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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-QSB

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

For quarterly period ended September 30, 1999

or

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|--- | ---------------------------------------------------------------

Commission file number 0-13343

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Illini Corporation(Exact name of small business issuer as specified in its charter)

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

3200 West Iles Avenue, 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
October 31, 1999

Transitional
Small Business Disclosure Format: Yes / /  No /x/

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ILLINI CORPORATION
INDEX TO FORM 10-QSB
September 30, 1999

|                               |  |         |  |                                                                                           |  | Page
|------------------------------ |  | ------- |  | ----------------------------------------------------------------------------------------- |  | ----
|PART I.  FINANCIAL INFORMATION |  |        
|                               |  | Item 1. |  | Financial Statements (Unaudited)                                                          |  |     
|                               |  |         |  | Consolidated Balance Sheets
September 30, 1999 and December 31, 1998                      |  | 3   
|                               |  |         |  | Consolidated Statements of Income
Three and Nine Months Ended September 30, 1999 and 1998 |  | 4   
|                               |  |         |  | Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998       |  | 5   
|                               |  |         |  | Notes to Interim Consolidated Financial Statements                                        |  | 6   
|                               |  | Item 2. |  | Management's Discussion and Analysis of Operations                                        |  | 9   
|                               |  | Item 3. |  | Quantitative and Qualitative Disclosures About
Market Risk                                |  | 22  
|PART II.  OTHER INFORMATION    |  | 23     
|SIGNATURES                     |  | 26     
|EXHIBIT INDEX                  |  | 27     

2



PART I.
FINANCIAL INFORMATION

Item 1.  Financial Statements

ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Unaudited)

|                                                                                             |  | September 30,
1999 |         | December 31,
1998
|-------------------------------------------------------------------------------------------- |  | ------------------ | ------- | -----------------
|
|ASSETS                                                                                       |  |                    |         |                  
|Cash and due from banks                                                                      |  | $                  | 7,496   |                  
|Interest-bearing deposits in other banks                                                     |  |                    | 5       |                  
|Federal funds sold                                                                           |  |                    |        |                  
|                                                                                             |  |                    |         |                  
|Cash and cash equivalents                                                                    |  |                    | 7,501   |                  
|Debt and marketable equity securities available for sale, at fair value                      |  |                    | 44,392  |                  
|Loans, net of the allowance for loan losses and unearned income                              |  |                    | 112,748 |                  
|Premises and equipment                                                                       |  |                    | 7,066   |                  
|Accrued interest receivable                                                                  |  |                    | 1,627   |                  
|Other real estate owned                                                                      |  |                    | 508     |                  
|Other assets                                                                                 |  |                    | 1,018   |                  
|                                                                                             |  |                    |         |                  
|                                                                                             |  | $                  | 174,860 |                  
|                                                                                             |  |                    |         |                  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                         |  |                    |         |                  
|Liabilities:                                                                                 |  |                    |         |                  
|Noninterest-bearing demand deposits                                                          |  | $                  | 23,444  |                  
|Interest-bearing deposits:                                                                   |  |                    |         |                  
|NOW and money market accounts                                                                |  |                    | 40,033  |                  
|Savings deposits                                                                             |  |                    | 16,325  |                  
|Time deposits, $100,000 and over                                                             |  |                    | 20,107  |                  
|Other time deposits                                                                          |  |                    | 57,313  |                  
|                                                                                             |  |                    |         |                  
|Total deposits                                                                               |  |                    | 157,222 |                  
|Federal funds purchased                                                                      |  |                    | 835     |                  
|Securities sold under agreements to repurchase                                               |  |                    | 190     |                  
|Accrued interest payable                                                                     |  |                    | 833     |                  
|Other liabilities                                                                            |  |                    | 1,083   |                  
|                                                                                             |  |                    |         |                  
|Total liabilities                                                                            |  |                    | 160,163 |                  
|                                                                                             |  |                    |         |                  
|Shareholders' equity:                                                                        |  |                    |         |                  
|Common stock$10 par value, authorized 800,000 shares; 448,456 shares issued and outstanding |  |                    | 4,485   |                  
|Capital surplus                                                                              |  |                    | 1,886   |                  
|Retained earnings                                                                            |  |                    | 8,646   |                  
|Accumulated other comprehensive income (loss)                                                |  |                    | (320    | )                
|                                                                                             |  |                    |         |                  
|Total shareholders' equity                                                                   |  |                    | 14,697  |                  
|                                                                                             |  |                    |         |                  
|                                                                                             |  | $                  | 174,860 |                  
|                                                                                             |  |                    |         |                  

See accompanying notes to interim consolidated financial statements.

3



ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months and Nine Months Ended September 30, 1999 and 1998
(Unaudited)

|                                                                                                                        |  | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | -
|
|
|Interest income:                                                                                                        |  |                                  |       |                                 |  
|Interest and fees on loans                                                                                              |  | $                                | 2,412 |                                 | $
|Interest on debt and marketable equity securities                                                                       |  |                                  |       |                                 |  
|Taxable                                                                                                                 |  |                                  | 578   |                                 |  
|Tax-exempt                                                                                                              |  |                                  | 90    |                                 |  
|Interest on short term investments                                                                                      |  |                                  | 1     |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Total interest income                                                                                                   |  |                                  | 3,081 |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Interest expense:                                                                                                       |  |                                  |       |                                 |  
|Interest on deposits:                                                                                                   |  |                                  |       |                                 |  
|NOW and money market accounts                                                                                           |  |                                  | 340   |                                 |  
|Savings deposits                                                                                                        |  |                                  | 83    |                                 |  
|Time deposits, $100,000 and over                                                                                        |  |                                  | 203   |                                 |  
|Other time deposits                                                                                                     |  |                                  | 672   |                                 |  
|Interest on borrowings                                                                                                  |  |                                  | 61    |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Total interest expense                                                                                                  |  |                                  | 1,359 |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Net interest income                                                                                                     |  |                                  | 1,722 |                                 |  
|Provision for loan losses                                                                                               |  |                                  | 101   |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Net interest income after provision for loan losses                                                                     |  |                                  | 1,621 |                                 |  
|Noninterest income:                                                                                                     |  |                                  |       |                                 |  
|Service charges on deposit accounts                                                                                     |  |                                  | 347   |                                 |  
|Other fee income                                                                                                        |  |                                  | 46    |                                 |  
|Mortgage loan servicing fees                                                                                            |  |                                  | 53    |                                 |  
|Gain on sale of mortgage loans                                                                                          |  |                                  | 7     |                                 |  
|Securities gains (losses)                                                                                               |  |                                  | (1    | )                               |  
|Other                                                                                                                   |  |                                  | 43    |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Total noninterest income                                                                                                |  |                                  | 495   |                                 |  
|Noninterest expense:                                                                                                    |  |                                  |       |                                 |  
|Salaries and employee benefits                                                                                          |  |                                  | 745   |                                 |  
|Net occupancy expense                                                                                                   |  |                                  | 224   |                                 |  
|Equipment expense                                                                                                       |  |                                  | 94    |                                 |  
|Data processing                                                                                                         |  |                                  | 145   |                                 |  
|Supplies                                                                                                                |  |                                  | 38    |                                 |  
|Communication and transportation                                                                                        |  |                                  | 118   |                                 |  
|Marketing and advertising                                                                                               |  |                                  | 32    |                                 |  
|Correspondent and processing fees                                                                                       |  |                                  | 65    |                                 |  
|Loan and other real estate owned expenses                                                                               |  |                                  | 27    |                                 |  
|Professional fees                                                                                                       |  |                                  | 327   |                                 |  
|Directors' and regulatory fees                                                                                          |  |                                  | 42    |                                 |  
|Other                                                                                                                   |  |                                  | 46    |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Total noninterest expense                                                                                               |  |                                  | 1,903 |                                 |  
|Income before income tax expense (benefit)                                                                              |  |                                  | 213   |                                 |  
|Income tax expense (benefit)                                                                                            |  |                                  | 42    |                                 |  
|                                                                                                                        |  |                                  |       |                                 |  
|Net income                                                                                                              |  | $                                | 171   |                                 | $
|                                                                                                                        |  |                                  |       |                                 |  
|Basic and diluted earnings per share (based on weighted average common shares outstanding of 448,456 for 1999 and 1998) |  | $                                | 0.38  |                                 | $
|                                                                                                                        |  |                                  |       |                                 |  

