<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


                                  FORM 10-QSB


[X]            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For quarterly period ended June 30, 1998        

[ ]             TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                               THE EXCHANGE ACT

                   Commission file number           0-13343

                              ILLINI CORPORATION
       (Exact name of small business issuer as specified in its charter)


                        Illinois                   37-1135429
             (State or other jurisdiction of    (I.R.S. Employer
             incorporation or organization)     Identification No.)


                 3200 West Iles, Springfield,  Illinois   62707
                   (Address of principal executive offices)

                                 (217) 787-5111
                          (Issuer's telephone number)

     Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months 
(or for such shorter period that the registrant was required to file such 
reports), and (2) has been subject to such filing requirements for the past 
90 days.

                                                             Yes   X    No
                                                                  ---      ---



     State the number of shares outstanding of each of the issuer's classes 
of common equity, as of the latest practicable date:  448,456 shares of $10 
par value common stock as of July 31, 1998.

Transitional Small Business Disclosure Format:               Yes       No   X
                                                                  ---      ---

<PAGE>

                              ILLINI CORPORATION
                             INDEX TO FORM 10-QSB
                                 June 30, 1998


<TABLE>
<CAPTION>

                                                                           Page
<S>                                                                        <C>
PART I.  FINANCIAL INFORMATION

   Item 1.  Financial Statements

            Consolidated Balance Sheets
               June 30, 1998 and December 31, 1997                            3

            Consolidated Statements of Income
               Six and Three Months Ended June 30, 1998 and 1997              4

            Consolidated Statements of Cash Flows
               Six Months Ended June 30, 1998 and 1997                        5

            Notes to Interim Consolidated Financial Statements                6

   Item 2.  Management's Discussion and Analysis                              8

   Item 3.  Quantitative and Qualitative Disclosures About                   21
               Market Risk

PART II. OTHER INFORMATION                                                   22

SIGNATURE PAGE                                                               24

EXHIBIT INDEX                                                                25

</TABLE>

<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                       ILLINI CORPORATION AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 1998 AND DECEMBER 31, 1997
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                    JUNE 30,     December 31, 
                                                      1998           1997
                                                 ------------    ------------
                                                    (dollars in thousands)
<S>                                              <C>             <C>
ASSETS 
  Cash and due from banks                          $   4,782      $   5,361
  Interest bearing deposits in other banks                14             77
  Federal funds sold                                   2,200          6,755
  Debt and marketable equity securities
    available for sale, at estimated market value     51,983         46,834
  Loans, net of the allowance for loan losses 
     and unearned income                              81,784         84,987
  Premises and equipment                               7,573          8,077
  Accrued interest receivable                          1,347          1,500
  Other real estate owned                              1,038            551
  Other assets                                           549            772
                                                 ------------    ------------
                                                   $ 151,270      $ 154,914
                                                 ------------    ------------
                                                 ------------    ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
  Non-interest bearing demand deposits                20,479         25,083
  Interest bearing deposits:
    NOW and money market accounts                     35,908         30,596
    Savings deposits                                  17,422         17,820
    Time deposits, $100,000 and over                  13,879         18,659
    Other time deposits                               46,779         45,418
                                                 ------------    ------------
      Total deposits                                 134,467        137,576

  Securities sold under agreements to repurchase         290            715
  Accrued interest payable                               769            784
  Other liabilities                                      945            861
                                                 ------------    ------------
    Total liabilities                                136,471        139,936
                                                 ------------    ------------
  Shareholders' equity:
    Common stock-authorized 800,000 shares of $10
      par value; 448,456 shares issued and 
      outstanding                                      4,485          4,485
    Capital surplus                                    1,886          1,886
    Retained earnings                                  8,193          8,450
    Accumulated other comprehensive income               235            157
                                                 ------------    ------------
  Total shareholders' equity                          14,799         14,978
                                                 ------------    ------------
                                                  $  151,270     $  154,914
                                                 ------------    ------------
                                                 ------------    ------------

</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                       ILLINI CORPORATION AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF INCOME
           THREE MONTHS AND SIX MONTHS ENDED JUNE  30, 1998 AND 1997
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                      Three Months Ended             Six Months Ended
                                                           June 30,                      June 30,
                                                    ----------------------        -----------------------
                                                      1998           1997           1998           1997
                                                    --------       --------       --------       --------
                                                        (dollars in thousands, except per share data)
<S>                                                 <C>            <C>            <C>            <C>
Interest income:
  Interest and fees on loans                        $  1,914       $  2,074       $  3,869       $  4,123
  Interest on debt and marketable equity securities
     Taxable                                             632            588          1,265          1,078
     Tax-exempt                                          104            169            209            336
  Interest on short term investments                      89              1            165              8
                                                    --------       --------       --------       --------
         Total interest income                         2,739          2,832          5,508          5,545
                                                    --------       --------       --------       --------
Interest expense:
  Interest on deposits:
     NOW and money market accounts                       312            180            591            354
     Savings deposits                                    109            113            217            228
     Time deposits, $100,000 and over                    227            210            485            430
     Other time deposits                                 659            615          1,302          1,225
  Interest on borrowings                                   4             83              8            107
                                                    --------       --------       --------       --------
         Total interest expense                        1,311          1,201          2,603          2,344
                                                    --------       --------       --------       --------

         Net interest income                           1,428          1,631          2,905          3,201
Provision for loan losses                                 51             75            102            150
                                                    --------       --------       --------       --------
         Net interest income after provision for 
           loan losses                                 1,377          1,556          2,803          3,051

Noninterest income:
  Service charges on deposit accounts                    266            263            511            512
  Other fee income                                        43             43             81             79
  Mortgage loan servicing fees                            65             47            124             92
  Gain on sale of mortgage loans                          60             17            138             28
  Securities gains (loss)                                 --             (7)             7             (3)
  Other income                                            19             20             42             34
                                                    --------       --------       --------       --------
         Total noninterest income                        453            383            903            742
Noninterest expense:
  Salaries and employee benefits                         892            813          1,759          1,660
  Net occupancy expense                                  178            139            350            317
  Equipment expense                                       82             73            168            153
  Data processing                                        156            123            320            300
  Supplies                                                46             25            100             57
  Communication and transportation                       105             78            203            176
  Marketing and advertising                               40             72             96            133
  Correspondent and processing fees                       36             33             68             67
  Loan and other real estate owned expenses               35             63             79             87
  Professional fees                                      284            132            497            310
  Directors' and regulatory fees                          57             44            105             88
  Other expense                                           90             88            168            154
                                                    --------       --------       --------       --------
         Total noninterest expense                     2,001          1,683          3,913          3,502

