter of 2009. For most of April, there were no sustained trends in the broader stock market as investors evaluated signs of an economic recovery and a mix of positive and negative first quarter earnings reports. Overall, strong earnings from some bellwether companies supported a 7.4% increase in the DJIA for the month of April. Stocks generally trended higher in early-May on some positive economic signs, which included April employment data that showed the pace of layoffs slowed. Mixed economic data and profit taking provided for day-to-day fluctuations in the broader stock market through the balance of May, with the DJIA posting a 2.9 % gain for the month. The broader stock market traded in a relatively narrow range during the first half June, which was followed by a pullback in mid-June as

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hopes for a quick economic recovery faded. The global economy continued to weigh down stocks heading into late-June, with the DJIA moving back into negative territory for 2009. More attractive valuations and gains in the energy sector helped to end the broader market downturn in late-June.

The downward trend in the broader market resumed in-early July 2009, with the DJIA falling to its lowest level in more than two months amid anxiety about second quarter earnings and a June employment report which showed more job losses than expected. Stocks rallied in mid-July on strong second quarter earnings reports, which included better-than-expected earnings posted by some bank bellwethers. The DJIA moved past 9000 going into late-July on some more favorable earnings reports and a positive report for new home sales in June. Fueled by a growing belief that the recession was over and favorable unemployment data for July, the DJIA moved to a new high for 2009 in the first week of August. The broader stock market fluctuated in a narrow range through mid-August, reflecting uncertainty over the sustainability of the economic recovery. Better-than-expected economic data for housing and consumer confidence sustained a positive trend in the stock market in late-August, with the DJIA moving to new highs for the year. The broader stock market faltered at the start of September 2009, as investors worried the summer rally would give way to a correction. Encouraging economic data led a rebound in the stock market moving into mid-September, which was followed by a pullback on disappointing housing data for August. Stocks spiked higher in late-September on news of some large merger deals. Despite closing lower at the end of September, the DJIA had its best third quarter since 1939 with a gain of 15% for the quarter.

Stocks started October with a sell-off, as investors reacted negatively to economic data showing a slow down in manufacturing activity from August to September and more job losses than expected for September. Energy and material stocks led a stock market rally heading into mid-October, as stock markets rallied around the world. Good earnings reports from J.P. Morgan Chase and Intel lifted the DJIA above a 10000 close in mid-October. Mixed economic data and concerns of the sustainability of the recovery following the removal of the federal stimulus programs

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provided for volatile trading at the close of October. Stocks moved higher in early-November, with the DJIA topping 10000 again on renewed optimism about the economy aided by a report that manufacturing activity rose around the world in October. Expectations that interest rates and inflation would remain low, following a weaker than expected employment report for October, sustained the rally heading into mid-November. The DJIA hit new highs for the year in mid-November, as investors focused on upbeat earnings from major retailers, signs of economic growth in Asia and the Federal Reserve’s commitment to low interest rates. Stocks traded unevenly through the second half of November, reflecting investor uncertainty over the strength of the economic recovery and Dubai debt worries. On November 27, 2009, the DJIA closed at 10309.92, an increase of 16.8% from one year ago and an increase of 17.5% year-to-date, and the NASDAQ closed at 2138.44, an increase of 39.3% from one year ago and an increase of 35.6% year-to-date. The Standard & Poor’s 500 Index closed at 1091.49 on November 27, 2009, an increase of 21.8% from one year ago and an increase of 20.8% year-to-date.

