UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2003

                        Commission File Number: 33-90342

                             MAIN STREET TRUST, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


           Illinois                                           37-1338484
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  (State or other jurisdiction                   (I.R.S. Employer Identification
of incorporation or organization)                              Number)

                 100 West University, Champaign, Illinois 61820
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               (Address of principal executive offices) (Zip Code)

                                 (217) 351-6500
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              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

                                                           Name of Each Exchange
Title of Exchange Class                                     On Which Registered
--------------------------------------------------------------------------------
        None                                                        None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.01 par value per share
                     --------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 __

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. [X]

The index to  exhibits is located on page 62 of 68 total  sequentially  numbered
pages.

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<PAGE>

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes X - No ___

As of March 5, 2004, the Registrant had issued and outstanding  9,512,251 shares
of the  Registrant's  Common Stock. The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant,  based on the
last reported price on June 30, 2003, the last business day of the  registrant's
most recently completed second fiscal quarter, was approximately $209,495,280.

*    Based on the last  reported  price  ($30.00)  of an actual  transaction  in
     Registrant's  Common  Stock on June 30,  2003,  and  reports of  beneficial
     ownership  filed by directors and executive  officers of Registrant  and by
     beneficial owners of more than 5% of the outstanding shares of Common Stock
     of Registrant;  however,  such  determination of shares owned by affiliates
     does not constitute an admission of affiliate status or beneficial interest
     in shares of Registrant's Common Sock.

Documents Incorporated By Reference

Part III of Form 10-K -  Portions  of Proxy  Statement  for  annual  meeting  of
shareholders to be held May 11, 2004.

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<PAGE>



                             MAIN STREET TRUST, INC.

                             Form 10-K Annual Report

                                Table of Contents

                                     Part I

Item 1.   Description of Business..........................................    4

          A.   General
          B.   Business of the Company and Subsidiaries
          C.   Competition
          D.   Monetary Policy and Economic Conditions
          E.   Supervision and Regulation
          F.   Employees
          G.   Internet Website

Item 2.   Properties.......................................................   12
Item 3.   Legal Proceedings................................................   12
Item 4.   Submission of Matters to a Vote of Security Holders..............   12

                                     Part II

Item 5.   Market for Registrant's Common Equity, Related Shareholder
            Matters and Issuer Purchases of Equity Securities..............   13
Item 6.   Selected Consolidated Financial Data.............................   14
Item 7.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations..................   14
Item 7a.  Quantitative and Qualitative Disclosures about Market Risk.......   33
Item 8.   Financial Statements and Supplementary Data......................   33
Item 9.   Changes in and Disagreements with Accountants
            On Accounting and Financial Disclosure.........................   60
Item 9a.  Controls and Procedures..........................................   60

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant..............    60
Item 11.  Executive Compensation..........................................    61
Item 12.  Security Ownership of Certain Beneficial Owners
            And Management and related shareholder matters................    61
Item 13.  Certain Relationships and Related Transactions..................    62
Item 14.  Principal Accountants Fees and Services.........................    62

                                     Part IV

Item 15.  Exhibits, Financial Statement Schedules and Reports
            On Forms 8-K..................................................    62

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                                     PART I

Item 1.  Description of Business

A. General

MAIN STREET TRUST,  INC. (the  "Company"),  an Illinois  corporation,  is a bank
holding  company  registered  under the Bank  Holding  Company  Act of 1956,  as
amended (the "BHCA").  The Company was  incorporated  on August 12, 1999, and is
the parent  company of  BankIllinois,  The First  National  Bank of Decatur  and
FirsTech, Inc.

On  March  23,  2000,  the  Company  acquired  all of the  outstanding  stock of
BankIllinois,   The  First  National  Bank  of  Decatur,  First  Trust  Bank  of
Shelbyville and FirsTech,  Inc.  following the merger of BankIllinois  Financial
Corporation  and First Decatur  Bancshares,  Inc. into the Company.  The merger,
which was accounted  for as a pooling of  interests,  was completed on March 23,
2000. Accordingly, prior period consolidated financial data has been restated as
though the prior entities had been consolidated for all periods  presented.  The
Company subsequently merged the Company's former banking subsidiary, First Trust
Bank of Shelbyville, into BankIllinois effective June 19, 2002.

B. Business of the Company and Subsidiaries

General

The Company  conducts the business of banking and offers trust services  through
BankIllinois  and The First National Bank of Decatur (the  "Banks"),  and retail
payment processing through FirsTech, Inc., its wholly owned subsidiaries.  As of
December 31, 2003, the Company had consolidated  total assets of $1.154 billion,
shareholders'  equity of $111.450 million and trust assets under  administration
of approximately $ 1.514 billion. Substantially all of the income of the Company
is currently  derived from  dividends  and  management  fees  received  from the
subsidiaries.  The amount of these dividends is directly related to the earnings
of the  subsidiaries  and is  subject to various  regulatory  restrictions.  See
"Regulation and Supervision".

Banking Segment

The Banks conduct a general  banking  business  embracing  most of the services,
both consumer and commercial,  which banks may lawfully  provide,  including the
following  principal  services:  the acceptance of deposits to demand,  savings,
time and  individual  retirement  accounts and the  servicing of such  accounts;
commercial,  consumer and real estate lending,  including  installment loans and
personal  lines of credit;  safe deposit  operations;  and  additional  services
tailored to the needs of  individual  customers,  such as the sale of traveler's
checks,  cashier's  checks and other  specialized  services.  The Company offers
personalized  financial  planning services through Raymond James, which services
include a broad spectrum of investment products, including stocks, bonds, mutual
funds  and tax  advantaged  investments.  In  addition,  the  Wealth  Management
division offers a wide range of services such as investment  management,  acting
as trustee,  serving as  guardian,  executor  or agent,  farm  management,  401K
administration and miscellaneous consulting.

Commercial   lending  at  the  Banks  covers  such  categories  as  agriculture,
manufacturing,  capital,  inventory,  construction,  real estate development and
commercial mortgages. Commercial lending, particularly loans to small and medium
sized  businesses,  accounts for a major portion of the Banks' loan  portfolios.
The  Banks'  retail  banking  divisions  make  loans to  consumers  for  various
purposes, including home equity and automobile loans. The consumer mortgage loan
departments, which are part of the retail banking divisions,  specialize in real
estate loans to  individuals.  The Banks also purchase  installment  obligations
from retailers, primarily without recourse.

The  Banks'  principal  sources  of income  are  interest  and fees on loans and
investments  and service  fees.  Their  principal  expenses are interest paid on
deposits and general  operating  expenses.  The Banks'  primary  service area is
Central Illinois.
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Remittance Services Segment

FirsTech,  Inc.  provides  the  following  services to  electric,  water and gas
utilities,  telecommunication  companies,  cable television firms and charitable
organizations: retail lockbox processing of payments delivered by mail on behalf
of the biller;  processing of payments delivered by customers to pay agents such
as grocery stores,  convenience stores and currency exchanges; and concentration
of payments delivered by the Automated Clearing House network,  money management
software such as Quicken and through  networks such as Visa e-Pay and Mastercard
RPS.  For the years ended  December  31,  2003,  2002 and 2001,  FirsTech,  Inc.
accounted  for $7.3 million  (10%),  $7.5 million  (9%),  and $7.7 million (9%),
respectively,  of the  consolidated  total revenues of the Company and accounted
for $2.3 million (9%), $2.4 million (9%) and $2.1 million (9%), respectively, of
the  consolidated  income  before  income tax of the Company.  See Note 2 to the
Consolidated Financial Statements for an analysis of segment operations.