             Income (loss) before income 
               tax expense                              (171)           256           (207)           291
Income tax expense (benefit)                            (108)            76           (175)            (5)
                                                    --------       --------       --------       --------
             Net income (loss)                        $  (63)        $  180         $  (32)        $  296
                                                    --------       --------       --------       --------
                                                    --------       --------       --------       --------
Basic earnings (loss) per share
  (based on weighted average common shares 
   outstanding of 448,456 for 1998 and 1997)        $  (0.14)       $  0.40       $  (0.07)       $  0.66
                                                    --------       --------       --------       --------
                                                    --------       --------       --------       --------
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                       ILLINI CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               1998           1997
                                                                            ----------     ----------
                                                                             (dollars in thousands)
<S>                                                                         <C>            <C>
Cash flows from operating activities:
  Net income (loss)                                                         $     (32)     $     296
  Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                                                 488            336
    Provision for loan losses                                                     102            150
    Securities (gains) loss                                                        (7)             3
    Loss on sale of other real estate                                              13             --
    (Increase) decrease in accrued interest receivable                            153            (43)
    Decrease in accrued interest payable                                          (15)           (63)
    Origination of mortgage loans for sale                                    (28,769)        (7,681)
    Proceeds from the sale of mortgage loans                                   29,001          7,169
    Other, net                                                                    234           (133)
                                                                            ----------     ----------
          Net cash provided by operating activities                             1,168             34
                                                                            ----------     ----------
Cash flows from investing activities:
  Proceeds from sales of investments in debt and marketable equity 
    securities available for sale                                               1,479          5,716
  Proceeds from maturities and paydowns of debt and
    marketable equity securities available for sale                             4,734          3,870
  Purchases of debt and marketable equity securities
    available for sale                                                        (11,313)       (13,240)
  Net decrease in loans                                                         2,795          5,596
  Purchases of premises and equipment                                            (409)        (1,476)
  Proceeds from sale of premises and equipment                                      1             --
  Proceeds from sales of other real estate                                        106            242
                                                                            ----------     ----------
          Net cash  provided by (used in) investing activities                 (2,607)           708
                                                                            ----------     ----------
Cash flows from financing activities:
  Net increase (decrease) in non-interest bearing deposit accounts             (4,604)           271
  Net increase in NOW, money market accounts and savings                        4,914          2,391
  Net increase (decrease) in time deposits $100,000 and over                   (4,780)           641
  Net increase in other time deposits                                           1,361            819
  Net decrease in federal funds purchased                                          --         (1,130)
  Net decrease in securities sold under agreements to repurchase                 (425)          (210)
  Net decrease in other short-term borrowings                                      --         (3,000)
  Cash dividends paid                                                            (224)          (224)
                                                                            ----------     ----------
          Net cash used in financing activities                                (3,758)          (442)
                                                                            ----------     ----------
Net increase (decrease) in cash and cash equivalents                           (5,197)           300

Cash and cash equivalents at beginning of period                               12,193          5,513
                                                                            ----------     ----------
Cash and cash equivalents at end of period                                  $   6,996      $   5,813
                                                                            ----------     ----------
                                                                            ----------     ----------
Supplemental Information:
  Income taxes paid                                                         $      37      $       7
  Interest paid                                                             $   2,618      $   2,407
                                                                            ----------     ----------
                                                                            ----------     ----------
Other non-cash investing activities:
  Transfer of loans to other real estate                                    $      74             14
                                                                            ----------     ----------
                                                                            ----------     ----------
  Transfer of premises to other real estate                                 $     533      $      --
                                                                            ----------     ----------
                                                                            ----------     ----------

</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>

                       ILLINI CORPORATION AND SUBSIDIARY
        NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 JUNE 30, 1998

(1)  BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been 
     prepared in accordance with the instructions to Form 10-QSB and, 
     therefore, do not include all of the information and notes required by 
     generally accepted accounting principles for complete consolidated 
     financial statements.  In the opinion of management, all adjustments 
     (consisting of normal recurring accruals) considered necessary for a 
     fair presentation have been included.  For further information, refer to 
     the consolidated financial statements and footnotes included in the 
     Illini Corporation Annual Report on Form 10-KSB for the year ended 
     December 31, 1997.

     Basic earnings per share is computed by dividing income available to 
     common stockholders by the weighted-average number of common shares 
     outstanding for the period.  Illini has no instruments which are 
     dilutive.

     Results for the three and six months ended June 30, 1998 may not be 
     indicative of the annual performance of Illini Corporation (Illini or 
     the Corporation).

(2)  ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS

     The allowance for loan losses is increased by provisions charged to 
     operations and is available to absorb loan losses.  Illini Bank (the 
     Bank), the Corporation's wholly owned subsidiary, utilizes a systematic, 
     documented approach in determining the appropriate level of the 
     allowance for loan losses.  Management's approach, which provides for 
     general and specific allowances, is based on current economic 
     conditions, past loan losses, collection experience, risk 
     characteristics of the portfolio, assessing collateral values by 
     obtaining independent appraisals for significant properties, and such 
     other factors which, in management's judgment, deserve current 
     recognition in estimating potential loan losses.  Management's 
     determination of the allowance for loan losses is one of the significant 
     estimates made by management in the preparation of the consolidated 
     financial statements.

     Loans, except large groups of smaller-balance homogeneous loans, for 
     which the full collection of principal and interest according to the 
     contractual terms of the loan agreement is not probable, are evaluated 
     for impairment. Information regarding impaired loans at June 30, 1998 
     and December 31, 1997 is as follows:

<TABLE>
<CAPTION>

                                                           June 30,       December 31,
                                                             1998             1997
                                                             ----             ----
                                                             (dollars in thousands)
     <S>                                                   <C>             <C>
     Nonaccrual loans                                      $   1,277       $     636
     Impaired loans continuing to accrue interest                 --              50
                                                               -----            ----
     Total impaired loans                                  $   1,277       $     686
                                                               -----            ----
                                                               -----            ----
     Allowance for losses on specific impaired loans       $      --       $      26
     Impaired loans with no specific related allowance
       for loan losses                                         1,277             595
     Average balance of impaired loans during the period         997             977
                                                               -----            ----
                                                               -----            ----
</TABLE>

<PAGE>

(3)  NEW ACCOUNTING PRONOUNCEMENTS

     During 1997, the Financial Accounting Standards Board (FASB) issued 
     Statement of Financial Accounting Standards (SFAS) 131, DISCLOSURES 
     ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.  SFAS 131 is 
     effective for financial statements for periods beginning after December 
     15, 1998, however interim period reporting is not required in 1998.  An 
     operating segment is defined under SFAS 131 as a component of an 
     enterprise that engages in business activities that generate revenue and 
     expense for which operating results are reviewed by the chief operating 
     decision maker in the determination of resource allocation and 
     performance.  Illini is currently evaluating the impact of SFAS 131 on 
     future financial statement disclosures.

     During 1998, the FASB issued SFAS 133, ACCOUNTING FOR DERIVATIVE 
     INSTRUMENTS AND HEDGING ACTIVITIES.  SFAS 133 is effective for all 
     fiscal quarters of fiscal years beginning after June 15, 1999.  This 
     statement should not be applied retroactively to financial statements of 
     prior periods.  This statement requires that an entity recognize all 
     derivatives as either assets or liabilities in the statement of 
     financial position and measure those instruments at fair value.  The 
     accounting for changes in the fair value of a derivative (that is, gains 
     and losses) depends on the intended use of the derivative and the 
     resulting designation.  Illini is currently evaluating the impact of 
     SFAS 133 on future financial statement disclosures.

(4)  OTHER COMPREHENSIVE INCOME

     In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE 
     INCOME, which establishes standards for reporting and display of 
     comprehensive income and its components (revenues, expenses, gains and 
     losses) in a full set of general-purpose financial statements.  Under 
     SFAS 130, comprehensive income is divided into net income and other 
     comprehensive income.  For the three and six months ended June 30, 1998 
     and 1997, unrealized holding gains/losses on debt and equity securities 
     available for sale is the Company's only other comprehensive income 
     component.  Comprehensive income for the three and six months ended June 
     30, 1998 and 1997 is summarized as follows:

<TABLE>
<CAPTION>

                                                           Three Months Ended      Six Months Ended
                                                                June 30,                June 30,
                                                                --------                --------
                                                            1998        1997       1998        1997
                                                            ----------------       ----------------
                                                                     (dollars in thousands)
     <S>                                                   <C>         <C>        <C>         <C>
     Net income (loss)                                     $  (63)     $   180    $  (32)     $   296

     Other comprehensive income - unrealized
      holding gain (loss) on debt and equity
      securities available for sale, net of tax                13          390        78          133
                                                           -------     -------    -------     -------
     Total comprehensive income (loss)                     $  (50)     $   570    $   46      $   429
                                                           -------     -------    -------     -------
</TABLE>

<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS


This discussion should be read in conjunction with the consolidated financial
statements, notes and tables included elsewhere in this report and in the 1997
Illini Corporation Annual Report on Form 10-KSB (1997 Form 10-KSB).  Illini
cautions that any forward looking statements contained in this report, or in any
report incorporated by reference to this report or made by management of Illini
involve risks and uncertainties and are subject to change based on various
factors.  Actual results could differ materially from those expressed or
implied.