The market for thrift stocks has been mixed as well in recent quarters, but in general has underperformed the broader stock market. Financial stocks continued to weigh heavily on the performance of the broader stock market during the first quarter of 2009, with the deepening recession extending the financial crisis into 2009. A gloomy economic outlook by the Federal Reserve and indications that the December employment report would show mounting job losses pressured financial stocks lower at the start of 2009. Bank of America and Citigroup led a downturn in financial stocks going into mid-January, as both companies reported significant fourth quarter losses. Mounting concerns over the health of the banking system pushed bank and thrift stocks sharply lower going in the second half of January, with some of the nation’s largest banks trading down 30% to 50% in one day amid worse than expected credit quality deterioration reflected in fourth quarter earnings reports. Oversold thrift stocks bounced higher in late-January and then followed the broader stock market lower to close out January. After trading in a narrow range in early-February, financial stocks led the market lower into mid-February. More bad economic data and the lack of detail in the Treasury’s rescue plan for financial institutions contributed to the sell-off in financial

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	IV.14

stocks. Counter to the broader market, thrift stocks rebounded slightly at the end of February, which was followed by a sell-off in financial stocks in early-March on growing fears of Citigroup becoming nationalized and the implications of further credit quality deterioration amid the prolonged recession. Bank and thrift stocks led a rally in the broader market in mid-March, as investors reacted favorably to a Federal Reserve initiative to provide greater support to the mortgage lending and housing markets through the purchase of $750 billion of agency mortgage-backed securities. The rebound in financial stocks accelerated in late-March, with the release of further details of the U.S. Treasury’s plan to partner with private investors to purchase troubled assets serving as the catalyst to an explosive one day rally. Following a brief pullback, bank and thrift stocks closed out the first quarter with gains on encouraging signs that financial stocks may have bottomed out.

Thrift stocks underperformed the broader stock market during the second quarter of 2009, with credit quality concerns continuing to weigh on the sector in the face of declining home prices and rising vacancy rates becoming more evident for commercial properties. Following a neutral start to the second quarter, thrift stocks move higher along with financial stocks in general on Wells Fargo’s mid-April announcement that it would book record first quarter earnings. Thrift stocks retreated heading into late-April, as investors reacted negatively to first quarter earnings reports showing credit losses growing at Bank of America and Citigroup. Comments from the Treasury Secretary indicating that the large majority of banks had more capital than they needed and a rally in the broader market provided a slight boost to the thrift sector in late-April, which was followed by the thrift sector settling into a narrow trading range during the first half of May. Thrift stocks dipped along with the broader market heading into second half of May, amid concerns about prolonged economic weakness and Standard & Poor’s warning that it may downgrade its rating of the United Kingdom. A healthy gain in the May Consumer Confidence Index and a well received auction of seven-year Treasury notes helped thrift stocks to close out May in a positive trend, which continued into the first part of June. Following a couple weeks of stability in the thrift sector, thrift stocks pulled back along with the broader market on economic and

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	IV.15

currency concerns. Another successful Treasury auction helped thrift stocks to rebound modestly in late-June.

Thrift stocks followed the broader market lower at the start of the third quarter of 2009, as a disappointing June employment report and uncertainty over forthcoming second quarter earnings reports weighed on the sector. Better-than-expected second quarter earnings results posted by some of the large banks fueled a mid-July rally in thrift stocks. Thrift socks traded unevenly heading into late-July, as trading for the sector was impacted by a mix of favorable and disappointing second quarter earnings reports. News that sales of new single-family houses were up in June boosted thrift stocks in late-July, with the upward trend being sustained into early-August on a more optimistic outlook for financial stocks as the economy showed more signs of pulling out of the recession. Thrift stocks pulled back in mid-August on profit taking and worries that earnings improvement may subside for financial stocks in general. Signs that the housing market was improving boosted thrifts stocks heading into late-August, which was followed by a slight pull back for the sector on concerns of more credit losses for thrifts and banks due to erosion in the commercial real estate market. Thrift stocks rebounded in mid-September on some positive comments regarding the level of loan loss reserves maintained by thrifts generally being in good shape. Concerns about the effects of a possible tightening by the Federal Reserve provided for a modest decline in thrift stocks heading into the close of the third quarter.