FirsTech,  Inc.  provides  retail lockbox  processing for  organizations,  which
provided  approximately 41%, 41% and 42% of the total revenue of FirsTech,  Inc.
in  2003,  2002  and  2001,  respectively.

FirsTech,  Inc. processes  payments  delivered by customers to pay agents.  Many
businesses and merchants such as grocery stores and  convenience  stores located
throughout the United States serve as agents of utilities in collecting customer
payments.  In 2003, 2002 and 2001, the remittance  collection business for these
companies  accounted for approximately  55%, 54% and 53%,  respectively,  of the
total revenue of FirsTech, Inc.

FirsTech, Inc. competes in the retail payment processing business with companies
that  range  from  large  national  companies  to small,  local  businesses.  In
addition,  many  companies  do  their  own  remittance  processing  rather  than
out-source  the work to an  independent  processor  such as  FirsTech,  Inc. The
principal  methods of  competition  in the  remittance  processing  industry are
pricing of services, use of technology and quality of service.

C. Competition

The Company faces strong competition both in originating loans and in attracting
deposits.  Competition  in  originating  real estate loans comes  primarily from
other commercial banks,  savings  institutions and mortgage bankers making loans
secured by real estate located in the Company's  market area.  Commercial  banks
and finance  companies,  including  finance  company  affiliates  of  automobile
manufacturers,  provide vigorous competition in consumer lending. In addition to
competition  from the local  market,  the Company faces  competition  from large
national organizations, such as financial organizations and insurance companies,
for large commercial real estate loans. The Company competes for real estate and
other  loans  primarily  on the  basis of the  interest  rates  and loan fees it
charges,  the  types of loans it  originates  and the  quality  of  services  it
provides to borrowers.

The Company faces  substantial  competition  in  attracting  deposits from other
commercial banks,  savings  institutions,  money market and mutual funds, credit
unions and other investment vehicles.  The ability of the Company to attract and
retain deposits depends on its ability to provide investment  opportunities that
satisfy the requirements of investors as to rate of return,  liquidity, risk and
other factors. The Company attracts a significant amount of deposits through its
branch offices, primarily from the communities in which those branch offices are
located;  therefore,  competition  for those deposits is principally  from other
commercial banks and savings institutions  located in the same communities.  The
Company competes for these deposits by offering a variety of deposit accounts at
competitive  rates,  convenient  business hours and convenient  branch locations
with interbranch deposit and withdrawal privileges at each.

Under the  Gramm-Leach-Bliley  Act, which was enacted in 2000,  securities firms
and insurance  companies that elect to become  financial  holding  companies may
acquire banks and other financial institutions. Although the Company has seen no
significant  impact  from  this  change,  it has the  potential  to  change  the
competitive environment in which the Company and the Banks conduct business. The
financial services industry is also likely to become more competitive as further
technological  advances  enable more  companies to provide  financial  services.
These   technological   advances  may  diminish  the  importance  of  depository
institutions and other financial intermediaries in the transfer of funds between
parties.

D. Monetary Policy and Economic Conditions

The earnings of  commercial  banks and bank holding  companies  are affected not
only by  general  economic  conditions,  but  also by the  policies  of  various
governmental  regulatory agencies. In particular,  the Federal Reserve regulates
money and credit  conditions  and interest  rates in order to influence  general
economic conditions and interest rates, primarily through open market operations
in U.S.  government  securities,  varying the discount  rate on member banks and
nonmember  bank  borrowings  and  setting  reserve   requirements  against  bank
deposits. Such Federal Reserve policies and acts have a significant influence on
overall growth and distribution of bank loans, investments, deposits and related
interest rates. The Company cannot  accurately  predict the effect, if any, such
policies and acts may have in the future on its business or earnings.

                                       5
<PAGE>

E. Supervision and Regulation

General

Financial  institutions,  their  holding  companies  and  their  affiliates  are
extensively  regulated under federal and state law. As a result,  the growth and
earnings  performance  of the  Company may be  affected  not only by  management
decisions  and general  economic  conditions,  but also by the  requirements  of
federal and state statutes and by the  regulations  and policies of various bank
regulatory  authorities,  including the Illinois  Commissioner of Banks and Real
Estate (the "Commissioner"),  the Office of the Comptroller of the Currency (the
"OCC"),  the Board of  Governors  of the Federal  Reserve  System (the  "Federal
Reserve")  and  the  Federal  Deposit   Insurance   Corporation   (the  "FDIC").
Furthermore,  taxation laws  administered  by the Internal  Revenue  Service and
state taxing  authorities and securities laws administered by the Securities and
Exchange Commission (the "SEC") and state securities  authorities have an impact
on the business of the Company.  The effect of these  statutes,  regulations and
regulatory  policies may be  significant,  and cannot be  predicted  with a high
degree of certainty.

Federal  and  state  laws and  regulations  generally  applicable  to  financial
institutions regulate,  among other things, the scope of business, the kinds and
amounts  of  investments,  reserve  requirements,  capital  levels  relative  to
operations,  the nature and amount of collateral for loans, the establishment of
branches,  mergers and consolidations and the payment of dividends.  This system
of supervision  and  regulation  establishes a  comprehensive  framework for the
respective  operations  of the  Company  and its  subsidiaries  and is  intended
primarily for the protection of the FDIC-insured  deposits and depositors of the
Bank Subsidiaries, rather than shareholders.

The following is a summary of the material elements of the regulatory  framework
that  applies to the Company and its  subsidiaries.  It does not describe all of
the  statutes,  regulations  and  regulatory  policies  that apply,  nor does it
restate  all of the  requirements  of those  that are  described.  As such,  the
following is qualified  in its  entirety by  reference  to  applicable  law. Any
change in  statutes,  regulations  or  regulatory  policies  may have a material
effect on the business of the Company and its subsidiaries.

Recent Regulatory Developments

National  Bank  Preemption.  On January 7, 2004,  the OCC issued two final rules
that clarify the federal  character of the national  banking  system.  The first
rule provides that, except where made applicable by federal law, state laws that
obstruct,  impair or condition  national  banks' ability to fully exercise their
deposit-taking,  lending and  operational  powers are not applicable to national
banks.  That rule further  provides that the following types of state laws apply
to national banks to the extent that they only incidentally  affect the exercise
of national banks'  deposit-taking,  lending and operational  powers:  contract,
criminal,  taxation, tort, zoning and laws relating to certain homestead rights,
rights to collect debts,  acquisitions  and transfers of property and other laws
as  determined  to apply to national  banks by the OCC.  The second rule affirms
that, under federal law, with some exceptions,  the OCC has exclusive visitorial
authority (the power to inspect,  examine,  supervise and regulate) with respect
to the content and conduct of activities  authorized for national  banks.  These
controversial  rules give  national  banks,  especially  those  that  operate in
multiple states, a significant  competitive advantage over state-chartered banks
and are therefore likely to be challenged by individuals and organizations  that
represent the interests of individual states and state-chartered banks. Both the
U.S.  House  Committee on Financial  Services and the New York Attorney  General
have already initiated such challenges.