SUMMARY

<TABLE>
<CAPTION>

                                                                  Quarter ended                   Six months ended
                                                                     June 30,                          June 30,
                                                                 ---------------      Percent     ---------------      Percent
EARNINGS                                                         1998       1997      Change       1998       1997      Change
--------------------------------------------------------------------------------------------------------------------------------
                                                                          (dollars in thousands, except per share data)
<S>                                                             <C>        <C>       <C>          <C>        <C>       <C>
Total revenue..............................................     $3,192     $3,215      (0.74)%    $6,411     $6,287       1.98%
Net income (loss)..........................................        (63)       180    (135.16)%       (32)       296    (110.91)%
Basic earnings (loss) per share............................     $(0.14)     $0.40    (135.16)%    $(0.07)     $0.66    (110.91)%

KEY RATIOS
---------------------------------------------------------------------------------------------------------------------------------
Return on average assets...................................     (0.16)%      0.49%     (0.65)%     (0.04)%     0.41%     (0.45)%
Return on average equity...................................     (1.73)%      5.07%     (6.80)%     (0.44)%     4.14%     (4.58)%
Average equity to assets...................................       9.53%      9.66%     (0.13)%       9.64%     9.86%     (0.22)%
Tier 1 leverage ratio......................................       9.35%      9.87%     (0.52)%
Tier 1 risk-based capital ratio............................      14.86%     14.65%       0.21%
Total risk-based capital ratio.............................      16.21%     15.89%       0.32%
Dividend payout ratio*.....................................         N/A     62.29%         N/A         N/A    75.81%         N/A
Net interest margin........................................       4.27%      5.13%     (0.86)%       4.39%     5.11%     (0.72)%
Efficiency ratio...........................................     103.35%     80.18%      23.17%      99.89%    85.15%      14.74%

</TABLE>

*1998's amount is not computable due to the net loss for the period.

<PAGE>

RESULTS OF OPERATION

EARNING ASSETS

Average earning assets of the Corporation for the first six months of 1998 
increased 4.05% or $5.4 million to $138.5 million from $133.1 million for the 
first six months of 1997.

As discussed in the asset quality section of this Form 10-QSB, management has 
actively pursued the improvement of the asset quality of all earning assets, 
loans and investment securities.  Management has focused on improving credit 
quality which has resulted in a decline in outstanding loans.  Average 
investments have increased over the six months of 1998 as a result of the 
decrease in loans outstanding.

Average net loans declined to $82.1 million for the three months ended June 
30, 1998 compared to $86.9 million for the same period in 1997.  The decline 
of $4.8 million for the three months ended June 30, 1998 as compared to the 
same period for 1997 was primarily due to a decrease of $4.4 million in 
residential real estate and $3.9 million in consumer loans.  The decline was 
partially offset by an increase of $1.6 million in commercial loans, 
including commercial real estate loans and $1.6 million in agriculture loans. 
 The average yield on the loan portfolio before the allowance for loan losses 
decreased 24 basis points to 9.24% due to slightly lower market interest 
rates, a decline in relatively higher yielding consumer loans, and increasing 
competition for commercial loans in Springfield, Illinois, Illini's principal 
market for commercial loans.

Average net loans declined to $83.0 million for the six months ended June 30, 
1998 compared to $87.6 million for the same period in 1997.  The decline of 
$4.6 million for the six months ended June 30, 1998 as compared to the same 
period in 1997 was primarily due to a decline of $4.1 million in residential 
real estate, and $4.2 million in consumer loans.  The decline was partially 
offset by an increase of $1.5 million in commercial loans, including 
commercial real estate loans and $2.0 million in agriculture loans.   The 
average yield on the loan portfolio before the allowance for loan losses 
decreased 10 basis points to 9.30%.

Average investment securities increased $3.2 million and $4.4 million for the 
three and six months ended June 30, 1998, respectively, as compared to the 
same period in 1997.  The average yield of the investment securities 
portfolio was 6.19% and 6.35% for the three and six months ended June 30, 
1998, respectively, a decrease of 85 and 62 basis points as compared to the 
same periods in 1997. The decrease in yield resulted from management's 
efforts to shorten the duration of the investment portfolio to minimize 
interest rate risk to the Bank.

FUNDING

The most important and stable source of funding is core deposits, considered 
by management to include non-interest bearing demand deposits, NOW and money 
market accounts, savings deposits and time deposits under $100,000.  Average 
core deposits for the six months ended June 30, 1998 increased 7.63% or $8.5 
million to $120.1 million from $111.5 million.  The Bank has incurred 
increased funding costs as it has grown core deposits.  The average rate paid 
on total interest bearing liabilities increased 23 basis points for the six 
months ended June 30, 1998 when compared to the same period in 1997.  The 
cost of time deposits less than $100,000 was up 25 basis points because of 
the Bank's decision to match local competition on rates for existing 
customers.  The cost of interest bearing demand accounts was up 83 basis 
points primarily because of a new money market index account which pays 
competitive money market rates which was introduced in the second half of 
1997.

The increase in core deposits, coupled with steady to declining loan growth 
has assisted Illini in maintaining 


<PAGE>

adequate liquidity.  In addition to federal funds sold, Illini maintains an 
overnight federal funds line of credit with an unaffiliated financial 
institution and an unused line of credit with the Federal Home Loan Bank of 
Chicago.

NET INTEREST INCOME/NET INTEREST MARGIN

The operating results of the Corporation depend primarily on its net interest 
income, which is the difference between interest income on interest-earning 
assets and interest expense on interest-bearing liabilities, consisting 
primarily of deposits.  Net interest income is determined by the difference 
between yields earned on assets and rates paid on liabilities and the 
relative amounts of interest-earning assets and interest-bearing liabilities. 

Interest income, on a fully taxable equivalent basis, was $2.8 million and 
$5.6 million for the three months and six months ended June 30, 1998, 
respectively, which is consistent with the $2.9 million and $5.7 million for 
same periods in 1997, respectively.  Interest expense was $1.3 million and 
$2.6 million for the three and six months ended June 30, 1998, respectively, 
compared to $1.2 and $2.3 million for the same periods in 1997, respectively. 
A slight decline in interest income and a slight increase in interest expense 
resulted in a $0.4 million decline in net interest income for the six months 
ended June 30, 1998. Net interest income of $3.0 million and a net interest 
margin of 4.39% are down when compared to the six months ended June 30, 
1997's net interest income of $3.4 million and margin of 5.11%.  See 
discussion above regarding changes in yields.  Interest income on loans was 
down approximately $0.3 million while investment securities remained 
unchanged for the six months ended June 30, 1998 when compared to the same 
period in 1997.  The increase in interest expense was primarily due to 
interest paid on money market demand deposit accounts which management began 
actively promoting as a funding source in the second half of 1997.

The Bank's net interest margin is down significantly at June 30, 1998 and 
management anticipates that the net interest margin will remain lower than 
preceding periods through the rest of 1998.  The decrease in net interest 
margin is due primarily because of management's decision to take a more 
conservative approach to investing funds not loaned out by shortening the 
investment portfolio's duration and maintaining increased levels of short 
term investments. A decrease in loan volumes also affected margin in the 
second quarter of 1998. The shift toward shorter-term investments is part of 
management's strategy to reevaluate and adjust the Bank's overall asset 
liability structure in 1998. Management will continue to take steps toward 
the Bank's overall objective which is to increase portfolio yields without 
jeopardizing the enhanced liquidity that has been gained thus far.