See accompanying notes to interim consolidated financial statements.

4



ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1999 and 1998
(Unaudited)

|                                                                                                  |  | 1999 |         | 1998 |  
|------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | -
|
|Cash flows from operating activities:                                                             |  |      |         |      |  
|Net income                                                                                        |  | $    | 351     |      | $
|Adjustments to reconcile net income to net cash provided by operating activities:                 |  |      |         |      |  
|Depreciation and amortization                                                                     |  |      | 836     |      |  
|Provision for loan losses                                                                         |  |      | 203     |      |  
|Securities gains, net                                                                             |  |      | (7      | )    |  
|(Gain) loss on sale of other real estate owned                                                    |  |      | 21      |      |  
|Increase in accrued interest receivable                                                           |  |      | (237    | )    |  
|Increase in accrued interest payable                                                              |  |      | 6       |      |  
|Origination of mortgage loans for sale                                                            |  |      | (5,851  | )    |  
|Proceeds from the sale of mortgage loans                                                          |  |      | 5,901   |      |  
|Other, net                                                                                        |  |      | (437    | )    |  
|                                                                                                  |  |      |         |      |  
|Net cash provided by operating activities                                                         |  |      | 786     |      |  
|                                                                                                  |  |      |         |      |  
|Cash flows from investing activities:                                                             |  |      |         |      |  
|Proceeds from sales of debt and marketable equity securities available for sale                   |  |      | 7,722   |      |  
|Proceeds from maturities and paydowns of debt and marketable equity securities available for sale |  |      | 8,872   |      |  
|Purchases of debt and marketable equity securities available for sale                             |  |      | (9,003  | )    |  
|Net (increase) decrease in loans                                                                  |  |      | (27,408 | )    |  
|Purchases of premises and equipment                                                               |  |      | (518    | )    |  
|Proceeds from sale of premises and equipment                                                      |  |      |        |      |  
|Proceeds from sales of other real estate owned                                                    |  |      | 71      |      |  
|                                                                                                  |  |      |         |      |  
|Net cash provided by (used in) investing activities                                               |  |      | (20,264 | )    |  
|                                                                                                  |  |      |         |      |  
|Cash flows from financing activities:                                                             |  |      |         |      |  
|Net decrease in non-interest bearing demand deposits                                              |  |      | (2,746  | )    |  
|Net increase in NOW, money market and savings                                                     |  |      | 379     |      |  
|Net increase (decrease) in time deposits, $100,000 and over                                       |  |      | 5,043   |      |  
|Net increase in other time deposits                                                               |  |      | 11,587  |      |  
|Net increase in federal funds purchased                                                           |  |      | 835     |      |  
|Net decrease in securities sold under agreements to repurchase                                    |  |      | (100    | )    |  
|Cash dividends paid                                                                               |  |      | (337    | )    |  
|                                                                                                  |  |      |         |      |  
|Net cash provided by (used in) financing activities                                               |  |      | 14,661  |      |  
|                                                                                                  |  |      |         |      |  
|Net decrease in cash and cash equivalents                                                         |  |      | (4,817  | )    |  
|Cash and cash equivalents at beginning of period                                                  |  |      | 12,318  |      |  
|                                                                                                  |  |      |         |      |  
|Cash and cash equivalents at end of period                                                        |  | $    | 7,501   |      | $
|                                                                                                  |  |      |         |      |  
|Supplemental Information:                                                                         |  |      |         |      |  
|Income taxes paid                                                                                 |  | $    | 182     |      | $
|Interest paid                                                                                     |  |      | 3,796   |      |  
|                                                                                                  |  |      |         |      |  
|Other non-cash investing activities:                                                              |  |      |         |      |  
|Transfer of premises and equipment to other real estate owned                                     |  | $    |        |      | $
|                                                                                                  |  |      |         |      |  
|Transfer of loans to other real estate owned                                                      |  | $    | 213     |      | $
|                                                                                                  |  |      |         |      |  

See accompanying notes to interim consolidated financial statements.

5



ILLINI CORPORATION AND SUBSIDIARY
Notes to Interim Consolidated Financial Statements (Unaudited)
September 30, 1999

(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, 1998.

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
potential common shares which are dilutive.

Results
for the three and nine months ended September 30, 1999 may not be indicative of the annual performance of Illini Corporation (Illini or the Corporation). Management of
the Corporation has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the interim
consolidated financial statements (unaudited) in conformity with generally accepted accounting principals. Actual results could differ from those estimates.

(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. The determination of the
allowance for loan losses is one of the significant estimates made by management in the preparation of the consolidated financial statements.

|                               |  | September 30,
|------------------------------ |  | -------------
|
|
|Balance at beginning of period |  | $            
|Provision charged to expense   |  |              
|Charge-offs                    |  |              
|Less: recoveries               |  |              
|                               |  |              
|Net charge-offs                |  |              
|                               |  |              
|Balance at end of period       |  | $            
|                               |  |              

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.