FACT Act.  On  December  4, 2003,  President  Bush  signed into law the Fair and
Accurate  Credit  Transactions  Act of 2003 (the  "FACT  Act"),  which  contains
numerous  amendments  to the Fair  Credit  Reporting  Act  relating  to  matters
including identity theft and privacy.  Among its other provisions,  the FACT Act
requires financial  institutions:  (i) to establish an identity theft prevention
program;  (ii) to enhance the accuracy and integrity of information furnished to
consumer reporting  agencies;  and (iii) to allow customers to prevent financial
institution   affiliates  from  using,  for  marketing   solicitation  purposes,
transaction  and experience  information  about the customers  received from the
financial   institution.   The  FACT  Act  also  requires  the  federal  banking
regulators,  and certain other agencies, to promulgate  regulations to implement
its  provisions.  The  various  provisions  of the  FACT Act  contain  different
effective dates  including March 31, 2004, for those  provisions of the FACT Act
that do not require  significant  changes to business procedures and December 1,
2004,  for certain  other  provisions  that will  require  significant  business
procedure changes.

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<PAGE>

The Company

General.  The Company,  as the sole shareholder of the Bank  Subsidiaries,  is a
bank holding company. As a bank holding company, the Company is registered with,
and is subject to  regulation  by, the Federal  Reserve  under the Bank  Holding
Company Act of 1956, as amended (the "BHCA"). In accordance with Federal Reserve
policy,  the Company is expected to act as a source of financial strength to the
Bank  Subsidiaries and to commit  resources to support the Bank  Subsidiaries in
circumstances  where the Company might not otherwise do so. Under the BHCA,  the
Company is subject to periodic  examination by the Federal Reserve.  The Company
is also  required  to file with the  Federal  Reserve  periodic  reports  of the
Company's operations and such additional  information  regarding the Company and
its subsidiaries as the Federal Reserve may require.

Acquisitions,  Activities and Change in Control.  The primary  purpose of a bank
holding company is to control and manage banks. The BHCA generally  requires the
prior  approval of the Federal  Reserve for any merger  involving a bank holding
company or any  acquisition  by a bank  holding  company of another bank or bank
holding company acquisition involving a bank holding company. Subject to certain
conditions (including deposit concentration limits established by the BHCA), the
Federal Reserve may allow a bank holding company to acquire banks located in any
state of the United States. In approving  interstate  acquisitions,  the Federal
Reserve is required to give effect to applicable  state law  limitations  on the
aggregate  amount of deposits  that may be held by the  acquiring  bank  holding
company and its insured depository  institution affiliates in the state in which
the target  bank is located  (provided  that  those  limits do not  discriminate
against  out-of-state  depository  institutions or their holding  companies) and
state  laws that  require  that the  target  bank have been in  existence  for a
minimum  period of time (not to exceed five years)  before being  acquired by an
out-of-state bank holding company.

The BHCA generally  prohibits a bank holding  company from  acquiring  direct or
indirect  ownership  or  control  of more  than 5% of the  voting  shares of any
company that is not a bank and from engaging in any business  other than that of
banking,  managing and  controlling  banks or  furnishing  services to banks and
their  subsidiaries.  This  general  prohibition  is  subject  to  a  number  of
exceptions.  The principal exception allows bank holding companies to engage in,
and to own shares of  companies  engaged  in,  certain  businesses  found by the
Federal  Reserve  to be "so  closely  related  to  banking...as  to be a  proper
incident  thereto."  This  authority  would  permit  the  Company to engage in a
variety of  banking-related  businesses,  including  the  operation of a thrift,
consumer finance,  equipment leasing, the operation of a computer service bureau
(including software development),  and mortgage banking and brokerage.  The BHCA
generally does not place territorial  restrictions on the domestic activities of
non-bank subsidiaries of bank holding companies.

Additionally,  bank holding companies that meet certain eligibility requirements
prescribed by the BHCA and elect to operate as financial  holding  companies may
engage in, or own shares in  companies  engaged in, a wider range of  nonbanking
activities,  including securities and insurance underwriting and sales, merchant
banking and any other activity that the Federal  Reserve,  in consultation  with
the Secretary of the Treasury, determines by regulation or order is financial in
nature,  incidental to any such financial  activity or complementary to any such
financial  activity  and does  not  pose a  substantial  risk to the  safety  or
soundness of depository  institutions  or the financial  system  generally.  The
Company  has  elected  (and the  Federal  Reserve  has  accepted  the  Company's
election) to operate as a financial holding company.

Federal law also prohibits any person or company from acquiring  "control" of an
FDIC-insured  depository institution or its holding company without prior notice
to the appropriate federal bank regulator. "Control" is conclusively presumed to
exist upon the acquisition of 25% or more of the outstanding  voting  securities
of a bank or bank holding company, but may arise under certain  circumstances at
10% ownership.

Capital  Requirements.  Bank holding  companies are required to maintain minimum
levels  of  capital  in  accordance  with  Federal   Reserve  capital   adequacy
guidelines. If capital levels fall below minimum required levels, a bank holding
company,  among other  things,  may be denied  approval to acquire or  establish
additional banks or non-bank businesses.

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<PAGE>

The  Federal  Reserve's  capital  guidelines  establish  the  following  minimum
regulatory  capital  requirements for bank holding  companies:  (i) a risk-based
requirement  expressed as a percentage  of total  assets  weighted  according to
risk; and (ii) a leverage requirement expressed as a percentage of total assets.
The risk-based requirement consists of a minimum ratio of total capital to total
risk-weighted  assets  of 8%,  and a minimum  ratio of Tier 1  capital  to total
risk-weighted assets of 4%. The leverage requirement consists of a minimum ratio
of Tier 1 capital to total  assets of 3% for the most  highly  rated  companies,
with a minimum  requirement of 4% for all others.  For purposes of these capital
standards,  Tier 1 capital consists primarily of permanent  stockholders' equity
less intangible  assets (other than certain loan servicing  rights and purchased
credit card  relationships.)  Total capital consists primarily of Tier 1 capital
plus certain  other debt and equity  instruments  which do not qualify as Tier 1
capital and a portion of the company's allowance for loan losses.

The risk-based and leverage standards described above are minimum  requirements.
Higher   capital  levels  will  be  required  if  warranted  by  the  particular
circumstances or risk profiles of individual banking organizations. For example,
the Federal Reserve's capital guidelines contemplate that additional capital may
be required to take adequate account of, among other things, interest rate risk,
or the risks posed by  concentrations  of credit,  nontraditional  activities or
securities trading activities. Further, any banking organization experiencing or
anticipating  significant  growth would be expected to maintain  capital ratios,
including  tangible capital  positions (i.e., Tier 1 capital less all intangible
assets), well above the minimum levels. As of December 31, 2003, the Company had
regulatory capital in excess of the Federal Reserve's minimum requirements.