Net interest income is affected by the growth, pricing, mix and maturity of 
interest earning assets and interest bearing liabilities, as well as other 
factors, including loan quality.  Also, the Corporation's interest-rate 
spread is affected by regulatory, economic and competitive factors that 
influence interest rates, loan demand and deposit flow.  Individual 
components of net interest income and net interest margin are presented in 
the consolidated average balance, interest income/expense and yield/rate 
tables on pages 11 and 12 and a net interest income rate/volume variance 
analysis on pages 13 and 14.


<PAGE>

CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES

<TABLE>
<CAPTION>


                                                                     Quarter ended June  30,
                                        -----------------------------------------------------------------------------------
                                                       1998                                     1997
                                        ---------------------------------------  ------------------------------------------
                                                   PERCENT   INTEREST  AVERAGE               Percent    Interest    Average
                                        AVERAGE    OF TOTAL  INCOME/   YIELD/    AVERAGE     of Total   Income/     Yield/
                                        BALANCE     ASSETS   EXPENSE    RATE     BALANCE      Assets    Expense      Rate
                                        --------   -------   -------   -------   -------     --------   -------     -------
                                                                      (dollars in thousands)
<S>                                     <C>        <C>      <C>        <C>       <C>         <C>       <C>         <C>
ASSETS

Interest-earning assets:
  
  Short-term investments                $  6,643     4.3%   $   89      5.53%    $     47       0.0%   $    1       8.29%
     Investment securities (3)
       Taxable                            42,510    27.5       632      5.95       34,186      23.2       588       6.87
       Tax-exempt (1)                      8,019     5.2       150      7.49       13,186       9.0       245       7.46
                                        --------   ------  -------     ------    --------     ------   ------      ------
         Total securities                 50,529    32.7       782      6.19       47,372      32.2       833       7.04
     Loans
       Commercial (1)                     15,659    10.1       366      9.38       16,326      11.1       414      10.17
       Agriculture                         7,290     4.7       151      8.33        5,658       3.8       123       8.71
       Real estate
         Commercial                       25,510    16.5       577      9.08       23,237      15.8       529       9.12
         Agriculture                       2,603     1.7        59      9.04        2,240       1.5        51       9.19
         Residential                      20,724    13.4       468      9.05       25,129      17.1       579       9.25
       Consumer, net                      11,035     7.2       274      9.94       14,904      10.1       362       9.73
       Credit card                           619     0.4        27     17.34          626       0.4        25      16.34
                                        --------           -------               --------              ------
         Total loans                      83,440    54.0     1,922      9.24       88,120      59.8     2,083       9.48
  Allowance for loan losses               (1,329)   (0.9)                          (1,221)     (0.8)            
                                        --------           -------               --------              
  Net loans (1) (2)                       82,111    53.2     1,922      9.39       86,899      59.0     2,083       9.61
                                        --------   ------  -------               --------     ------   ------
  Total interest earning assets          139,283    90.2     2,793      8.04      134,318      91.2     2,917       8.71
                                        --------           -------               --------              ------
  Cash and due from banks                  4,345     2.8                            4,427       3.0 
  Premises and equipment                   7,654     4.9                            6,150       4.2 
  Other real estate owned                  1,020     0.7                              579       0.4
  Other assets (3)                         2,111     1.4                            1,869       1.2 
                                        --------   ------                        --------     ------
         TOTAL ASSETS                   $154,413   100.0%                        $147,343     100.0%
                                        --------   ------                        --------     ------
                                        --------   ------                        --------     ------
LIABILITIES

Interest-bearing liabilities:
  Deposits
    Non-interest bearing deposits        $21,553    14.0%                         $20,316      13.8%
     Interest bearing demand              34,534    22.4   $   312      3.63%      26,222      17.8    $  180       2.75%
     Savings                              17,854    11.6       109      2.45       18,480      12.5       113       2.46
     Time deposits less than $100,000     47,577    30.8       659      5.55       45,989      31.2       615       5.36
                                        --------           -------               --------              ------
     Total core deposits                 121,518    78.7     1,080      3.57      111,007      75.3       908       3.28
     Time deposits $100,000 and over      16,054    10.4       227      5.67       14,987      10.2       210       5.62
                                        --------           -------               --------              ------
       Total deposits                    137,572    89.1     1,307      3.81      125,994      85.5     1,118       3.56
  Short-term borrowings                      288     0.2         4      5.41        5,606       3.8        83       5.94
     Total interest bearing liabilities  116,307    75.3     1,311      4.52      111,284      75.5     1,201       4.33
  Other liabilities                        1,840     1.2                            1,508       1.0
                                        --------   ------                        --------     ------
     Total liabilities                   139,700    90.5                          133,108      90.3
  Shareholders' Equity                    14,713     9.5                           14,235       9.7
                                        --------   ------                        --------     ------
     TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY               $154,413   100.0%                        $147,343     100.0%
                                        --------   ------                        --------     ------
                                        --------   ------                        --------     ------
  NET INTEREST MARGIN                                      $ 1,482      4.27%                          $1,716       5.13%
                                                           -------     ------                          ------      ------
                                                           -------     ------                          ------      ------
</TABLE>

(1)  Income amounts are presented on a fully taxable equivalent basis (FTE),
     which is defined as income on earning assets that is subject to either a
     reduced rate or zero rate of income tax, adjusted to give effect to the
     appropriate incremental federal income tax rate and adjusted for 
     non-deductible carrying costs, where applicable.  Where appropriate, yield
     calculations include these adjustments.  The federal statutory rate was 34%
     for all periods presented.
(2)  Nonaccrual loans are included in the loan balances.  Interest income
     includes related fee income of $60,000 in 1998 and $66,000 in 1997.
(3)  Average securities balances are based on amortized historical cost,
     excluding SFAS 115 adjustments to fair value, which are included in other
     assets.

<PAGE>

CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES

<TABLE>
<CAPTION>


                                                                   Six Months ended June  30,
                                        -----------------------------------------------------------------------------------
                                                       1998                                     1997
                                        ---------------------------------------  ------------------------------------------
                                                   PERCENT   INTEREST  AVERAGE               Percent    Interest    Average
                                        AVERAGE    OF TOTAL  INCOME/   YIELD/    Average     of Total   Income/     Yield/
                                        BALANCE     ASSETS   EXPENSE    RATE     Balance      Assets    Expense      Rate
                                        --------   -------   -------   -------   -------     --------   -------     -------
                                                                      (dollars in thousands)
<S>                                     <C>        <C>      <C>        <C>       <C>         <C>       <C>         <C>
ASSETS

Interest-earning assets:
  