Disappointing economic data pushed thrift stocks along with the broader market lower at the beginning of October 2009. Thrift stocks rebounded modestly through mid-October, aided by a rally in the broader stock market and a strong earnings report from J.P. Morgan Chase. Worries of more loan losses and a disappointing report on September new home sales provided for a modest retreat in thrift prices in late-October. After bouncing higher on a better-than-expected report for third quarter GDP growth, financial stocks led the broader market lower at the end of October in the face of a negative report on consumer spending. In contrast to the broader market, thrift stocks edged lower following the Federal Reserve’s early-November statement that is would leave the federal funds rate unchanged. Thrift stocks rebounded along with the

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	IV. 16

broader market going into mid-November, following some positive reports on the economy and comments from the Federal Reserve that interest rates would remain low amid concerns that unemployment and troubles in commercial real estate would weigh on the economic recovery. Fresh economic data that underscored expectations for a slow economic recovery and Dubai debt worries pushed thrift stocks lower during the second half of November. On November 27, 2009, the SNL Index for all publicly-traded thrifts closed at 546.3, a decrease of 18.6% from one year ago and a decrease of 16.4% year-to-date.

B. The New Issue Market

In addition to thrift stock market conditions in general, the new issue market for converting thrifts is also an important consideration in determining the Company’s pro forma market value. The new issue market is separate and distinct from the market for seasoned thrift stocks in that the pricing ratios for converting issues are computed on a pro forma basis, specifically: (1) the numerator and denominator are both impacted by the conversion offering amount, unlike existing stock issues in which price change affects only the numerator; and (2) the pro forma pricing ratio incorporates assumptions regarding source and use of proceeds, effective tax rates, stock plan purchases, etc. which impact pro forma financials, whereas pricing for existing issues are based on reported financials. The distinction between pricing of converting and existing issues is perhaps no clearer than in the case of the price/book (“P/B”) ratio in that the P/B ratio of a converting thrift will typically result in a discount to book value whereas in the current market for existing thrifts the P/B ratio may reflect a premium to book value. Therefore, it is appropriate to also consider the market for new issues, both at the time of the conversion and in the aftermarket.

The market for converting thrift issues continues to be affected by the overall weak market for thrift stocks, as only three conversion offerings have been completed since the beginning of 2009. Two small standard conversion offerings were completed in the first quarter of 2009 and a third larger standard conversion offering was completed in mid-July of 2009. No standard conversion offerings have been completed during the past three months. As shown in Table 4.2, one mutual holding

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	IV. 17

company offering was completed during the past three months. Cullman Bancorp’s mutual holding company offering was closed at the top of the valuation range, raising gross proceeds of $10.8 million. Cullman Bancorp’s mutual holding company offering closed at a pro forma fully-converted P/TB ratio of 53.5%. Based on closing stock market prices as of November 27, 2009, Cullman Bancorp’s stock price was 3.5% above its IPO price.

C. The Acquisition Market

Also considered in the valuation was the potential impact on Harvard Illinois’ stock price of recently completed and pending acquisitions of other thrift institutions operating in Illinois. As shown in Exhibit IV-4, there were nine Illinois thrift acquisitions completed from the beginning of 2006 through November 27, 2009, and there is currently one acquisition pending of an Illinois savings institution. The recent acquisition activity involving Illinois savings institutions may imply a certain degree of acquisition speculation for the Company’s stock. To the extent that acquisition speculation may impact the Company’s offering, we have largely taken this into account in selecting companies for the Peer Group which operate in markets that have experienced a comparable level of acquisition activity as the Company’s market and, thus, are subject to the same type of acquisition speculation that may influence Harvard Illinois’ stock. However, since converting thrifts are subject to a three-year regulatory moratorium from being acquired, acquisition speculation in Harvard Illinois’ stock would tend to be less compared to the stocks of the Peer Group companies.

* * * * * * * * * * *

In determining our valuation adjustment for marketing of the issue, we considered trends in both the overall thrift market, the new issue market including the new issue market for thrift conversions and the local acquisition market for thrift stocks. Taking these factors and trends into account, RP Financial concluded that a moderate downward adjustment was appropriate in the valuation analysis for purposes of marketing of the issue.