Dividend  Payments.  The Company's  ability to pay dividends to its shareholders
may be affected by both general corporate law considerations and policies of the
Federal  Reserve   applicable  to  bank  holding   companies.   As  an  Illinois
corporation,  the Company is subject to the limitations of the Illinois Business
Corporation Act, as amended,  which prohibits the Company from paying a dividend
if, after giving effect to the dividend: (i) the Company would be insolvent;  or
(ii) the net assets of the  Company  would be less than  zero;  or (iii) the net
assets of the  Company  would be less than the maximum  amount  then  payable to
shareholders of the company who would have preferential  distribution  rights if
the Company  were  liquidated.  Additionally,  policies  of the Federal  Reserve
caution that a bank holding  company  should not pay cash  dividends that exceed
its net income or that can only be funded in ways that  weaken the bank  holding
company's  financial  health,  such as by  borrowing.  The Federal  Reserve also
possesses  enforcement  powers over bank holding  companies  and their  non-bank
subsidiaries  to  prevent or remedy  actions  that  represent  unsafe or unsound
practices or  violations  of applicable  statutes and  regulations.  Among these
powers is the ability to  proscribe  the payment of  dividends by banks and bank
holding companies.

Federal Securities Regulation. The Company's common stock is registered with the
SEC under the  Securities Act of 1933, as amended,  and the Securities  Exchange
Act of 1934,  as amended  (the  "Exchange  Act").  Consequently,  the Company is
subject  to the  information,  proxy  solicitation,  insider  trading  and other
restrictions and requirements of the SEC under the Exchange Act.

The Bank Subsidiaries

General.  BankIllinois is an  Illinois-chartered  bank, the deposit  accounts of
which  are  insured  by  the  FDIC's  Bank   Insurance   Fund  ("BIF").   As  an
Illinois-chartered   FDIC-insured   bank,   BankIllinois   is   subject  to  the
examination,   supervision,   reporting  and  enforcement  requirements  of  the
Commissioner,  the  chartering  authority  for  Illinois  banks,  and the  FDIC,
designated  by federal law as the primary  federal  regulator  of insured  state
banks that,  like  BankIllinois,  are not members of the Federal  Reserve System
(non-member  banks").  BankIllinois  is a member of the  Federal  Home Loan Bank
System,   which  provides  a  central  credit  facility   primarily  for  member
institutions.

The First  National Bank of Decatur  ("Decatur") is a national bank chartered by
the OCC under the National Bank Act. The deposit accounts of Decatur are insured
by the BIF,  and  Decatur  is a member of the  Federal  Reserve  System  and the
Federal  Home  Loan  Bank  System.   Decatur  is  subject  to  the  examination,
supervision,  reporting and enforcement  requirements of the OCC, the chartering
authority for national banks.  The FDIC, as  administrator  of the BIF, also has
regulatory authority over Decatur.

Deposit  Insurance.  As FDIC-insured  institutions,  the Bank  Subsidiaries  are
required to pay deposit insurance premium  assessments to the FDIC. The FDIC has
adopted a  risk-based  assessment  system  under  which all  insured  depository
institutions  are placed  into one of nine  categories  and  assessed  insurance
premiums  based  upon  their  respective   levels  of  capital  and  results  of
supervisory evaluations. Institutions classified as well-capitalized (as defined
by the FDIC) and considered  healthy pay the lowest  premium while  institutions
that  are  less  than  adequately  capitalized  (as  defined  by the  FDIC)  and
considered of  substantial  supervisory  concern pay the highest  premium.  Risk
classification  of all  insured  institutions  is  made  by the  FDIC  for  each
semi-annual assessment period.

                                       8
<PAGE>

During the year ended  December  31,  2003,  BIF  assessments  ranged from 0% of
deposits to 0.27% of deposits.  For the semi-annual  assessment period beginning
January 1, 2004,  BIF  assessment  will continue to range from 0% of deposits to
0.27% of deposits.

FICO  Assessments.  Since 1987, a portion of the deposit  insurance  assessments
paid by members of the FDIC's  Savings  Association  Insurance Fund ("SAIF") has
been used to cover interest  payments due on the outstanding  obligations of the
Financing  Corporation  ("FICO").  FICO  was  created  in  1987 to  finance  the
recapitalization  of the Federal  Savings and Loan  Insurance  Corporation,  the
SAIF's predecessor insurance fund. As a result of federal legislation enacted in
1996,  beginning as of January 1, 1997, both SAIF members and BIF members became
subject to  assessments  to cover the  interest  payments  on  outstanding  FICO
obligations  until the final maturity of such  obligations  in 2019.  These FICO
assessments  are in  addition  to  amounts  assessed  by the  FDIC  for  deposit
insurance. During the year ended December 31, 2003, the FICO assessment rate for
BIF and SAIF members were approximately 0.02% of deposits.

Supervisory  Assessments.  All Illinois banks and national banks are required to
pay supervisory  assessments to the Commissioner and the OCC,  respectively,  to
fund the operations of those  agencies.  The amount of the assessment paid by an
Illinois  bank  to  the   Commissioner   is  calculated  on  the  basis  of  the
institution's total assets, including consolidated subsidiaries,  as reported to
the  Commissioner.  In the case of a national bank, the amount of the assessment
paid to the OCC is calculated using a formula that takes into account the bank's
size and its  supervisory  condition  (as  determined  by the  corporate  rating
assigned to the bank as a result of its most recent OCC examination). During the
year ended December 31, 2003,  BankIllinois paid supervisory  assessments to the
Commissioner  totaling $106,000 and Decatur paid supervisory  assessments to the
OCC totaling $109,000.

Capital Requirements. Banks are generally required to maintain capital levels in
excess  of  other  businesses.   The  federal  bank  regulatory   agencies  have
established  the  following  minimum  capital  standards  for insured  state and
national  banks,  such as the  Bank  Subsidiaries:  (i) a  leverage  requirement
consisting  of a minimum  ratio of Tier 1 capital to total  assets of 3% for the
most  highly-rated  banks  with a  minimum  requirement  of at  least 4% for all
others; and (ii) a risk-based capital requirement  consisting of a minimum ratio
of total  capital to total  risk-weighted  assets of 8%, and a minimum  ratio of
Tier 1 capital  to total  risk-weighted  assets  of 4%.  For  purposes  of these
capital  standards,  the  components of Tier 1 capital and total capital are the
same as those for bank holding companies discussed above.

The  capital  requirements  described  above are  minimum  requirements.  Higher
capital levels will be required if warranted by the particular  circumstances or
risk profiles of individual  institutions.  For example,  the regulations of the
FDIC  and the OCC  provide  that  additional  capital  may be  required  to take
adequate  account of, among other things,  interest rate risk or the risks posed
by concentrations  of credit,  nontraditional  activities or securities  trading
activities.

Further,  federal law and regulations  provide  various  incentives to financial
institutions  to  maintain  regulatory  capital  at levels in excess of  minimum
regulatory   requirements.   For  example,  a  financial   institution  that  is
"well-capitalized"  may qualify for exemptions  from prior notice or application
requirements otherwise applicable to certain types of activities and may qualify
for  expedited   processing   of  other   required   notices  or   applications.
Additionally,  one of the criteria  which  determines  a bank holding  company's
eligibility to operate as a financial  holding company is a requirement that all
of its  financial  institution  subsidiaries  be  "well-capitalized".  Under the
regulations  of the  FDIC and the OCC,  in  order  to be  "well-capitalized",  a
financial   institution  must  maintain  a  ratio  of  total  capital  to  total
risk-weighted  assets  of 10% or  greater,  a ratio of Tier 1  capital  to total
risk-weighted  assets of 6% or  greater  and a ratio of Tier 1 capital  to total
assets of 5% or greater.