  Short-term investments                $  6,230     4.0%   $  165      5.35%    $    568       0.4%   $    8       2.95%
     Investment securities (3)
       Taxable                            41,274    26.8     1,265      6.13       31,836      21.8     1,078       6.77
       Tax-exempt (1)                      8,051     5.2       302      7.51       13,072       8.9       487       7.46
                                        --------   ------  -------     ------    --------     ------   ------      ------
         Total securities                 49,325    32.0     1,567      6.35       44,908      30.7     1,565       6.97
     Loans
       Commercial (1)                     15,499    10.1       724      9.42       14,412       9.9       728      10.18
       Agriculture                         6,963     4.5       295      8.53        5,001       3.4       223       8.98
       Real estate
         Commercial                       25,727    16.7     1,160      9.09       25,330      17.3     1,139       9.07
         Agriculture                       2,496     1.6       113      9.14        2,198       1.5       100       9.15
         Residential                      21,495    14.0       980      9.20       25,632      17.5     1,159       9.12
       Consumer, net                      11,460     7.4       559      9.84       15,657      10.7       742       9.55
       Credit card                           631     0.4        54     17.26          635       0.4        51      16.24
                                        --------           -------               --------              ------
         Total loans                      84,271    54.7     3,885      9.30       88,865      60.7     4,142       9.40
  Allowance for loan losses               (1,317)   (0.8)                          (1,229)     (0.8)            
                                        --------           -------               --------              
  Net loans (1) (2)                       82,954    53.9     3,885      9.44       87,636      59.9     4,142       9.53
                                        --------   ------  -------               --------     ------   ------
  Total interest earning assets          138,509    89.9     5,617      8.18      133,112      91.0     5,715       8.66
                                        --------           -------               --------              ------
  Cash and due from banks                  4,606     3.0                            4,631       3.2 
  Premises and equipment                   7,931     5.1                            5,854       4.0 
  Other real estate owned                    774     0.5                              660       0.5
  Other assets (3)                         2,296     1.5                            1,948       1.3 
                                        --------   ------                        --------     ------
         TOTAL ASSETS                   $154,116   100.0%                        $146,205     100.0%
                                        --------   ------                        --------     ------
                                        --------   ------                        --------     ------
LIABILITIES

Interest-bearing liabilities:
  Deposits
    Non-interest bearing deposits        $21,347    13.9%                         $19,987      13.7%
     Interest bearing demand              33,663    21.8   $   591      3.54%      26,337      18.0    $  354       2.71%
     Savings                              17,769    11.5       217      2.46       18,612      12.7       228       2.47
     Time deposits less than $100,000     47,274    30.7     1,302      5.55       46,611      31.9     1,225       5.30
                                        --------           -------               --------              ------
     Total core deposits                 120,053    77.9     2,110      3.54      111,547      76.3     1,807       3.27
     Time deposits $100,000 and over      17,142    11.1       485      5.71       15,079      10.3       430       5.75
                                        --------           -------               --------              ------
       Total deposits                    137,195    89.0     2,595      3.82      126,626      86.6     2,237       3.56
  Short-term borrowings                      298     0.2         8      5.42        3,652       2.5       107       5.91
     Total interest bearing liabilities  116,146    75.3     2,603      4.52      110,291      75.4     2,344       4.29
  Other liabilities                        1,763     1.2                            1,511       1.0
                                        --------   ------                        --------     ------
     Total liabilities                   139,256    90.4                          131,789      90.1
  Shareholders' Equity                    14,860     9.6                           14,416       9.9
                                        --------   ------                        --------     ------
     TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY               $154,116   100.0%                        $146,205     100.0%
                                        --------   ------                        --------     ------
                                        --------   ------                        --------     ------
  NET INTEREST MARGIN                                      $ 3,014      4.39%                          $3,371       5.11%
                                                           -------     ------                          ------      ------
                                                           -------     ------                          ------      ------
</TABLE>

(1)  Income amounts are presented on a fully taxable equivalent basis (FTE),
     which is defined as income on earning assets that is subject to either a
     reduced rate or zero rate of income tax, adjusted to give effect to the
     appropriate incremental federal income tax rate and adjusted for 
     non-deductible carrying costs, where applicable.  Where appropriate, yield
     calculations include these adjustments.  The federal statutory rate was 34%
     for all periods presented.
(2)  Nonaccrual loans are included in the loan balances.  Interest income
     includes related fee income of $125,000 in 1998 and $119,000 in 1997.
(3)  Average securities balances are based on amortized historical cost,
     excluding SFAS 115 adjustments to fair value, which are included in other
     assets.

<PAGE>

NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS(*)

<TABLE>
<CAPTION>

                                       QUARTER ENDED JUNE 30, 1998
                                             AS COMPARED TO
                                       QUARTER ENDED JUNE 30, 1997
                                --------------------------------------
                                  CHANGES IN      VOLUME         RATE
                                INCOME/EXPENSE    EFFECT        EFFECT
                                --------------    ------        ------
                                        (dollars in thousands)
<S>                             <C>               <C>          <C>
Short-term investments             $    88        $  136       $   (48)
Investment securities:
   Taxable                              44           142           (98)
   Nontaxable                          (95)          (96)            1
                                   --------       -------      --------
         Total securities              (51)           46           (97)
Loans:
   Commercial                          (48)          (17)          (31)
   Agriculture                          28            35            (7)
   Real Estate:
      Commercial                        48            52            (4)
      Agriculture                        8             8            --
      Residential                     (111)         (101)          (10)
   Consumer, net                       (88)          (94)            6
   Credit card                           2            --             2
                                   --------       -------      --------
         Total loans                  (161)         (117)          (44)
                                   --------       -------      --------
   Total interest income              (124)           65          (189)
                                   --------       -------      --------
Interest bearing demand                132           (32)          164
Savings                                 (4)           98          (102)
Time deposits less than $100,000        44          (376)          420
                                   --------       -------      --------
         Total core deposits           172          (310)          482
Time deposits $100,000 and over         17            15             2
                                   --------       -------      --------
         Total deposits                189          (295)          484
Short-term borrowings                  (79)          (79)           --
                                   --------       -------      --------
   Total interest expense              110          (374)          484
                                   --------       -------      --------
         Net interest income       $  (234)       $  439       $  (673)
                                   --------       -------      --------
                                   --------       -------      --------
</TABLE>

(*) Fully taxable equivalent basis
NOTE:  The change in interest which can not be attributed to only a change in
       volume or a change in rate, but instead represents a combination of the 
       two factors, has been allocated to the rate effect.

<PAGE>

NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS(*)

<TABLE>
<CAPTION>

                                    SIX MONTHS ENDED JUNE 30, 1998
                                           AS COMPARED TO
                                    SIX MONTHS ENDED JUNE 30, 1997
                                --------------------------------------
                                  CHANGES IN      VOLUME         RATE
                                INCOME/EXPENSE    EFFECT        EFFECT
                                --------------    ------        ------
                                        (dollars in thousands)
<S>                             <C>               <C>          <C>
Short-term investments             $   157        $   83       $   74
Investment securities:
   Taxable                             187           317         (130)
   Nontaxable                         (185)         (186)           1
                                   --------       -------      --------
         Total securities                2           131         (129)
Loans:
   Commercial                           (4)           55          (59)
   Agriculture                          72            87          (15)
   Real Estate:
      Commercial                        21            18            3
      Agriculture                       13            13           --
      Residential                     (179)         (187)           8
   Consumer, net                      (183)         (199)          16
   Credit card                           3            --            3
                                   --------       -------      --------
         Total loans                  (257)         (213)         (44)
                                   --------       -------      --------
   Total interest income               (98)            1          (99)
                                   --------       -------      --------
Interest bearing demand                237            99          138
Savings                                (11)          (10)          (1)
Time deposits less than $100,000        77            17           60
                                   --------       -------      --------
         Total core deposits           303           106          197
Time deposits $100,000 and over         55            59           (4)
                                   --------       -------      --------
         Total deposits                358           165          193
Short-term borrowings                  (99)          (98)          (1)
                                   --------       -------      --------
   Total interest expense              259            67          192
                                   --------       -------      --------
         Net interest income       $  (357)       $  (66)      $ (291)
                                   --------       -------      --------
                                   --------       -------      --------
</TABLE>

(*)  Fully taxable equivalent basis
NOTE:  The change in interest which can not be attributed to only a change in
       volume or a change in rate, but instead represents a combination of the 
       two factors, has been allocated to the rate effect.