6



Information
regarding impaired loans at September 30, 1999 and December 31, 1998 is as follows:

|                                                                  |  | September 30,
1999 |       | December 31,
1998
|----------------------------------------------------------------- |  | ------------------ | ----- | -----------------
|
|Nonaccrual loans                                                  |  | $                  | 891   |                  
|Impaired loans continuing to accrue interest                      |  |                    |      |                  
|                                                                  |  |                    |       |                  
|Total impaired loans                                              |  | $                  | 891   |                  
|                                                                  |  |                    |       |                  
|Allowance for losses on specific impaired loans                   |  | $                  | 11    |                  
|Impaired loans with no specific related allowance for loan losses |  |                    | 880   |                  
|Average balance of impaired loans during the period               |  |                    | 1,107 |                  
|                                                                  |  |                    |       |                  

(3)  New Accounting Pronouncements

During 1998, the Financial Accounting Standards Board (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.
SFAS 137,Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB Statement
No. 133,was issued in June 1999. SFAS 133, as amended, is now effective for all fiscal quarters of all fiscal years beginning after June 15, 2000.
Illini is currently evaluating the impact of SFAS 133 on future financial statements and related disclosures.

7



ILLINI CORPORATION AND SUBSIDIARY
Notes to Interim Consolidated Financial Statements (Unaudited) (Continued)
September 30, 1999

(4) Other Comprehensive Income

For the three and nine-month periods ended September 30, 1999 and 1998, unrealized gains (losses) on debt and marketable equity securities
available for sale, net of tax, is the Company's only other comprehensive income component. Comprehensive income for the three and nine-month periods ended September 30, 1999 and
1998 is summarized as follows:

|                                                                                 |  | Three Months Ended
September 30, |      | Nine Months Ended
September 30, |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | ---- | ------------------------------- | -
|
|
|Net income                                                                       |  | $                                | 171  |                                 | $
|Other comprehensive income:                                                      |  |                                  |      |                                 |  
|Net realized and unrealized gains (losses) on securities available for sale, net |  |                                  | (119 | )                               |  
|Less adjustment for net securities (gains) losses realized in net income, net    |  |                                  | 1    |                                 |  
|                                                                                 |  |                                  |      |                                 |  
|Other comprehensive income (loss)                                                |  |                                  | (118 | )                               |  
|                                                                                 |  |                                  |      |                                 |  
|Total comprehensive income (loss)                                                |  | $                                | 53   |                                 | $
|                                                                                 |  |                                  |      |                                 |  

(5) Pending Acquisition

On March 2, 1999, Illini announced a definitive agreement to acquire all of the outstanding shares of Farmers State Bank of Camp Point in exchange for
123,333 shares of Illini's common stock and cash of
$3,256,260. Farmers State Bank of Camp Point is headquartered in Camp Point, Illinois and had assets of approximately $33 million at December 31, 1998. Illini expects to close the
acquisition in the fourth quarter of 1999.

8



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 1998
Illini Corporation Annual Report on Form 10-KSB (1998 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

|                         |  | Quarter ended
September 30, |       |  |   | Nine months ended
September 30, |  |        |   
|------------------------ |  | --------------------------- | ----- |  | - | ------------------------------- |  | ------ | --
|
|
|
|Total revenue            |  | $                           | 3,576 |  | $ | 3,206                           |  | 11.55  | % 
|Net income               |  |                             | 171   |  |   | 242                             |  | (29.34 | )%
|Basic earnings per share |  | $                           | 0.38  |  | $ | 0.54                            |  | (29.34 | )%

|                                |  | Quarter ended
September 30, |   |       |   | Nine months ended
September 30, |   |       |  
|------------------------------- |  | --------------------------- | - | ----- | - | ------------------------------- | - | ----- | -
|
|
|Return on average assets(1)     |  | 0.40                        | % | 0.64  | % | (0.24                           | ) | 0.29  | %
|Return on average equity(1)     |  | 4.57                        | % | 6.44  | % | (1.87                           | ) | 3.10  | %
|Average equity to assets        |  | 8.77                        | % | 9.87  | % | (1.10                           | ) | 9.30  | %
|Tier 1 leverage ratio           |  | 8.81                        | % | 9.64  | % | (0.83                           | ) |       |  
|Tier 1 risk-based capital ratio |  | 11.54                       | % | 14.96 | % | (3.42                           | ) |       |  
|Total risk-based capital ratio  |  | 12.66                       | % | 16.35 | % | (3.69                           | ) |       |  
|Dividend payout ratio           |  | 65.56                       | % | 46.33 | % | 19.23                           |   | 95.82 | %
|Net interest margin             |  | 4.55                        | % | 4.35  | % | 0.20                            |   | 4.47  | %
|Efficiency ratio                |  | 84.07                       | % | 75.09 | % | 8.98                            |   | 87.83 | %

---

9



RESULTS OF OPERATION

Earning Assets

Management is pleased with the results of our efforts to grow earning assets. Average earning assets of the Corporation for the first nine months of 1999
increased 7.54% or $10.4 million to $148.3 million from $137.9 million for the first nine months of 1998.

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, including
loans and investment securities.

Average
net loans increased to $108.5 million for the three months ended September 30, 1999 compared to $81.8 million for the same period in 1998. The increase of
$26.7 million for the three months ended September 30, 1999 as compared to the same period for 1998 was primarily due to an increase of $18.7 million in commercial loans,
including commercial real estate loans, $6.2 million in residential loans, and $2.7 million in agriculture loans, including agriculture real estate. The increase was offset by a decline
of $0.7 million in consumer loans. The average yield on the loan portfolio, net of the allowance for loan losses, decreased 58 basis points to 8.84% for the three months ended
September 30, 1999, due to the competitive interest rate environment and a change in loan mix for the three months ended September 30, 1999 compared to the three months ended
September 30, 1998.

Average
net loans increased to $96.3 million for the nine months ended September 30, 1999 compared to $82.6 million for the same period in 1998. The increase of
$13.7 million for the nine months ended September 30, 1999 as compared to the same period in 1998 was primarily due to an increase of $10.5 million in commercial loans, including
commercial real estate loans, $2.0 million in agriculture loans, including agriculture real estate, and $3.0 million in residential real estate loans. The increase was offset by a
decline of $1.7 million in consumer loans. The average yield on the loan portfolio, net of the allowance for loan losses, decreased 54 basis points to 8.90%.

Average
investment securities decreased $4.0 million and increased $0.3 million for the three and nine months ended September 30, 1999, respectively, as compared
to the same periods in 1998. The average yield of the investment securities portfolio was 6.20% and 6.09% for the three and nine months ended September 30, 1999, respectively, a decrease of 10
and 25 basis points as compared to the same periods in 1998. The decrease in investments from December 31, 1998 to September 30, 1999 is a result of the increase in loan growth.
Management intends to maintain a balance in the investment portfolio to support basic surplus.