                                       9
<PAGE>

Federal law also  provides the federal  banking  regulators  with broad power to
take  prompt  corrective  action to resolve  the  problems  of  undercapitalized
institutions.  The extent of the  regulators'  powers  depends  on  whether  the
institution  in  question  is  "adequately   capitalized",   "undercapitalized",
"significantly undercapitalized", or "critically undercapitalized", in each case
as  defined by  regulation.  Depending  upon the  capital  category  to which an
institution  is  assigned,   the  regulators'  correction  powers  include:  (i)
requiring the  institution to submit a capital  restoration  plan; (ii) limiting
the institution's  asset growth and restricting its activities;  (iii) requiring
the institution to issue additional  capital stock (including  additional voting
stock) or to be acquired; (iv) restricting  transactions between the institution
and its affiliates; (v) restricting the interest rate the institution may pay on
deposits;  (vi) ordering a new election of directors of the  institution;  (vii)
requiring  that senior  executive  officers or  directors be  dismissed;  (viii)
prohibiting the institution from accepting  deposits from  correspondent  banks;
(ix) requiring the institution to divest certain  subsidiaries;  (x) prohibiting
the payment of principal or interest on subordinated  debt; and (xi) ultimately,
appointing a receiver for the institution.

As of December 31,  2003:  (i) none of the Bank  Subsidiaries  were subject to a
directive from the FDIC (in the case of BankIllinois) or the OCC (in the case of
Decatur)  to  increase  its  capital  to an  amount  in  excess  of the  minimum
regulatory capital requirements; (ii) each of the Bank Subsidiaries exceeded its
minimum  regulatory  capital  requirements  under  applicable  capital  adequacy
guidelines;  and (iii) each of the Bank Subsidiaries was "well-capitalized",  as
defined by applicable regulations.

Liability of Commonly Controlled  Institutions.  Under Federal law, institutions
insured  by the FDIC may be  liable  for any loss  incurred  by,  or  reasonably
expected to be incurred by, the FDIC in connection  with the default of commonly
controlled  FDIC-insured  depository  institutions or any assistance provided by
the FDIC to commonly controlled  FDIC-insured  depository institutions in danger
of default. Because the Company controls each of the Bank Subsidiaries, the Bank
Subsidiaries are commonly controlled for purposes of these provisions of federal
law.

Dividend Payments. The primary source of funds for the Company is dividends from
the subsidiaries. Under the Illinois Banking Act, BankIllinois generally may not
pay  dividends  in excess of their net  profits.  Under the  National  Bank Act,
Decatur may pay dividends  out of its  undivided  profits in such amounts and at
such times as its board of directors deemed prudent. Without prior OCC approval,
however,  Decatur  may not pay  dividends  in any  calendar  year  that,  in the
aggregate,  exceed its  year-to-date net income plus its retained net income for
the two preceding years.

The payment of dividends by any financial  institution or its holding company is
affected by the requirement to maintain  adequate capital pursuant to applicable
capital  adequacy  guidelines  and  regulations,  and  a  financial  institution
generally is prohibited from paying any dividends if, following payment thereof,
the institution would be undercapitalized.  As described above, each of the Bank
Subsidiaries   exceeded  its  minimum  capital   requirements  under  applicable
guidelines  as of December  31, 2003.  As of December  31,  2003,  approximately
$29,378,000  was  available to be paid as  dividends  by the Bank  Subsidiaries.
Notwithstanding the availability of funds for dividends,  however,  the FDIC (in
case of BankIllinois)  and the OCC (in case of Decatur) may prohibit the payment
of dividends if the agency determines such payment would constitute an unsafe or
unsound practice.

Insider Transactions.  The Bank Subsidiaries are subject to certain restrictions
imposed  by  federal  law on  extensions  of  credit  to  the  Company  and  its
subsidiaries, on investments in the stock or other securities of the Company and
its  subsidiaries  and the  acceptance  of the stock or other  securities of the
Company  or  its   subsidiaries  as  collateral  for  loans  made  by  the  Bank
Subsidiaries.  Certain limitations and reporting requirements are also placed on
extensions of credit by the Bank  Subsidiaries  to their directors and officers,
to  directors  and  officers of the Company and its  subsidiaries,  to principal
shareholders  of the  Company  and to  "related  interests"  of such  directors,
officers and principal  shareholders.  In addition,  federal law and regulations
may affect  the terms upon which any person who is a director  or officer of the
Company or one of its subsidiaries or a principal shareholder of the Company may
obtain credit from banks with which the Bank Subsidiaries maintain correspondent
relationships.

                                       10
<PAGE>

Safety and  Soundness  Standards.  The federal  banking  agencies  have  adopted
guidelines that establish  operational  and managerial  standards to promote the
safety  and  soundness  of  federally  insured  depository   institutions.   The
guidelines  set forth  standards  for internal  controls,  information  systems,
internal audit systems, loan documentation,  credit underwriting,  interest rate
exposure,  asset  growth,  compensation,  fees and  benefits,  asset quality and
earnings.

In  general,  the  safety and  soundness  guidelines  prescribe  the goals to be
achieved in each area, and each  institution is responsible for establishing its
own procedures to achieve those goals.  If an  institution  fails to comply with
any of the  standards set forth in the  guidelines,  the  institution's  primary
federal regulator may require the institution to submit a plan for achieving and
maintaining  compliance.  If  an  institution  fails  to  submit  an  acceptable
compliance plan, or fails in any material respect to implement a compliance plan
that has been  accepted by its  primary  federal  regulator,  the  regulator  is
required to issue an order  directing the  institution  to cure the  deficiency.
Until the deficiency cited in the regulator's  order is cured, the regulator may
restrict the institution's  rate of growth,  require the institution to increase
its capital,  restrict the rates the institution pays on deposits or require the
institution  to take any  action  the  regulator  deems  appropriate  under  the
circumstances.  Noncompliance  with the standards  established by the safety and
soundness guidelines may also constitute grounds for other enforcement action by
the federal  banking  regulators,  including  cease and desist  orders and civil
money penalty assessments.

Branching  Authority.  Illinois banks, such as BankIllinois,  have the authority
under  Illinois  law to  establish  branches  anywhere in the State of Illinois,
subject  to  receipt  of  all  required  regulatory  approvals.  National  banks
headquartered  in Illinois,  such as Decatur,  have the same branching rights in
Illinois as banks chartered under Illinois law, subject to OCC approval.

Federal law permits state and national banks to merge with banks in other states
subject  to:  (i)   regulatory   approval;   (ii)  federal  and  state   deposit
concentration limits; and (iii) state law limitations requiring the merging bank
to have  been in  existence  for a minimum  period  of time (not to exceed  five
years) prior to the merger. The establishment of new interstate  branches or the
acquisition  of individual  branches of a bank in another state (rather than the
acquisition of an out-of-state  bank in its entirety) is permitted only in those
few states that authorize such expansion.