<PAGE>

NONINTEREST INCOME

<TABLE>
<CAPTION>
                                            Three months ended        Percent          Six months ended         Percent
                                                 June 30,              Change               June 30,             Change
                                            ------------------       ---------        -------------------       ---------
                                              1998      1997         1998/1997        1998           1997       1998/1997
                                            ------      ------       ---------        ----           ----       ---------
                                                                       (dollars in thousands)
<S>                                           <C>       <C>             <C>           <C>            <C>          <C>
Service charges on deposit accounts           $266      $263              1.1%        $511           $512          (0.2)%
Other fee income                                43        43            ---             81             79           2.5
Mortgage loan servicing fees                    65        47             38.3          124             92          34.8
Gain on sale of mortgage loans                  60        17            252.9          138             28         392.9
Securities gains (loss)                          0        (7)           100.0            7             (3)        333.3
Other income                                    19        20             (5.0)          42             34          23.5
                                              ----      ----            -----         ----           ----         -----
                                              $453      $383             18.3%        $903           $742          21.7
                                              ----      ----            -----         ----           ----         -----
                                              ----      ----            -----         ----           ----         -----
</TABLE>

Services charges on deposit accounts remained relatively steady for the three 
and six months ending June 30, 1998 compared to the same period in 1997.  
Other fee income and securities gains (loss) were relatively unchanged.  
Other income was up because of increased commission on check sales to new 
account customers.

The Bank experienced a significant increase in fixed rate mortgage loan 
originations which are sold on the secondary market.  Declining interest 
rates, coupled with effective marketing strategies, significantly increased 
the volume of residential real estate refinance loans.  This, in turn, 
increased the Bank's gain on sale of these loans and to a lesser extent, 
increased servicing income.

<PAGE>

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
                                            Three months ended        Percent          Six months ended         Percent
                                                 June 30,              Change               June 30,             Change
                                            ------------------       ---------        -------------------       ---------
                                              1998      1997         1998/1997        1998           1997       1998/1997
                                            ------      ------       ---------        ----           ----       ---------
                                                                       (dollars in thousands)
<S>                                         <C>       <C>               <C>         <C>            <C>          <C>
Salaries and employee benefits              $  892    $  813              9.7%      $1,759         $1,660            6.0%
Net occupancy expense                          178       139             28.1          350            317           10.4
Equipment expense                               82        73             12.3          168            153            9.8
Data processing                                156       123             26.8          320            300            6.7
Supplies                                        46        25             84.0          100             57           75.4
Communication and transportation               105        78             34.6          203            176           15.4
Marketing and advertising                       40        72            (44.4)          96            133          (27.8)
Correspondent and processing fees               36        33              9.1           68             67            1.5
Loan and other real estate owned expenses       35        63            (44.4)          79             87           (9.2)
Professional fees                              284       132            115.2          497            310           60.3
Directors' and regulatory fees                  57        44             29.5          105             88           19.3
Other expense                                   90        88              2.3          168            154            9.1
                                            ------    ------            -----       ------         ------        -------
                                            $2,001    $1,683             18.9       $3,913         $3,502           11.7
                                            ------    ------            -----       ------         ------        -------
                                            ------    ------            -----       ------         ------        -------
</TABLE>

Increases in salaries and employee benefits, net occupancy expense, data 
processing, and supplies expense for the three and six months ended June 30, 
1998 were related to Illini Bank's opening a new banking, corporate, and 
operations location at 3200 West Iles in Springfield.  These increases were 
the result of salaries and employee benefits of new employees to staff the 
new office, annual merit increases to other Bank employees, and typical new 
occupancy expenses, including the relocation of operations and credit 
administration from other locations, and one-time expenses for open house 
activities for customers and startup. 

Professional fees totaling $284,000 and $497,000 for the three and six months 
ended June 30, 1998, respectively, are up $152,000 and $187,000 from the same 
periods in 1997, respectively, and remain significantly above historical 
levels. Approximately $348,000 or 70% of the professional fees incurred for 
the six months ended June 30, 1998 represents fees paid to a national 
consulting firm to reengineer the Bank's operations.  An additional estimated 
$19,000 of fees related to this reengineering will be incurred in the last 
six months of 1998. Total professional fees are expected to return to peer 
levels by January 1, 1999.  Because of the reengineering, and net of 
severance payments paid to departing employees, the Bank has reduced annual 
employee compensation by $798,000.  This part of the Bank's efforts to 
substantially increase net income and return to shareholders was discussed in 
greater detail in the Corporation's 1997 Form 10-KSB.  

In the first six months of 1997, the Company incurred approximately $22,000 
of professional fees to study and approve a Shareholder Rights Agreement 
designed to protect the right of all Illini shareholders to receive a fair 
price for their shares.  Although minimal professional fees have been 
incurred to maintain the plan since its adoption, the Company may from time 
to time incur expenses to determine the market value of Illini's stock as 
required by the plan and to revise the plan as circumstances may require.

<PAGE>

YEAR 2000 ISSUES

In 1998, Illini will complete a comprehensive review of its computer systems 
to identify those systems that could be affected by the "Year 2000" issue and 
is developing an implementation plan to resolve any potential problems 
revealed. The Year 2000 problem is the result of computer programs being 
written using two digits rather than four to define the applicable year.  Any 
of Illini's programs that have time-sensitive software may recognize a date 
using "00" as the year 1900 rather than the year 2000.  This could result in 
a major system failure or miscalculations.  Management presently believes 
that, with modifications to existing software and by converting to new 
software, the Year 2000 problem will not pose significant operational 
problems for the Bank's computer systems as so modified and converted.  
However, if such modifications and conversions are not completed timely, the 
Year 2000 problem may have a material impact on the operations of Illini.  
The Corporation incurred $35,000 in expenses for the six month period ended 
June 30, 1998 and anticipates incurring an additional $60,000 for Year 2000 
related expenses through the end of 1998. 

<PAGE>

CREDIT QUALITY

Gross loans totaled $83.1 million at June 30, 1998, a decline of $3.2 
million, or 3.7%, from $86.3 million at December 31, 1997, while the 
allowance for loan losses has remained relatively consistent at $1.3 million 
at June 30, 1998 and December 31, 1997, respectively.  The allowance as a 
percent of total loans and nonperforming loans decreased from 164.70% at June 
30, 1997 to 102.19% at June 30, 1998 due to an increase in nonperforming 
loans.  Approximately 48% of the increase in nonperforming loans was the 
result of management's decision to delay the renewal of two commercial loans 
to allow the Bank to enhance its security position.  The remaining increase 
in nonperforming assets is primarily attributable to the Bank's reclassifying 
a property from Bank premises to available for sale, a decision based on 
conclusions reached during strategic planning regarding the desired level of 
the Bank's investment in real estate devoted to the retail delivery of its 
products and services.  Declining consumer and residential real estate loan 
balances have been substantially offset by increases in commercial and 
agricultural loans.