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 nine months ended September 30, 1999 increased 7.01% or $8.4 million to
$128.5 million from $120.1 million for the nine months ended September 30, 1998. The average rate paid on total interest bearing liabilities for the nine months ended
September 30, 1999 decreased 37 basis points when compared to the nine months ended September 30, 1998.

The
increase in average core deposits, including noninterest bearing demand deposits, for the nine months ended September 30, 1999 as compared to the same period in 1998 has
provided a low cost funding source for the growth in the loan portfolio. As a result of the increase in loan growth, federal funds purchased have increased to $0.8 million at
September 30, 1999 as compared to no funds purchased at December 31, 1998. In addition to federal funds purchased, 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.

10



Net Interest Income/Net Interest Margin

The operating results of the Corporation are highly dependent on 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 $3.1 million and $8.8 million for the three and nine months ended September 30, 1999, respectively,
compared to $2.8 million and $8.4 million for same periods in 1998. Interest expense was $1.4 million and $3.8 million for the three and nine months ended
September 30, 1999, respectively, compared to $1.3 million and $3.9 million for the same periods in 1998. An increase in interest income and a slight decrease in interest expense
resulted in a $0.4 million increase in net interest income for the nine months ended September 30, 1999.

The
Bank's net interest margin for the nine months ended September 30, 1999 of 4.47% was up from 4.38% reported for the same period in 1998. Management is encouraged by the
slight upward trend in net interest margin. Management will continue to closely monitor its funding costs to maintain an acceptable spread given the increased demand in commercial lending. Management
will continue to structure the balance sheet to provide insulation for extreme interest rate changes. Management has begun to focus on increasing the loan portfolio without jeopardizing the enhanced
liquidity that has been gained in prior periods.

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 balances, interest income/expense and yield/rates table on page 12 and 13 and a net interest
income-rate/volume variance analysis on page 14 and 15.

11



Consolidated Average Balances, Interest Income/Expense and Yield/Rates

|                                           |  | Quarter ended September 30, |        
|------------------------------------------ |  | --------------------------- | -------
|
|
|
|ASSETS                                     |  |                             |        
|Interest-earning assets:                   |  |                             |        
|Short-term investments                     |  | $                           | 18     
|Investment securities(3)                   |  |                             |        
|Taxable                                    |  |                             | 38,768 
|Tax-exempt (1)                             |  |                             | 7,029  
|                                           |  |                             |        
|Total securities                           |  |                             | 45,797 
|Loans                                      |  |                             |        
|Commercial (1)                             |  |                             | 13,969 
|Agriculture                                |  |                             | 8,915  
|Real estate:                               |  |                             |        
|Commercial                                 |  |                             | 46,465 
|Agriculture                                |  |                             | 3,941  
|Residential                                |  |                             | 26,253 
|Consumer, net                              |  |                             | 9,793  
|Credit card                                |  |                             | 619    
|                                           |  |                             |        
|Total loans                                |  |                             | 109,955
|Allowance for loan losses                  |  |                             | (1,409 
|                                           |  |                             |        
|Net loans (1) (2)                          |  |                             | 108,546
|                                           |  |                             |        
|Total interest-earning assets              |  |                             | 154,361
|                                           |  |                             |        
|Cash and due from banks                    |  |                             | 5,252  
|Premises and equipment                     |  |                             | 7,201  
|Other real estate owned                    |  |                             | 507    
|Other assets (3)                           |  |                             | 1,897  
|                                           |  |                             |        
|Total assets                               |  | $                           | 169,218
|                                           |  |                             |        
|LIABILITIES AND SHAREHOLDERS' EQUITY       |  |                             |        
|Deposits:                                  |  |                             |        
|Noninterest-bearing demand                 |  | $                           | 23,588 
|Interest-bearing demand                    |  |                             | 42,138 
|Savings                                    |  |                             | 16,807 
|Time deposits, less than $100,000          |  |                             | 49,934 
|                                           |  |                             |        
|Total core deposits                        |  |                             | 132,467
|Time deposits, $100,000 and over           |  |                             | 15,570 
|                                           |  |                             |        
|Total deposits                             |  |                             | 148,037
|Short-term borrowings                      |  |                             | 4,478  
|Total interest-bearing liabilities         |  |                             | 128,927
|Other liabilities                          |  |                             | 1,866  
|                                           |  |                             |        
|Total liabilities                          |  |                             | 154,381
|Shareholders' equity                       |  |                             | 14,837 
|                                           |  |                             |        
|Total liabilities and shareholders' equity |  | $                           | 169,218
|                                           |  |                             |        
|Net interest margin                        |  |                             |        
|                                           |  |                             |        

---

12



Consolidated Average Balances, Interest Income/Expense and Yield/Rates

|                                           |  | Nine months ended September 30, |        
|------------------------------------------ |  | ------------------------------- | -------
|
|
|
|ASSETS                                     |  |                                 |        
|Interest-earning assets:                   |  |                                 |        
|Short-term investments                     |  | $                               | 2,187  
|Investment securities (3)                  |  |                                 |        
|Taxable                                    |  |                                 | 42,788 
|Tax-exempt(1)                              |  |                                 | 7,048  
|                                           |  |                                 |        
|Total securities                           |  |                                 | 49,836 
|Loans                                      |  |                                 |        
|Commercial(1)                              |  |                                 | 12,658 
|Agriculture                                |  |                                 | 8,147  
|Real estate:                               |  |                                 |        
|Commercial                                 |  |                                 | 39,194 
|Agriculture                                |  |                                 | 3,570  
|Residential                                |  |                                 | 24,046 
|Consumer, net                              |  |                                 | 9,398  
|Credit card                                |  |                                 | 620    
|                                           |  |                                 |        
|Total loans                                |  |                                 | 97,633 
|Allowance for loan losses                  |  |                                 | (1,376 
|                                           |  |                                 |        
|Net loans(1)(2)                            |  |                                 | 96,257 
|                                           |  |                                 |        
|Total interest-earning assets              |  |                                 | 148,280
|                                           |  |                                 |        
|Cash and due from banks                    |  |                                 | 4,883  
|Premises and equipment                     |  |                                 | 7,287  
|Other real estate owned                    |  |                                 | 417    
|Other assets (3)                           |  |                                 | 2,049  
|                                           |  |                                 |        
|Total assets                               |  | $                               | 162,916
|                                           |  |                                 |        
|LIABILITIES AND SHAREHOLDERS' EQUITY       |  |                                 |        
|Deposits                                   |  |                                 |        
|Noninterest-bearing deposits               |  | $                               | 22,910 
|Interest-bearing demand                    |  |                                 | 41,483 
|Savings                                    |  |                                 | 17,248 
|Time deposits, less than $100,000          |  |                                 | 46,874 
|                                           |  |                                 |        
|Total core deposits                        |  |                                 | 128,515
|Time deposits, $100,000 and over           |  |                                 | 14,575 
|                                           |  |                                 |        
|Total deposits                             |  |                                 | 143,090
|Short-term borrowings                      |  |                                 | 2,774  
|Total interest-bearing liabilities         |  |                                 | 122,954
|Other liabilities                          |  |                                 | 1,905  
|                                           |  |                                 |        
|Total liabilities                          |  |                                 | 147,769
|Shareholders' equity                       |  |                                 | 15,147 
|                                           |  |                                 |        
|Total liabilities and shareholders' equity |  | $                               | 162,916
|                                           |  |                                 |        
|Net interest margin                        |  |                                 |        
|                                           |  |                                 |        