State Bank  Investments and Activities.  BankIllinois  generally is permitted to
make  investments and engage in activities  directly or through  subsidiaries as
authorized by Illinois  law.  However,  under  federal law and FDIC  regulation,
FDIC-insured  state banks are prohibited,  subject to certain  exceptions,  from
making or retaining equity investments of a type, or in an amount,  that are not
permissible for a national bank.  Federal law and FDIC regulations also prohibit
FDIC-insured state banks and their subsidiaries,  subject to certain exceptions,
from  engaging as principal in any activity that is not permitted for a national
bank unless the bank  meets,  and  continues  to meet,  its  minimum  regulatory
capital  requirements  and the FDIC  determines  the  activity  would not pose a
significant  risk to the deposit  insurance  fund of which the bank is a member.
These  restrictions  have not had,  and are not  currently  expected to have,  a
material impact on the operations of BankIllinois.

Financial  Subsidiaries.  Under Federal law and OCC regulations,  national banks
are authorized to engage, through "financial subsidiaries", in any activity that
is  permissible  for a  financial  holding  company  and any  activity  that the
Secretary of the Treasury, in consultation with the Federal Reserve,  determines
is financial in nature or incidental to any such financial activity,  except (i)
insurance  underwriting,  (ii) real estate development or real estate investment
activities  (unless  otherwise   permitted  by  law),  (iii)  insurance  company
portfolio  investments  and (iv) merchant  banking.  The authority of a national
bank to invest in a financial  subsidiary is subject to a number of  conditions,
including,  among other things,  requirements that the bank must be well-managed
and  well-capitalized  (after  deducting  from  capital  the bank's  outstanding
investments  in financial  subsidiaries).  Federal law also  provides that state
banks may invest in financial  subsidiaries  (assuming  they have the  requisite
investment  authority under applicable  state law) subject to substantially  the
same   conditions   that  apply  to  national  bank   investments  in  financial
subsidiaries. None of the Bank Subsidiaries has applied for or received approval
to establish any financial subsidiaries.

Federal Reserve System.  Federal  Reserve  regulations,  as presently in effect,
require  depository  institutions  to  maintain  non-interest  earning  reserves
against  their  transactions   accounts  (primarily  NOW  and  regular  checking
accounts),  as follows:  for transactions  accounts aggregating $45.4 million or
less,  the reserve  requirement  is 3% of total  transaction  accounts;  and for
transaction  accounts  aggregating  in  excess  of $45.4  million,  the  reserve
requirement  is  $1.164  million  plus  10% of the  aggregate  amount  of  total
transaction  accounts  in excess of $45.4  million.  The first  $6.6  million of
otherwise reservable balances are exempted from the reserve requirements.  These
reserve  requirements  are subject to annual  adjustment by the Federal Reserve.
The Bank Subsidiaries are in compliance with the foregoing requirements.

                                       11
<PAGE>

F. Employees

The Company had a total of 453 employees at December 31, 2003, consisting of 347
full-time  employees and 106  part-time.  The Company  places a high priority on
staff development, which involves extensive training, including customer service
training.  New employees are selected on the basis of both technical  skills and
consumer service capabilities.  None of the Company's employees are covered by a
collective  bargaining  agreement  with the  Company  or its  subsidiaries.  The
Company  offers a variety of employee  benefits,  and  management  considers its
employee relations to be excellent.

G. Internet Website

The   Company   maintains   internet   sites   for  its   subsidiary   banks  at
www.bankillinois.com and www.1stdecatur.com. The Company makes available free of
charge on these sites its annual report on Form 10-K,  quarterly reports on Form
10-Q,  current reports on Form 8-K and other reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably  practicable
after it  electronically  files such  material  with,  or  furnishes  it to, the
Securities and Exchange Commission.

Item 2. Properties

The Company and its subsidiaries  conduct business in seventeen  locations.  The
Company and BankIllinois'  headquarters are located at 100 W. University Ave. in
Champaign,  Illinois.  The  Company  and/or  its  subsidiaries  own the land and
buildings  for  eleven  locations  and lease six  locations,  three of which are
located in supermarkets.

All of the Banks own their main banking  facilities.  The Company  believes that
its facilities are adequate to serve its present needs.

Item 3. Legal Proceedings

In the course of business,  the Company and its subsidiaries  become involved in
various legal  proceedings,  claims and  litigation  arising out of the ordinary
course of business.  As of the date of filing this report,  there were no causes
of action  which  would  have a  material  adverse  effect  on the  consolidated
financial position of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

There  were no items  submitted  to a vote of  security  holders  in the  fourth
quarter of 2003.

                                       12
<PAGE>


                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Shareholder Matters and
        Issuer Purchases of Equity Securities

The Company's common stock was held by approximately  700 shareholders of record
as of March 12, 2004 and is traded in the over-the-counter market.

The following table shows,  for the periods  indicated,  the range of prices per
share of the Company's common stock in the over-the-counter  market, as reported
to the  Company by the  brokers  known to the  Company to  regularly  follow the
market  for the  common  stock.  Certain  other  private  transactions  may have
occurred during the periods indicated of which the Company has no knowledge. The
following prices represent inter-dealer prices without retail markups, markdowns
or commissions.

                                                                          Cash
                                               High         Low        Dividends
                                              ----------------------------------

  2002     First quarter                      $ 18.95     $ 17.85        $ 0.13
           Second quarter                       24.00       18.70          0.13
           Third quarter                        24.30       22.60          0.13
           Fourth quarter                       24.95       24.00          0.13

  2003     First quarter                      $ 25.25     $ 24.25        $ 0.15
           Second quarter                       30.00       25.00          0.15
           Third quarter                        31.00       27.75          0.20
           Fourth quarter                       35.00       29.70          0.20

During the fourth quarter of 2003,  the Company  declared a $0.21 per share cash
dividend,  which was paid on January 23, 2004. The ability of the Company to pay
dividends  in the  future  will be  primarily  dependent  upon  its  receipt  of
dividends from the Banks. In determining cash dividends,  the Board of Directors
considers  the  earnings,  capital  requirements,  debt and  dividend  servicing
requirements,  financial  ratio  guidelines  it has  established,  the financial
condition of the Company and other relevant  factors.  The Banks' ability to pay
dividends  to the  Company and the  Company's  ability to pay  dividends  to its
shareholders are also subject to certain regulatory restrictions.  See "Business
- Supervision and Regulation - The Company - Dividend  Payments" and "Business -
Supervision  and Regulation - The Bank  Subsidiaries - Dividend  Payments" for a
more detailed description of these limitations.

On October 27,  2003,  the Company  announced  that its Board of  Directors  had
reinstated the Stock Repurchase Program,  allowing the purchase of up to 500,000
shares of the Company's outstanding stock. No shares were repurchased during the
fourth  quarter of 2003.  During that period,  23,485 shares were issued through
exercise of stock options.