<TABLE>
<CAPTION>
                                           Three Months Ended           Six Months Ended
                                                June 30,                   June 30,
                                           ------------------         -------------------
                                             1998      1997           1998           1997
                                           -------    -------        ------         ------
ALLOWANCE FOR LOAN LOSSES:                            (dollars in thousands)
<S>                                         <C>       <C>            <C>            <C>
    Balance at beginning of period          $1,324    $1,216         $1,302         $1,258
    Provision charged to expense                51        75            102            150
    Charge-offs                                 81        74            123            207
    Less:  recoveries                           11        10             24             26
                                            ------    ------         ------         ------
        Net charge-offs                         70        64             99            181
                                            ------    ------         ------         ------
    Ending allowance for loan losses        $1,305    $1,227         $1,305         $1,227
                                            ------    ------         ------         ------
                                            ------    ------         ------         ------
NET CHARGE-OFF RATIOS (1):
        Commercial                            0.28%    (0.02)%         0.24%          0.15%
        Real Estate                           0.03      0.18           0.01           0.29
        Installment                           1.64      1.00           0.92           1.06
        Credit Cards                          3.24      3.20           5.43           2.86
        Totals                                0.34%     0.29%          0.24%          0.41%
</TABLE>

(1) Ratios to average loans are presented on  an annualized basis

Illini's primary business of making commercial, real estate and consumer 
loans entails potential losses, the magnitude of which depends on a variety 
of economic factors affecting borrowers which are beyond the control of the 
Corporation.  Accordingly, a significant factor in the Corporation's past and 
future operating results is the level of the provision for loan losses.  The 
provision for loan losses decreased to $51,000 and $102,000 for the three and 
six months ended June 30, 1998, respectively, as compared to $75,000 and 
$150,000 for the comparable periods in the prior year.  Net charge-offs 
increased to $70,000 and decreased to $99,000 for the three and six months 
ended June 30, 1998, respectively, as compared to $64,000 and $181,000 for 
the comparable periods in the prior year.

For the six months ended June 30, 1998, provision expense and net loan losses 
decreased.  The net charge off ratio for the three and six months ended June 
30, 1998 was 0.34% and 0.24% compared to 0.29% and 1.17% for years ended 
December 31, 1997 and 1996, respectively.

Despite an increase in nonperforming loans for the reasons given above, 
management believes that credit quality systems of loan review and default 
risk management implemented in 1996 and 1997 have resulted in an overall 
improvement in the credit quality of the Bank's loan portfolio.  As noted 
above, the increase in nonaccrual loans in the three months ended June 30, 
1998 was the result of the management's decision to delay the renewal of two 


<PAGE>

commercial credits to allow the Bank to enhance its security position.  
Management believes the increase in nonaccrual loans does not reflect 
adversely on the collectibility on either of these loans or the overall 
portfolio.

At June 30, 1998, impaired loans totaled $1,277,000 for which no allowance 
for loan losses has been allocated compared to December 31, 1997 impaired 
loans of $686,000 for which an allowance for loan losses of $26,000 had been 
allocated. Of the total impaired loans at June 30, 1998 there were no loans 
still accruing interest, and at December 31, 1997 loans totaling $50,000 were 
continuing to accrue interest.

<TABLE>
<CAPTION>
                                          JUNE 30,   December 31,    June 30,
CREDIT QUALITY                              1998        1997          1997
                                          --------   ------------    --------
                                                (dollars in thousands)
<S>                                         <C>       <C>            <C>
NONPERFORMING ASSETS:
    Loans delinquent over 90 days, 
     still accruing interest                $    0    $    0         $   96
    Nonaccrual                               1,277       636            649
    Other real estate owned                  1,038       551            522
                                            ------    ------         ------
    Total nonperforming assets              $2,315    $1,187         $1,267
                                            ------    ------         ------
                                            ------    ------         ------

KEY RATIOS:                                       
    Nonperforming loans to ending loans       1.54%     0.74%          0.85%
    90 days delinquent to ending loans        0.00      0.00           0.11
    Allowance to ending loans                 1.57      1.51           1.39
    Allowance to nonperforming loans        102.19    204.72         164.70
</TABLE>

Illini's loan underwriting guidelines, credit review procedures and policies 
are designed to protect the Corporation from avoidable credit losses.  
Illini's process for monitoring loan quality includes detailed monthly trend 
analysis of delinquencies and non-performing assets.  Management and the 
board of directors monitor potential problem loans, changes to the watchlist 
and extensions of credit outside of the loan policy.  Management extensively 
monitors significant credit relationships through appraisals, assessment of 
the financial condition of borrowers, restrictions on out-of-area lending, 
and avoidance of loan concentrations.

As discussed in the Corporation's 1997 Form 10-KSB and previous 10-QSB 
reports, management has implemented several initiatives to improve credit 
quality.  These steps include a new officer driven problem loan 
identification system, a revamped allowance adequacy determination process, a 
new loan policy, and improved reporting systems (credit quality and 
production).  Management is committed to continuing these initiatives and is 
supplementing these efforts in 1998 by engaging an outside firm to perform a 
comprehensive review of the Bank's loan portfolio to assess its credit 
quality and the effectiveness of management loan quality systems and controls.

The sharp increase in other real estate owned results from the transfer of a 
$533,000 property from bank premises.  The property was acquired in 1995 and 
was held for potential future expansion in the Bloomington/Normal, Illinois 
market. Management abandoned its plans to build a facility on this site.  In 
July 1998, the Bank sold this property at a gain and continues to 
aggressively market the remaining other real estate properties.  Management 
expects no losses will be incurred on the disposition of the remaining other 
real estate properties.

<PAGE>

CAPITAL RESOURCES

The current economic and regulatory environment places increased emphasis on 
capital strength.  A strong capital position, which is vital to the continued 
profitability of Illini, also promotes depositor and investor confidence and 
provides a solid foundation for the future growth of the organization.  
Despite the minimal loss from operations in the first six months of 1998, 
management believes earnings will be an adequate source of capital to fund 
future growth. At June 30, 1998, Tier 1 risk based capital, total risk-based 
capital and leverage capital ratios were 14.86%, 16.21% and 9.35%, 
respectively.  As of June 30, 1998, the Bank met the criteria to be 
classified as "well capitalized."

Earnings retention is affected by the board of director's declaration of cash 
dividends.  As previously discussed, the Bank has recognized significant 
expense relating to the overall reengineering process.  Management expects 
these efforts to enhance long term performance.  However, in the short term, 
net income was depressed for the first six months of 1998 and consequently 
the dividend payout ratio is elevated.  The total dollar amount of dividends 
for the three and six months ended June 30, 1998 is unchanged from the same 
periods in 1997.

LIQUIDITY

Illini's policy is to manage interest rate risk to a level which places 
limits on the sensitivity of its earnings to changes in market interest 
rates.  An explanation of the asset/liability management process is found in 
the Corporation's 1997 Form 10-KSB, beginning on page 13.  Interest rate risk 
management at Illini is executed by the use of on-balance sheet investment 
products.

The assets portion of the balance sheet provides liquidity primarily through 
loan principal repayments, maturities of investment securities and sales of 
investment securities available for sale.  The liability side of the balance 
sheet provides liquidity through various customers' interest bearing 
accounts. Short-term borrowings are an additional source of liquidity and 
represent Illini's incremental borrowing capacity.

During the second quarter of 1998, Illini completed a comprehensive analysis 
of its asset liability function, including a review of its funds management 
policy and its principal measure of liquidity.  The Bank implemented a new 
measure of liquidity measurement, called "Basic Surplus," which redefines 
liquid assets as the total assets held by the Bank which can be converted to 
cash in thirty days or less, reduced by short term liabilities.  As of April 
30, 1998, the first measurement date using the new basic surplus method, the 
Bank's core liquidity was $27 million, or 17.6% of total assets.

Management believes the new formula provides an accurate measurement of 
liquidity and provides management with a comprehensible and consistent tool 
to plan pricing and profitability strategies.  Based on the new measurement 
and as compared to peer banks, management believes the liquidity position of 
the Bank at June 30, 1998 is strong.

At June 30, 1998, large liability dependence was 6.5%, compared to 6.2% at 
March 31, 1998 and 8.2% at December 31, 1997.  Short-term borrowings, reduced 
significantly during 1997, and continue to decrease during 1998.  In 1997 
management restructured its available for sale securities portfolio by 
selling a selected number of higher risk long-term fixed rate securities.  
Additionally in 1997, management shifted its position from a net borrower of 
short-term funds to a net seller of short-term funds, a shift designed to 
improve the Bank's liquidity.  Management's conservative approach has 
continued through the second quarter 1998.  The Bank's short-term borrowings 
decreased from December 31, 1997 to June 30, 1998.