---

13



Net Interest IncomeRate/Volume Variance Analysis(*)

|                                  |  | Quarter ended September 30, 1999
as compared to
quarter ended September 30, 1998 |    
|--------------------------------- |  | -------------------------------------------------------------------------------- | ---
|
|
|Short-term investments            |  | $                                                                                | (63
|Investment securities:            |  |                                                                                  |    
|Taxable                           |  |                                                                                  | (57
|Tax-exempt                        |  |                                                                                  | (18
|                                  |  |                                                                                  |    
|Total securities                  |  |                                                                                  | (75
|Loans:                            |  |                                                                                  |    
|Commercial                        |  |                                                                                  | (81
|Agriculture                       |  |                                                                                  | 7  
|Real Estate:                      |  |                                                                                  |    
|Commercial                        |  |                                                                                  | 457
|Agriculture                       |  |                                                                                  | 21 
|Residential                       |  |                                                                                  | 106
|Consumer, net                     |  |                                                                                  | (33
|Credit card                       |  |                                                                                  | 0  
|                                  |  |                                                                                  |    
|Total loans                       |  |                                                                                  | 477
|                                  |  |                                                                                  |    
|Total interest income             |  |                                                                                  | 339
|                                  |  |                                                                                  |    
|Interest bearing demand           |  |                                                                                  | 1  
|Savings                           |  |                                                                                  | (24
|Time deposits, less than $100,000 |  |                                                                                  | 28 
|                                  |  |                                                                                  |    
|Total core deposits               |  |                                                                                  | 5  
|Time deposits, $100,000 and over  |  |                                                                                  | 10 
|                                  |  |                                                                                  |    
|Total deposits                    |  |                                                                                  | 15 
|Short-term borrowings             |  |                                                                                  | 57 
|                                  |  |                                                                                  |    
|Total interest expense            |  |                                                                                  | 72 
|                                  |  |                                                                                  |    
|Net interest income               |  | $                                                                                | 267
|                                  |  |                                                                                  |    

---

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.

14



Net Interest IncomeRate/Volume Variance Analysis(*)

|                                  |  | Nine months ended September 30, 1999 as compared to nine months ended September 30, 1998 |     
|--------------------------------- |  | ---------------------------------------------------------------------------------------- | ----
|
|
|Short-term investments            |  | $                                                                                        | (156
|Investment securities:            |  |                                                                                          |     
|Taxable                           |  |                                                                                          | (21 
|Tax-exempt                        |  |                                                                                          | (56 
|                                  |  |                                                                                          |     
|Total securities                  |  |                                                                                          | (77 
|Loans:                            |  |                                                                                          |     
|Commercial                        |  |                                                                                          | (258
|Agriculture                       |  |                                                                                          | 40  
|Real Estate:                      |  |                                                                                          |     
|Commercial                        |  |                                                                                          | 807 
|Agriculture                       |  |                                                                                          | 56  
|Residential                       |  |                                                                                          | 89  
|Consumer, net                     |  |                                                                                          | (150
|Credit card                       |  |                                                                                          | (1  
|                                  |  |                                                                                          |     
|Total loans                       |  |                                                                                          | 583 
|                                  |  |                                                                                          |     
|Total interest income             |  |                                                                                          | 350 
|                                  |  |                                                                                          |     
|Interest bearing demand           |  |                                                                                          | 74  
|Savings                           |  |                                                                                          | (62 
|Time deposits, less than $100,000 |  |                                                                                          | (81 
|                                  |  |                                                                                          |     
|Total core deposits               |  |                                                                                          | (69 
|Time deposits, $100,000 and over  |  |                                                                                          | (111
|                                  |  |                                                                                          |     
|Total deposits                    |  |                                                                                          | (180
|Short-term borrowings             |  |                                                                                          | 92  
|                                  |  |                                                                                          |     
|Total interest expense            |  |                                                                                          | (88 
|                                  |  |                                                                                          |     
|Net interest income               |  | $                                                                                        | 438 
|                                  |  |                                                                                          |     

---

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.

15



Noninterest Income

|                                    |  | Three months ended
September 30, |     | Percent
Change |   | Nine months ended
September 30, |  | Percent
Change |  
|----------------------------------- |  | -------------------------------- | --- | -------------- | - | ------------------------------- |  | -------------- | -
|
|
|Service charges on deposit accounts |  | $                                | 347 |                | $ | 269                             |  | 29.0           | %
|Other fee income                    |  |                                  | 46  |                |   | 46                              |  | 0.0            |  
|Mortgage loan servicing fees        |  |                                  | 53  |                |   | 64                              |  | (17.2          | )
|Gain on sale of mortgage loans      |  |                                  | 7   |                |   | 25                              |  | (72.0          | )
|Securities gains (losses)           |  |                                  | (1  | )              |   | 1                               |  | (200.0         | )
|Other                               |  |                                  | 43  |                |   | 67                              |  | (35.8          | )
|                                    |  |                                  |     |                |   |                                 |  |                |  
|                                    |  | $                                | 495 |                | $ | 472                             |  | 4.9            | %
|                                    |  |                                  |     |                |   |                                 |  |                |  

The
management of the Bank has concentrated efforts on restructuring our product offerings and enhancing our noninterest income. During 1998, the Bank reviewed service charges and
introduced a new fee structure for 1999. This has been the primary reason for the increase in service charges on deposit accounts. Overall our service charge on deposit accounts and other fee income
is up 29.0% and 22.9% for the three and nine months ended September 30, 1999, respectively, as compared to the same periods in 1998. For the three months ended September 30, 1999 other
income decreased. The decrease was a result of a one-time gain on bank real estate sold in 1998. Other income increased for the nine months ended September 30, 1999. The increase is
a result of re-engineering efforts from 1998.

The
decrease in the gain on sale of mortgage loans is primarily due to a decrease in volume. The volume in 1998 was significantly higher than prior periods due to the lower rate
environment during 1998. The refinancing surge during 1998 contributed to higher gains in our mortgage area and we expect volumes to continue to decline in 1999.