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	IV. 19

8. Management

Harvard Illinois’ management team appears to have experience and expertise in all of the key areas of the Company’s operations. Exhibit IV-5 provides summary resumes of Harvard Illinois’ Board of Directors and senior management. While the Company does not have the resources to develop a great deal of management depth, given its asset size and the impact it would have on operating expenses, management and the Board have been effective in implementing an operating strategy that can be well managed by the Company’s present organizational structure. Harvard Illinois currently does not have any executive management positions that are vacant.

Similarly, the returns, capital positions and other operating measures of the Peer Group companies are indicative of well-managed financial institutions, which have Boards and management teams that have been effective in implementing competitive operating strategies. Therefore, on balance, we concluded no valuation adjustment relative to the Peer Group was appropriate for this factor.

9. Effect of Government Regulation and Regulatory Reform

In summary, as a fully-converted institution, Harvard Illinois will operate in substantially the same regulatory environment as the Peer Group members — all of whom are adequately capitalized institutions and are operating with no apparent restrictions. Exhibit IV-6 reflects Harvard Savings’ pro forma regulatory capital ratios. On balance, no adjustment has been applied for the effect of government regulation and regulatory reform.

Summary of Adjustments

Overall, based on the factors discussed above, we concluded that the Company’s pro forma market value should reflect the following valuation adjustments relative to the Peer Group:

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	IV. 20

Key Valuation Parameters:	Valuation Adjustment
Financial Condition	No Adjustment
Profitability, Growth and Viability of Earnings	Moderate Downward
Asset Growth	Slight Downward
Primary Market Area	No Adjustment
Dividends	No Adjustment
Liquidity of the Shares	Slight Downward
Marketing of the Issue	Moderate Downward
Management	No Adjustment
Effect of Govt. Regulations and Regulatory Reform	No Adjustment

Valuation Approaches

In applying the accepted valuation methodology promulgated by the OTS and adopted by the FDIC, i.e., the pro forma market value approach, we considered the three key pricing ratios in valuing the Company’s to-be-issued stock — price/earnings (“P/E”), price/book (“P/B”), and price/assets (“P/A”) approaches — all performed on a pro forma basis including the effects of the stock proceeds. In computing the pro forma impact of the conversion and the related pricing ratios, we have incorporated the valuation parameters disclosed in the Company’s prospectus for reinvestment rate, effective tax rate, stock benefit plan assumptions and expenses (summarized in Exhibits IV-7 and IV-8).

In our estimate of value, we assessed the relationship of the pro forma pricing ratios relative to the Peer Group and recent conversion offerings.

RP Financial’s valuation placed an emphasis on the following:

• P/E Approach. The P/E approach is generally the best indicator of long-term value for a stock. However, given that the Company’s reported and core earnings reflected net losses for the twelve months ended September 30, 2009, the Company’s pro forma P/E multiples were not meaningful for purposes of comparison to the Peer Group’s P/E multiples.

• P/B Approach. P/B ratios have generally served as a useful benchmark in the valuation of thrift stocks, particularly in the context of an initial public offering, as the earnings approach involves assumptions regarding the use of proceeds. In deriving Harvard Illinois’ valuation, RP Financial considered the P/B approach to be a highly valuable indicator of pro forma value, since the

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	IV.21

P/E approach did not render meaningful P/E multiples for the Company. We have also modified the P/B approach to exclude the impact of intangible assets (i.e., price/tangible book value or “P/TB”), in that the investment community frequently makes this adjustment in its evaluation of this pricing approach.

• P/A Approach. P/A ratios are generally a less reliable indicator of market value, as investors typically assign less weight to assets and attribute greater weight to book value and earnings. Furthermore, this approach as set forth in the regulatory valuation guidelines does not take into account the amount of stock purchases funded by deposit withdrawals, thus understating the pro forma P/A ratio. At the same time, the P/A ratio is an indicator of franchise value, and, in the case of highly capitalized institutions, high P/A ratios may limit the investment community’s willingness to pay market multiples for earnings or book value when ROE is expected to be low.