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivative financial instruments include futures, forwards, interest rate 
swaps, option contracts, and other financial instruments with similar 
characteristics. The Bank currently does not enter into futures, forwards, 
swaps, or options. However, the Bank is party to financial instruments with 
off-balance sheet risk in the normal course of business to meet the financing 
needs of its customers. These financial instruments include commitments to 
extend credit and standby letters of credit.  These instruments involve to 
varying degrees, elements of credit and interest rate risk in excess of the 
amount recognized in the consolidated balance sheets.  Commitments generally 
have fixed expiration dates and require collateral from the borrower if 
deemed necessary by the Bank. Standby letters of credit are conditional 
commitments issued by the Bank to guarantee the performance of a customer to 
a third party up to a stipulated amount and within specified terms and 
conditions.  Commitments to extend credit and standby letters of credit are 
not recorded as an asset or liability by the Bank until and unless the 
instrument is exercised.

The Bank's exposure to market risk and interest rate risk is reviewed by the 
Asset/Liability Committee.  Management realizes certain risks are inherent, 
such as the uncertainty of market interest rates, and that its goal is to 
identify and manage such risks.  The primary tool management uses to monitor 
and manage interest rate risk is a static gap report.  The Bank has no market 
risk sensitive instruments held for trading purposes.

The Bank's interest rate and market risk profile has not materially changed 
from the year ended December 31, 1997.  Please refer to the Corporation's 
1997 Form 10-KSB for further discussion of the Corporation's market and 
interest rate risk.

<PAGE>

PART II.  OTHER INFORMATION

Item 1 LEGAL PROCEEDINGS

       The Company adopted a Shareholder Rights Agreement on June 20, 1997 
       and named Illinois Stock Transfer Company ("ISTC") as its rights agent 
       thereunder.  The Company was notified in May, 1998 of a threatened 
       complaint against ISTC by an Illini shareholder.  The shareholder, 
       Mary K. Quinn, who owns 21 shares of stock in Illini, filed suit 
       against ISTC on June 9, 1998 in the Seventh Judicial Circuit Court, 
       Sangamon County, Illinois.  Quinn seeks to compel ISTC to distribute 
       rights certificates to Illini's shareholders and further seeks to 
       certify all Illini shareholders as a class.  Ms. Quinn asserts that 
       Ida R. Noll became an acquiring person under the Rights Agreement on 
       April 16, 1998, and that the Rights Agreement was triggered.  ISTC is 
       being represented in the litigation by Howard & Howard, which 
       vigorously contests Quinn's assertions that Ida R. Noll is an 
       acquiring person, that the Rights Agreement has been triggered, and 
       that ISTC has a duty to distribute rights certificates.

       Ida R. Noll has filed a 14-count Complaint for Declaratory Judgment, 
       Injunctive Relief, and money damages against Illini Corporation and 
       the following members of the Board of Directors of Illini:  Thomas A. 
       Black, Ronald E. Cramer, Lawrence B. Curtin, Kenneth Deverman, William 
       Etherton, William McCubbin, Burnard K. McHone, Robert F. Olson, John 
       H. Pickrell, N. Ronald Thunman and Perry Williams.  The Action was 
       filed in the 7th Judicial Circuit Court of Sangamon County, Illinois, 
       on or about July 27, 1998, and the Complaint was served upon Illini 
       Corporation on July 27, 1998.  Illini's responsive pleading is due on 
       or before August 26, 1998.

       The Complaint arises out of Illini's enactment of a Shareholder Rights 
       Agreement on June 20, 1997 and the subsequent Amendment of that 
       Agreement on June 30, 1998.  The Plaintiff seeks relief against Illini 
       Corporation only in Counts I and II of the Complaint, in which she 
       seeks declaratory judgment and injunctive relief with respect to the 
       Rights Agreement.  Count I seeks a declaration that the Rights 
       Agreement was Triggered by the Plaintiff on April 16, 1998 and that 
       Illini's subsequent Amendment is void. The Plaintiff seeks attorneys' 
       fees and costs from Illini in Count I. Count II seeks a permanent 
       injunction against Illini from implementing the First Amendment of the 
       Rights Agreement, as well as attorneys' fees and costs.

       The Plaintiff seeks money damages in Counts III through XIV against 
       the Directors of Illini individually for breaching their fiduciary 
       with regard to the enactment of the Rights Agreement and its 
       subsequent Amendment. Count XIV seeks relief against all Defendants 
       except Illini Corporation for conspiracy.

       Illini and the Directors intend to vigorously contest and oppose the 
       allegations of the Noll Complaint and the relief sought therein.

Item 2 CHANGES IN SECURITIES - none 

Item 3 DEFAULTS UPON SENIOR SECURITIES - none

<PAGE>

Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS        The Annual 
       Meeting of Shareholders of the Company was held on April 16, 1998, for 
       the purpose of electing six directors each to serve a term of three 
       years and ratifying the appointment of KPMG Peat Marwick LLP as the 
       Company's auditors for the fiscal year ending December 31, 1998.  
       Proxies for the meeting were solicited by management pursuant to 
       Regulation 14A under the Securities Exchange Act of 1934, and there 
       was no solicitation in opposition to Management's solicitation.

       All six of Management's nominees for director listed in the proxy 
       statement were elected.  The results of the vote were as follows:

<TABLE>
<CAPTION>
                                              Shares                     Broker
                                              Voted      Shares           Non
                                              "For"    "Withheld"        Votes      
                                             -------   ----------        ------
       <S>                                   <C>        <C>                 <C>
       William B. McCubbin                   215,718    13,054              0
       Burnard K. McHone                     214,293    13,054              0
       Robert F. Olson                       217,182    11,583              0
       N. Ronald Thunman                     214,154    13,054              0
       William G. Walschleger                217,114    11,583              0
       Perry Williams                        217,000    11,583              0
</TABLE>

       The following persons continued their terms of office as directors of 
       the Company following the Annual Meeting:  Thomas A. Black, John H. 
       Pickrell, Ronald E. Cramer, Lawrence B. Curtin, Kenneth Deverman and 
       William N. Etherton.

       The appointment of KPMG Peat Marwick LLP as the Company's auditors for 
       the fiscal year ending December 31, 1998, was ratified.  The results 
       of the vote were as follows:

<TABLE>
<CAPTION>
                                              "For"      "Against"   "Abstain"
                                              -----      ---------   ---------
       <S>                                   <C>           <C>         <C>
       Ratification of KPMG
       Peat Marwick LLP                      222,346       2,770       3,113
</TABLE>

Item 5 OTHER INFORMATION - none

Item 6 EXHIBITS AND REPORTS ON FORM 8-K

        (a) EXHIBITS:
            The Exhibits filed herewith are set forth  in the Exhibit Index 
            filed as a part of these Form 10-QSB.

        (b) REPORTS ON FORM 8-K:
            There were no reports on Form 8-K filed for the quarter ended 
            June 30, 1998.

<PAGE>

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.

Illini Corporation
  (Registrant)



By:  /s/ Burnard K. McHone                     August 6, 1998
-----------------------------------            --------------
Burnard K. McHone                              Date signed
President 



By:  /s/ Deann Hager                           August 6, 1998  
-----------------------------------            --------------
Deann Hager                                    Date signed
Finance Manager

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
     Number                                      Description
     ------                                      -----------
       <S>                        <C>
       27                         Financial Data Schedule
</TABLE>