16



Noninterest Expense

|                                          |  | Three months ended
September 30, |       |  |   | Nine months ended
September 30, |   |       |  
|----------------------------------------- |  | -------------------------------- | ----- |  | - | ------------------------------- | - | ----- | -
|
|
|
|Salaries and employee benefits            |  | $                                | 745   |  | $ | 728                             |   | 2.3   | %
|Net occupancy expense                     |  |                                  | 224   |  |   | 132                             |   | 69.7  |  
|Equipment expense                         |  |                                  | 94    |  |   | 90                              |   | 4.4   |  
|Data processing                           |  |                                  | 145   |  |   | 196                             |   | (26.0 | )
|Supplies                                  |  |                                  | 38    |  |   | 36                              |   | 5.6   |  
|Communication and transportation          |  |                                  | 118   |  |   | 92                              |   | 28.3  |  
|Marketing and advertising                 |  |                                  | 32    |  |   | (96                             | ) | 133.3 |  
|Correspondent and processing fees         |  |                                  | 65    |  |   | 39                              |   | 66.7  |  
|Loan and other real estate owned expenses |  |                                  | 27    |  |   | (10                             | ) | 370.0 |  
|Professional fees                         |  |                                  | 327   |  |   | 144                             |   | 127.1 |  
|Directors' and regulatory fees            |  |                                  | 42    |  |   | 45                              |   | (6.7  | )
|Other                                     |  |                                  | 46    |  |   | 86                              |   | (46.5 | )
|                                          |  |                                  |       |  |   |                                 |   |       |  
|                                          |  | $                                | 1,903 |  | $ | 1,482                           |   | 28.4  | %
|                                          |  |                                  |       |  |   |                                 |   |       |  

Salaries
and employee benefits increased $17,000 and decreased $226,000 for the three and nine months ended September 30, 1999, respectively, when compared to the same periods
in 1998. The overall decrease resulted from reduced full time equivalent costs relating to the reorganization of the Bank in May 1998. Net occupancy expense increased for the three and nine
months ended September 30, 1999 when compared to the same periods in 1998. The increase in occupancy expense is a result of an
increase in maintenance and repair of bank buildings and the loss of rental income associated with the sale of bank owned property in 1998.

The
upward trend in equipment expense will continue as the Bank continues to invest in new technology to gain operational efficiencies. Data processing expense decreased $51,000 and
increased $22,000 for the three and nine months ended September 30, 1999, respectively, when compared to the same periods in 1998. The decrease is a result of less cost associated with year
2000 expenses as compared to the same periods in 1998. The increase is a result of increased amortization expenses associated with upgrading hardware and software for the data processing area of the
Bank. The increase in correspondent and processing fees is the result of an increase in the number of merchants in our credit card program, and an increase in the costs associated with processing.

Loan
and other real estate owned expenses increased $37,000 for the three months ended September 30, 1999 from the same period in 1998 and were unchanged for the nine months
ended September 30, 1999. The increase in expense is due to holding costs of other real estate owned. Marketing and advertising increased $128,000 and $69,000 for the three and nine months
ended September 30, 1999, respectively, when compared to the same periods in 1998. In 1998 advertising was suspended until the internal reorganization was completed. In 1999, the Bank began a
marketing and advertising campaign to facilitate the growth projected for 1999.

Professional
fees total $327,000 and $823,000 for the three and nine months ended September 30, 1999, respectively, as compared to $144,000 and $641,000 for the same periods in
1998, respectively. The professional fees are primarily due to fees that are directly related to shareholder litigation matters. Litigation expenses equal approximately 56% and 45% of total
professional fees for the three and nine months ended September 30, 1999, respectively.

17



Other
operating expenses are down $40,000 and $80,000 for the three and nine months ended September 30, 1999, respectively, as compared to the same periods in 1998. Management
believes our reorganization contributed to a reduction in other operating expenses by gaining increased efficiencies with our new staffing levels.

Year 2000 Issues

The Bank is committed to taking the necessary steps to enable both new and existing systems, applications, and equipment to effectively process transactions up
to and beyond the Year 2000. To that end, the Bank has made satisfactory progress with respect to its Year 2000 readiness program. Management estimates approximately $30,000 will be expended to
address year 2000 issues. These expenditures will have no impact on earnings as they were expensed in the previous year. Because of such ongoing readiness efforts, Year 2000 processing issues and
risks are not expected to have a material adverse impact on the ability of the Bank to continue its general business operations.

The
Bank has completed the following Year 2000 program initiatives:



The
risk of failures of computer applications, systems, and networks due to improper Year 2000 data processing are substantial, not only for users of information technologies, but
also for any entities and individuals which interact with them. Moreover, when aggregated multiple individual malfunctions and failures relating to Year 2000 issues occur, they can potentially cause
broader, systemic disruptions across industries and economies. The risks arising from Year 2000 issues which face many companies, including the Bank, include the potential diminished ability to
respond to the needs and expectations of customers in a timely manner, and the potential for inaccurate processing of information. As of September 30, 1999, Illini has successfully tested all
mission critical systems.

In
addition, the Bank has begun developing contingency plans to complement the Year 2000 readiness efforts already in progress, including backup and offsite processing of certain
information and functions. The Bank anticipates that such contingency plans will provide an additional level of security to its Year 2000 efforts already underway.

The
foregoing narrative of Year 2000 issues is based on estimates of Bank management as to the amount of time, and costs necessary to remediate and test our systems. Such estimates
are based on the facts and circumstances existing at this time, and were derived utilizing multiple assumptions of future events, including, but not limited to, the continued availability of certain
resources, third-party modification plans, implementation success, and other factors. However, there can be no guarantee that these estimates will be achieved, and actual costs and results could
differ materially from the costs and results currently anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer code, the impact of third-party systems interacting with the Bank systems, the planning and modification success attained
by the business counterparties of the Bank, and similar uncertainties.

18



CREDIT QUALITY

Gross loans totaled $114.2 million at September 30, 1999, an increase of $27.0 million, or 31.02%, from $87.2 million at
December 31, 1998, while the allowance for loan losses has remained relatively consistent at $1.4 million at September 30, 1999 and December 31, 1998, respectively. At
September 30, 1999 the allowance as a percent of total loans and nonperforming loans decreased to 1.27% as compared to 1.57% at December 31, 1998. The decline is a result of the growth
in the loan portfolio offset partially by a decline in nonperforming loans. Management believes this percentage is adequate to support any unexpected losses, and is consistent with peer group ratios.