                                       13
<PAGE>

Item 6. Selected Consolidated Financial Data

The following table presents selected consolidated financial information for the
Company  for each of the five  years  ended  December  31,  2003.  The  selected
consolidated  financial data should be read in conjunction with the Consolidated
Financial  Statements  of the Company,  including the related  notes,  presented
elsewhere herein.
<TABLE>
                                                                          Year Ended December 31,
                                                      ------------------------------------------------------------------
                                                         2003          2002          2001          2000         1999
                                                                (dollars in thousands, except per share data)
                                                      ------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>           <C>
Interest income ...................................   $   55,686    $   63,363    $   73,195    $   74,271    $   67,070
Interest expense ..................................       16,723        21,717        33,598        36,599        31,713
                                                      ------------------------------------------------------------------
Net interest income ...............................       38,963        41,646        39,597        37,672        35,357
Provision for loan losses .........................        1,470         1,450         2,670           804           573
                                                      ------------------------------------------------------------------
Net interest income after provision for loan losses       37,493        40,196        36,927        36,868        34,784
Non-interest income ...............................       20,294        18,866        17,266        16,316        17,991
Non-interest expense ..............................       32,341        33,161        30,286        34,769        35,922
Income tax expense ................................        8,841         8,520         7,736         6,426         5,165
                                                      ------------------------------------------------------------------
     Net income ...................................   $   16,605    $   17,381    $   16,171    $   11,989    $   11,688
                                                      ------------------------------------------------------------------
Basic earnings per share ..........................   $     1.62    $     1.61    $     1.48    $     1.08    $     1.05
                                                      ------------------------------------------------------------------
Diluted earnings per share ........................   $     1.60    $     1.60    $     1.45    $     1.06    $     1.03
                                                      ------------------------------------------------------------------
Return on average total assets ....................         1.47%         1.58%         1.47%         1.15%         1.16%
Return on average shareholders' equity ............        12.67%        12.79%        12.32%        10.03%        10.10%
Dividend payout ratio .............................        46.91%        33.54%        30.41%        37.04%        27.62%
Cash dividends declared per common share1 .........   $     0.76    $     0.54    $     0.45    $     0.40    $     0.29
                                                      ------------------------------------------------------------------
Total assets ......................................   $1,154,174    $1,122,728    $1,151,511    $1,091,081    $1,035,746
Investment in debt and equity securities ..........      370,726       316,210       335,422       303,187       300,040
Loans held for investment, net ....................      666,259       664,142       673,061       659,849       601,594
Deposits ..........................................      898,472       868,586       884,109       839,932       795,075
Borrowings ........................................      132,978       108,457       120,102       110,636       111,198
Total shareholders' equity ........................      111,450       134,470       135,993       125,402       116,081
Total shareholders' equity to total assets ........         9.66%        11.98%        11.81%        11.49%        11.21%
Average shareholders' equity to average assets ....        11.63%        12.35%        11.91%        11.45%        11.46%
<FN>
1    Prior to the merger of BankIllinois Financial Corporation and First Decatur
     Bancshares in March 2000, both companies paid cash dividends each year.
</FN>
</TABLE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

The following  discussion  and analysis is designed to provide the reader with a
comprehensive  review of the  consolidated  results of operations for 2003, 2002
and 2001 for the Company,  including  all  subsidiaries,  and an analysis of the
Company's financial condition at December 31, 2003 compared to December 31, 2002
and at December  31, 2002  compared to December 31, 2001.  This  discussion  and
analysis  should  be  read  in  conjunction  with  the  consolidated   financial
statements and related notes, which begin at page 30 of this report.

Overview

Earnings were flat for the year ended  December 31, 2003 compared to 2002,  with
diluted  earnings  per  share of $1.60 in both  2003 and  2002.  Interest  rates
continued  to  stay  at  unprecedented  lows  during  2003.  The  interest  rate
environment caused compression in our margins. Also affecting our margin was the
lack of loan growth during 2003.  However,  the economy  continued to improve in
the fourth  quarter of 2003,  and loan demand,  which showed  growth late in the
fourth quarter of 2003, should continue to increase.  Loan quality was strong in
2003,  with  non-performing  loans as a percentage  of gross loans  improving to
0.15%, compared to 0.33% in 2002 and 0.74% in 2001. The years ended December 31,
2002 and 2001 were years of  transition  for the Company  involving  fundamental
reorganization  of  the  consolidated   organization.   Despite  being  in  this
post-merger transitional period, and facing a worsening economic environment and
sagging consumer  confidence,  the Company posted record results during 2001 and
2002.  Non-recurring  items  during  2002 and 2001,  many of which  were  merger
related, had significant effects on the Company's reported results.

                                       14
<PAGE>

Merger  and  related  non-recurring  restructuring  expenses  incurred  in  2002
consisted  of  $529,000  of  termination  of  employment  contracts,  $40,000 of
professional fees and $38,000 of data processing expenses, offset by $243,000 of
tax benefit.  The resulting  effect of these items on basic and diluted earnings
per  share  was a  decrease  of $0.03  for the year  2002.  Merger  and  related
non-recurring  restructuring  expenses  incurred in 2001 consisted of $70,000 of
data  processing  expense and $256,000 of termination  of employment  contracts,
offset  by  $111,000  of  tax  benefits.   Also  during  2001,  a  $2.5  million
reconciliation  liability  expense,  net of tax of $1.0  million,  was  reversed
against  non-interest  expense. The resulting effect of these items on basic and
diluted earnings per share for 2001 was an increase of  approximately  $0.12 and
$0.11 respectively.

During the second quarter of 2002, the Company completed a tender offer in which
711,832 of its shares of common stock were  acquired  for an  aggregate  cost of
$16.556  million.  Also in the second quarter of 2002, one of the Company's bank
subsidiaries, First Trust Bank of Shelbyville, was merged into BankIllinois. The
Company  completed a second  tender  offer  during the third  quarter of 2003 in
which  1,074,140  of its shares of common  stock were  acquired for an aggregate
cost of $32.395 million.

Segment Operations

FirsTech,  Inc.  operates  as a  separate  segment  of the  Company.  Results of
FirsTech, Inc.'s operations are included as non-interest income and non-interest
expense of the Company.

Critical Accounting Policies

The Company's significant accounting policies are more fully described in Note 2
to the Company's  consolidated  financial  statements  located in Item 8 of this
Annual  Report  on  form  10-K.  The  preparation  of  financial  statements  in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported amounts of assets, liabilities,  revenues, and expenses and the related
disclosures of contingent  assets and  liabilities.  Actual results could differ
from those  estimates  under  different  assumptions or conditions.  The Company
believes that it has one critical accounting policy that is subject to estimates
and judgements used in the preparation of its consolidated financial statements.

Allowance for Loan Losses.  The allowance for loan losses is a material estimate
that is  particularly  susceptible to significant  changes in the near term. The
allowance for loan losses is increased by provisions  charged to operations  and
is reduced by loan charge-offs less recoveries. Management utilizes an approach,
which provides for general and specific valuation  allowances,  that is based on
current  economic  conditions,   past  losses,   collection   experience,   risk
characteristics  of the portfolio,  assessment of collateral values by obtaining
independent appraisals for significant properties, and such other factors which,
in management's judgment, deserve current recognition in estimating loan losses,
to determine the appropriate level of the allowance for loan losses.

The allowance for loan losses  related to impaired loans that are identified for
evaluation is based on discounted  cash flow using the loan's initial  effective
interest  rate or the fair value,  less selling  costs,  of the  collateral  for
collateral  dependent loans.  Loans are categorized as "impaired" when, based on
current information or events, it is probable that the Company will be unable to
collect all amounts due,  including  principal and interest,  in accordance with
the contractual terms of the loan agreement. The Company reviews all non-accrual
and  substantially  delinquent  loans,  as well as problem  loans  identified by
management,  for impairment as defined above. A specific  reserve amount will be
established  for impaired  loans in which the present value of the expected cash
flows to be  generated  is less  than the  amount  of the loan  recorded  on the
Company's books. As an alternative to discounting, the Company may use the "fair
value" of any collateral supporting a collateral-dependent loan in reviewing the
necessity  for  establishing  a  specific  loan loss  reserve  amount.  Specific
reserves  will be  established  for  accounts  having  a  collateral  deficiency
estimated to be $50,000 or more. The Company's  general reserve is maintained at
an adequate level to cover accounts having a collateral  deficiency of less than
$50,000.  Loans  evaluated  as  groups  or  homogeneous  pools of loans  will be
excluded from this analysis.