The Company will adopt Statement of Position (“SOP”) 93-6, which will cause earnings per share computations to be based on shares issued and outstanding excluding unreleased ESOP shares. For purposes of preparing the pro forma pricing analyses, we have reflected all shares issued in the offering, including all ESOP shares, to capture the full dilutive impact, particularly since the ESOP shares are economically dilutive, receive dividends and can be voted. However, we did consider the impact of the adoption of SOP 93-6 in the valuation.

Based on the application of the three valuation approaches, taking into consideration the valuation adjustments discussed above, RP Financial concluded that, as of November 27, 2009, the pro forma market value of Harvard Illinois’ conversion stock was $9,000,000 at the midpoint, equal to 900,000 shares at $10.00 per share.

1. Price-to-Earnings (“P/E”). The application of the P/E valuation method requires calculating the Company’s pro forma market value by applying a valuation P/E multiple to the pro forma earnings base. In applying this technique, we considered both reported earnings and a recurring earnings base, that is, earnings adjusted to exclude any one-time non-operating items, plus the estimated after-tax earnings benefit of the reinvestment of the net proceeds. The Company’s reported earnings equaled a net loss of $864,000 for the twelve months ended September 30, 2009. In deriving Harvard Illinois’ core earnings, the adjustments made to reported earnings were to eliminate

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	IV.22

losses on sale of investment securities equal to $7,000, losses on OTTI of equity securities equal to $219,000, losses on foreclosed assets equal to $230,000 and gains on the sale of loans equal to $236,000. As shown below, on a tax effected basis, assuming an effective marginal tax rate of 39.0% for the earnings adjustments, the Company’s core earnings were determined to equal a net loss of $730,000 for the twelve months ended September 30, 2009. (Note: see Exhibit IV-9 for the adjustments applied to the Peer Group’s earnings in the calculation of core earnings).

	Amount
	$	(000	)
Net income(loss)	$	(864	)
Add back: Loss on sale of securities(1)		4
Add back: Loss on OTTI of equity securities(1)		134
Add back: Loss on foreclosed assets(1)		140
Deduct: Gain on sale of loans(1)		(144	)
Core earnings estimate	$	(730	)

(1) Tax effected at 39.0%.

Based on the Company’s reported and estimated core earnings and incorporating the impact of the pro forma assumptions discussed previously, the Company’s pro forma reported and core earnings were negative throughout the valuation range. Accordingly, the Company’s pro forma P/E multiples were considered to be not meaningful (“NM”) throughout the valuation range. Comparatively, as shown in Table 4.3, the Peer Group’s average reported and core P/E multiples were 15.74 times and 17.01 times, respectively, and the Peer Group’s median reported and core earnings multiples were 14.19 times and 15.56 times, respectively.

2. Price-to-Book (“P/B”). The application of the P/B valuation method requires calculating the Company’s pro forma market value by applying a valuation P/B ratio, as derived from the Peer Group’s P/B ratio, to the Company’s pro forma book value. Based on the $9.0 million midpoint valuation, the Company’s pro forma P/B and P/TB ratios both equaled 46.82%. In comparison to the average P/B and P/TB ratios for the Peer Group of 72.57% and 79.77%, respectively, the Company’s ratios reflected a discount of 35.5% on a P/B basis and a discount of 41.3% on a P/TB basis. In

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	IV.24

comparison to the Peer Group’s median P/B and P/TB ratios of 80.59% and 81.73%, respectively, the Company’s ratios reflected a discount of 41.9% on a P/B basis and a discount of 42.7% on a P/TB basis. At the top of the super range, the Company’s P/B and P/TB ratios both equaled 54.64%. In comparison to the Peer Group’s average P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 24.7% and 31.5%, respectively. In comparison to the Peer Group’s median P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 32.2% and 33.1%, respectively. RP Financial considered the discounts under the P/B approach to be reasonable, given the nature of the calculation of the P/B ratio which mathematically results in a ratio discounted to book value. The discounts reflected under the P/B approach were also supported by the pro forma net loss shown under the P/E approach.