|                               |  | Three months ended
September 30, |       | Nine months ended
September 30,
|------------------------------ |  | -------------------------------- | ----- | -------------------------------
|
|
|Allowance for Loan Losses:     |  |                                  |       |                                
|Balance at beginning of period |  | $                                | 1,369 |                                
|Provision charged to expense   |  |                                  | 101   |                                
|Charge-offs                    |  |                                  | 34    |                                
|Less: recoveries               |  |                                  | 12    |                                
|                               |  |                                  |       |                                
|Net charge-offs                |  |                                  | 22    |                                
|                               |  |                                  |       |                                
|Balance at end of period       |  | $                                | 1,448 |                                
|                               |  |                                  |       |                                

|Net Charge-Off (Recovery) Ratios (1): |  |         |  |         |  |       |  |      
|------------------------------------- |  | ------- |  | ------- |  | ----- |  | -----
|Commercial                            |  | (0.07)% |  | (0.07)% |  | 0.23% |  | 0.13%
|Real Estate                           |  | 0.12    |  | (0.01)  |  | 0.18  |  | 0.01 
|Installment                           |  | 0.31    |  | 0.38    |  | 0.69  |  | 0.75 
|Credit Cards                          |  | (0.49)  |  | 0.63    |  | 2.01  |  | 3.81 
|Totals                                |  | 0.08%   |  | 0.03%   |  | 0.25% |  | 0.17%

---

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 is up 50% and 32% for the three and nine months ended September 30, 1999, respectively, as compared to the comparable periods in the prior year. The increase in
provision is consistent with the growth in the loan portfolio and to a lesser extent the increase in loan charge-offs. Net charge-offs increased to $22,000 and $123,000 for the
three and nine months ended September 30, 1999, respectively, as compared to $6,000 and $105,000 for the comparable periods in the prior year.

Management
feels that credit quality systems and controls implemented in 1996 and 1997, along with the creation of a formalized credit administration function in 1998, have resulted
in significantly improved credit quality. Illini has a 1.27% allowance to ending loans ratio as of September 30, 1999 and 1.57% and 1.62% as of December 31, 1998 and September 30,
1998, respectively. The net charge-off ratio for the three and nine months ended September 30, 1999 was 0.08% and 0.25% compared to 0.16% and 0.29% for years ended
December 31, 1998 and 1997, respectively.

19



At
September 30, 1999, impaired loans totaled $891,000 compared to $1,329,000 at December 31, 1998. At September 30, 1999, allowance for loan losses on impaired
loans totaled $11,000 compared to $25,000 at December 31, 1998. Of the total impaired loans at September 30, 1999, there were no loans still accruing interest, and at December 31,
1998, impaired loans totaling $300,000 were continuing to accrue interest.

Credit Quality

|                                                       |  | September 30,
1999 |        | December 31, 1998 |   | September 30,
1998 |  
|------------------------------------------------------ |  | ------------------ | ------ | ----------------- | - | ------------------ | -
|
|Nonperforming assets:                                  |  |                    |        |                   |   |                    |  
|Loans delinquent over 90 days, still accruing interest |  | $                  | 0      |                   | $ | 0                  |  
|Nonaccrual                                             |  |                    | 891    |                   |   | 1,029              |  
|Other real estate owned                                |  |                    | 508    |                   |   | 366                |  
|                                                       |  |                    |        |                   |   |                    |  
|Total nonperforming assets                             |  | $                  | 1,399  |                   | $ | 1,395              |  
|                                                       |  |                    |        |                   |   |                    |  
|Key ratios:                                            |  |                    |        |                   |   |                    |  
|Nonperforming loans to ending loans                    |  |                    | 0.78   | %                 |   | 1.18               | %
|90 days delinquent to ending loans                     |  |                    | 0.00   |                   |   | 0.00               |  
|Allowance to total loans                               |  |                    | 1.27   |                   |   | 1.57               |  
|Allowance to nonperforming loans                       |  |                    | 162.51 |                   |   | 132.99             |  

Illini's
loan underwriting guidelines and credit review procedures and policies are designed to protect the Corporation from credit losses. Illini's process for monitoring loan
quality includes detailed monthly trend analysis of delinquencies and nonperforming 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 1998 Form 10-KSB and previous Form 10-QSB reports, management has implemented several initiatives to improve
credit quality. These steps included a new officer driven problem loan identification system, a revamped allowance for loan losses adequacy determination process, a new loan policy, and improved
reporting systems (credit quality and production). Management is committed to continuing these initiatives and has supplemented these efforts in 1999 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's loan quality systems and controls.

20



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. Illini has satisfied its capital requirements
principally through the retention of earnings. At September 30, 1999, Tier 1 risk-based capital, total risk-based capital and leverage capital ratios were 11.54%,
12.66% and 8.81%, respectively, as compared to 14.19%, 15.52% and 9.35% for the period ending December 31, 1998. As of September 30, 1999, 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. The dividend payout ratio is an indicator of the level of earnings retained. The Board of
Directors of the Corporation considers the capital strength of the Corporation and the Bank in determining the appropriate level of cash dividends to be paid to shareholders. The dividend payout ratio
for the three and nine months ended September 30, 1999 was 65.56% and 95.82%, respectively, as compared to 46.33% and 160.16% for the three and nine months ended September 30, 1998. The
total dollar amount of dividends for the three and nine months ended September 30, 1999 is unchanged from the same periods in 1998.

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 1998 Form 10-KSB, beginning on page 14. Interest rate risk management at Illini is
executed through 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 and noninterest-bearing deposit 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 July 31, 1999, the most recent calculation, the Bank's core liquidity was $11 million, or 6.4% of total assets.

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

At
September 30, 1999, large liability dependence was 12.63%, an increase from 4.76% at December 31, 1998. The increase in large liability dependence is due to a
decrease in short-term investments of $7.4 million to $1.5 million at September 30, 1999 compared to $8.9 million at December 31, 1998, and an increase
in federal funds purchased of $0.8 million at September 30, 1999 compared to $0.0 million at December 31, 1998.

21



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, 1998. Please refer to the Corporation's 1998
Form 10-KSB for further discussion of the Corporation's market and interest rate risk.

22



PART II.
OTHER INFORMATION

Item 1.  Legal Proceedings

Mary Quinn v. Illini Corporation and Illinois Stock Transfer Co.,Sangamon County Case No. 98 CH 240

Illini
adopted a Shareholder Rights Agreement on June 20, 1997 and named Illinois Stock Transfer Company ("ISTC") as its rights agent thereunder. Illini 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.

On
June 9, 1998, Quinn filed a Motion to Certify the Class, which was granted on December 29, 1998. On January 13, 1999, Quinn filed an Amended Complaint adding
Illini as a defendant to her action. Illini is represented in the litigation by Howard & Howard. Both Illini and ISTC have answered the Amended Complaint and have denied that Ida R. Noll
is an acquiring person. Quinn asserts that she is entitled to recover her attorneys' fees from Illini and ISTC, which the defendants deny. The parties are currently engaged in discovery. Quinn filed a
Motion for Summary Judgment that asks the Court to determine as a matter of law that Ida R. Noll became an acquiring person on April 16, 1998 and that the Rights Agreement was triggered
as a result and that Illini and ISTC have a duty to distribute rights certificates to all shareholders as of April 16, 1998 except for Ida R. Noll. Illini opposed Quinn's Motion for
Summary Judgment, which was heard by the Court on June 18, 1999.