3. Price-to-Assets (“P/A”). The P/A valuation methodology determines market value by applying a valuation P/A ratio to the Company’s pro forma asset base, conservatively assuming no deposit withdrawals are made to fund stock purchases. In all likelihood there will be deposit withdrawals, which results in understating the pro forma P/A ratio which is computed herein. At the $9.0 million midpoint of the valuation range, the Company’s value equaled 5.48% of pro forma assets. Comparatively, the Peer Group companies exhibited an average P/A ratio of 7.26%, which implies a discount of 24.5% has been applied to the Company’s pro forma P/A ratio. In comparison to the Peer Group’s median P/A ratio of 6.84%, the Company’s pro forma P/A ratio at the midpoint value reflects a discount of 19.9%.

Comparison to Recent Offerings

As indicated at the beginning of this chapter, RP Financial’s analysis of recent conversion offering pricing characteristics at closing and in the aftermarket has been limited to a “technical” analysis and, thus, the pricing characteristics of recent conversion offerings can not be a primary determinate of value. Particular focus was placed on the P/TB approach in this analysis, since the P/E multiples do not reflect the actual impact of reinvestment and the source of the stock proceeds (i.e., external funds

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	IV.25

vs. deposit withdrawals). The only conversion completed during the past three months was Cullman Bancorp of Alabama, which was a mutual holding company offering. Cullman Bancorp’s closing P/TB ratio on a fully-converted basis was 53.5%. In comparison to Cullman Bancorp’s closing pro forma P/TB ratio, the Company’s P/TB ratio of 46.8% at the midpoint value reflects an implied discount of 12.5% and at the top of the super range the Company’s pro forma P/TB ratio reflects an implied premium of 2.1% based on the Company’s pro forma P/TB ratio of 54.6%. As of November 27, 2009, Cullman Bancorp’s stock price closed up 3.5% from its IPO price.

The most recent standard conversion offering completed was completed by Territorial Bancorp of Hawaii on July 14, 2009. Territorial Bancorp’s offering was well received, as the offering was closed at the top of the super range with gross proceeds totaling $122.3 million resulting in a pro forma price/tangible book ratio of 59.4% at closing. Territorial Bancorp’s trading price closed 47.5% above its IPO price after its first week of trading. As of November 27, 2009, Territorial Bancorp closed 67.7% above its IPO price. In comparison to Territorial Bancorp’s closing pro forma P/TB ratio of 59.4%, the Company’s P/TB ratio of 46.8% at the midpoint value reflects an implied discount of 21.2%. At the top of the super range, the Company’s P/TB ratio of 54.6% reflects an implied discount of 8.1% relative to Territorial Bancorp’s closing P/TB ratio.

The success of Territorial Bancorp’s offering, in what is still considered to be a fairly weak market for thrift IPOs, is believed to be related to the specific attributes of Territorial Bancorp’s offering as opposed to a broader market trend. Territorial Bancorp is the largest thrift based in Hawaii and, counter to industry trends in general, has maintained strong earnings and very favorable measures for credit quality during a period when most institutions have reported depressed earnings and increases in loan delinquencies.

Valuation Conclusion

Based on the foregoing, it is our opinion that, as of November 27, 2009, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion equaled $9,000,000 at the midpoint, equal to 900,000 shares

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	IV.26

offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $7,650,000 and a maximum value of $10,350,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 765,000 at the minimum and 1,035,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a supermaximum value of $11,902,500 without a resolicitation. Based on the $10.00 per share offering price, the supermaximum value would result in total shares outstanding of 1,190,250. The pro forma valuation calculations relative to the Peer Group are shown in Table 4.3 and are detailed in Exhibit IV-7 and Exhibit IV-8.

CORRESP

Correspondence to the SEC