On
June 29, 1999, the Court entered an Opinion and Order denying Quinn's Motion for Summary Judgment.

On
or about May 6, 1999, counsel for Mary Quinn advised Illini's counsel of their intent to seek an injunction that would preclude Illini from completing its acquisition of the
Farmers Bank of Camp Point (Camp Point), an Illinois corporation, pending further order of the Court. Quinn subsequently filed a Motion for Preliminary Injunction and a Memorandum of Law in Support of
her Motion. Quinn argued that the class (consisting of all Illini's shareholders as of April 16, 1998 except for Ida R. Noll) would be irreparably harmed if the Camp Point merger closed
prior to there being a determination on the merits of her suit. Illini filed extensive briefs in opposition to the Motion for Preliminary Injunction, and the Court heard the Motion on July 1.
The Court ruled from the bench at that hearing that the Motion was denied, and the Court subsequently entered a written Order on July 13, 1999 denying the Motion for Preliminary Injunction.

Quinn's
counsel filed a Motion for Reconsideration of the Orders denying her Motion for Summary Judgment and her Motion for Preliminary Injunction. Illini and ISTC filed a Motion for
Summary Judgment on August 25, 1999. At a hearing held on October 18, 1999, the Court ruled from the bench that it was granting Illini and ISTC's Motion for Summary Judgment and denying
Quinn's Motion for Reconsideration. Illini's counsel is preparing a written order that will be submitted to the Court shortly. Plaintiff's counsel announced at the October 18, 1999 hearing that
he intended to petition the court for an order directing Illini and ISTC to pay Plaintiff's attorneys' fees pursuant to the attorney fee provision of the Rights Agreement. Plaintiff has not yet filed
her petition, but a hearing has been scheduled for December 9, 1999. Illini and ISTC intend to oppose Plaintiff's petition vigorously. An appeal by Plaintiff from all adverse orders is
anticipated.

23



Ida R. Noll v. Illini Corporation, et al.,Sangamon County Case No. 98 MR 226

On
or about July 17, 1998, Ida R. Noll filed a 14 count complaint against Illini and all members of Illini's Board of Directors serving at that time except William
Walschleger Jr. in the Seventh Judicial Circuit, Sangamon County, Illinois. On September 28, 1998, Judge Carmody dismissed the complaint and granted Plaintiff 21 days in which to file an
amended complaint. The Plaintiff filed her amended pleading on October 19, 1998. This pleading was also dismissed, but Plaintiff was granted leave to file a second amended complaint.
Illini and the directors answered the second amended complaint. The second amended complaint arises out of Illini's adoption of a Shareholder Rights Agreement on June 20, 1997, Illini's
subsequent adoption of a First Amendment to the Rights Agreement on July 1,
1998, and the Plaintiff's assertion that she became an "acquiring person" under the Rights Agreement on April 16, 1998. The Plaintiff seeks declaratory and injunctive relief from Illini and the
directors regarding the alleged triggering of the Rights Agreement and the enforceability and validity of the First Amendment to the Rights Agreement. The Plaintiff also seeks compensatory and
punitive damages against the directors arising out of the directors' alleged breaches of fiduciary duty committed in connection with the Rights Agreement and the First Amendment to the Rights
Agreement. The Plaintiff seeks recovery of her attorneys' fees and costs in connection with her action. Ida Noll asserted that her attorneys' fees through October 23, 1998 were approximately
$50,000 and that her expenses at that time were approximately $5,000. Illini and the directors have vigorously contested and opposed the allegations made by Ida R. Noll, and the parties are
engaged in discovery in the case.

The
presiding judge in this case is the same judge that presides in theQuinncase. On July 6, 1999, Illini adopted a Second
Amendment to its Shareholder Rights Agreement. Illini moved on August 31, 1999 for summary judgment as to the counts of the second amended complaint directed against it. Illini's motion argued
that the adoption of the Second Amendment rendered the case against it moot. The Defendant directors also filed on or about September 15, 1999 a joint motion for summary judgment as to the
counts directed against them on October 18, 1999, after denying Plaintiff's motion to continue the hearing, the Court granted both motions. Counsel for the Defendants are preparing written
orders for entry by the Court. Plaintiff's counsel also requested leave of court to file a petition for payment of attorneys' fees by Illini, which has not yet been filed. A hearing has been
scheduled for December 9, 1999. Illini will vigorously oppose Plaintiff's petition. Illini anticipates that Noll will appeal this case.

Ida R. Noll v. Ernest H. Huls, Illini Corporation, et al.,Sangamon County Case No. 99 CH 196

On
or about April 22, 1999, Ida R. Noll filed a new lawsuit against Illini, Illinois Stock Transfer Company, Ernest H. Huls and Farmers State Bank of Camp Point in the
Seventh Judicial Circuit Court, Sangamon County, Illinois. The suit seeks specific performance of the Rights Agreement, alleging that Ernest Huls became an acquiring person under the Rights Agreement
by reason of his right to receive shares of Illini common stock pursuant to an Agreement and Plan of Reorganization between Illini and the Farmers State Bank of Camp Point. Ida Noll seeks to compel
Illini and ISTC to distribute rights certificates to all shareholders of Illini except for Mr. Huls. Illini strongly disputes Ida Noll's assertion that Ernest Huls has become an acquiring
person under the Rights Agreement. Illini was served with this complaint on April 27, 1999.

In
June 1999, Illini and ISTC filed a joint Motion to Dismiss Noll's Complaint on the grounds that the alleged acquiring person, Ernest Huls, is not a beneficial owner of a
substantial block of Illini common stock. The Motion to Dismiss was scheduled for hearing on July 20, 1999 but on July 16, 1999 Plaintiff's counsel moved for a substitution of judges.
Illini and ISTC opposed substitution, but the court granted the motion. The case has been reassigned to Judge Tim Olson. Briefing of the Motion to Dismiss has been completed, and the Motion to Dismiss
is scheduled for hearing on November 10, 1999.

24



Item 2.  Changes in Securitiesnone

Item 3.  Defaults Upon Senior Securitiesnone

Item 4.  Submission of Matters to a Vote of Security Holdersnone

Item 5.  Other Informationnone

Item 6.  Exhibits and Reports on Form 8-K



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)                |  |                             
|------------------------------------------------ |  | ----------------------------
|/S/ BARNARD K. MCHONEBarnard K. McHone
President |  | November 10, 1999Date signed
|/s/DEANN HAGERDeann Hager
Finance Manager        |  | November 10, 1999Date signed

26



EXHIBIT INDEX

|Number |  | Description            
|------ |  | -----------------------
|27     |  | Financial Data Schedule

27