                                       15
<PAGE>

The Company  utilizes its data  processing  system to identify loan payments not
made by their  contractual  due date and  calculate the number of days each loan
exceeds  the  contractual  due date.  The  accrual  of  interest  on any loan is
discontinued when, in the opinion of management, there is reasonable doubt as to
the collectibility of interest or principal.  Management  believes the allowance
for loan losses is adequate to absorb  probable  credit  losses  inherent in the
loan portfolio.  However,  there can be no assurance that the allowance for loan
losses will be adequate to cover all losses.  While  management  uses  available
information to recognize loan losses, future additions to the allowance for loan
losses may be necessary  based on changes in economic  conditions.  In addition,
various regulatory  agencies,  as an integral part of their examination process,
periodically review the adequacy of the allowance for loan losses. Such agencies
may require the Company to recognize  additions to the allowance for loan losses
based on their  judgments of information  available to them at the time of their
examination.

Results of Operations

The Company had earnings of $16.605  million in 2003 compared to $17.381 million
in 2002 and $16.171  million in 2001. The Company had a return on average assets
of 1.47%, 1.58% and 1.47% in 2003, 2002 and 2001,  respectively.  Basic earnings
per share was  $1.62,  $1.61  and  $1.48 in 2003,  2002 and 2001,  respectively.
Diluted  earnings per share was $1.60,  $1.60 and $1.45 in 2003,  2002 and 2001,
respectively.  Management  believes  that a strong  balance  sheet and excellent
profitability are critical to success.

Net Interest Income

Interest  rates and fees charged on loans are  affected  primarily by the market
demand for loans and the supply of money available for lending  purposes.  These
factors are affected by, among other things, general economic conditions and the
policies of the Federal  government,  including  the Board of  Governors  of the
Federal Reserve, legislative tax policies and governmental budgetary matters.

Net interest income, the most significant  component of the Company's  earnings,
is the difference  between interest received or accrued on the Company's earning
assets--primarily  loans  and  investments--and  interest  paid  or  accrued  on
deposits  and  borrowings.  In order to  compare  the  interest  generated  from
different  types of earning assets,  the interest  income on certain  tax-exempt
investment  securities  and loans is increased for analysis  purposes to reflect
the income tax savings  provided by these tax-exempt  assets.  The adjustment to
interest  income for tax-exempt  investment  securities and loans was calculated
based on the federal  income tax statutory  rate of 35% in 2003 and 2002 and 34%
in 2001. The adjustment to net interest  income for the tax effect of tax-exempt
assets is shown in the following schedule.

                  Net Interest Income on a Tax Equivalent Basis
                                 (in thousands)

                                               2003          2002          2001
                                             -----------------------------------

Total interest income ................       $55,686       $63,363       $73,195
Total interest expense ...............        16,723        21,717        33,598
                                             -----------------------------------
   Net interest income ...............        38,963        41,646        39,597
Tax equivalent adjustment:
   Tax-exempt investments ............         1,222         1,279         1,210
   Tax-exempt loans ..................            16            19            59
                                             -----------------------------------
        Total adjustment .............         1,238         1,298         1,269
                                             -----------------------------------
Net interest income (TE) .............       $40,201       $42,944       $40,866
                                             ===================================

                                       16
<PAGE>

The following schedule, "Consolidated Average Balance Sheet and Interest Rates",
provides details of average balances,  interest income or interest expense,  and
the average rates for the Company's major asset and liability categories.

              Consolidated Average Balance Sheet and Interest Rates
                             (dollars in thousands)
<TABLE>
                                                      2003                            2002                           2001
                                        --------------------------------------------------------------------------------------------
                                         Average                         Average                        Average
                                         Balance    Interest    Rate     Balance    Interest   Rate     Balance    Interest   Rate
                                        --------------------------------------------------------------------------------------------
<S>                                     <C>         <C>         <C>     <C>         <C>         <C>    <C>         <C>        <C>
Assets

Taxable investment securities1 ......   $  305,146   $11,502    3.77%   $  262,275   $ 12,471   4.75%  $  250,890   $13,831   5.51%
Tax-exempt investment
   securities1 (TE) .................       55,601     3,492    6.28%       55,134      3,654   6.63%      52,836     3,557   6.73%
Federal funds sold and interest
   bearing deposits2 ................       36,786       447    1.22%       25,602        437   1.71%      39,526     1,737   4.39%
Loans3,4 (TE) .......................      645,543    41,483    6.43%      673,423     48,099   7.14%     669,702    55,339   8.26%
                                        --------------------------------------------------------------------------------------------
   Total interest earning assets
      and interest income (TE) ......   $1,043,076   $56,924    5.46%   $1,016,434   $ 64,661   6.36%   $1,012,954  $74,464   7.35%
                                        -------------------------------------------------------------------------------------------
Cash and due from banks .............   $   45,872                      $   46,771                      $   49,282
Premises and equipment ..............       17,864                          18,928                          20,336
Other assets ........................       19,848                          18,149                          20,013
                                        -------------------------------------------------------------------------------------------
   Total assets .....................   $1,126,660                      $1,100,282                      $1,102,585
                                        ===========================================================================================

Liabilities and Shareholders' Equity

Interest bearing demand deposits ....   $   87,351   $   641    0.73%   $   90,916   $   944    1.04%   $  107,992  $ 2,229   2.06%
Savings .............................      284,641     2,586    0.91%      261,063     3,689    1.41%      229,493    6,743   2.94%
Time deposits .......................      337,737    10,843    3.21%      350,353    14,081    4.02%      360,590   19,859   5.51%
Federal funds purchased, repurchase
   agreements and notes payable .....       95,029     1,094    1.15%       68,615     1,169    1.70%       74,918    2,550   3.40%
FHLB advances & other
   borrowings .......................       28,492     1,559    5.47%       32,889     1,834    5.58%       38,980    2,217   5.69%
                                        -------------------------------------------------------------------------------------------
   Total interest bearing liabilities
      and interest expense ..........   $  833,250   $16,723    2.01%   $  803,836   $21,717    2.70%   $  811,973  $33,598   4.14%
                                        -------------------------------------------------------------------------------------------
Non-interest bearing demand
   deposits .........................       89,935                          93,590                         102,136
Non-interest bearing savings
   deposits .........................       62,056                          56,204                          42,810
Other liabilities ...................       10,339                          10,738                          14,375
                                        -------------------------------------------------------------------------------------------
   Total liabilities ................   $  995,580                      $  964,368                      $  971,294
Shareholders' equity ................      131,080                         135,914                         131,291
                                        -------------------------------------------------------------------------------------------
   Total liabilities and

      shareholders' equity ..........   $1,126,660                      $1,100,282                      $1,102,585
                                        ------------------------------------------------------------------------------------------
Interest spread (average
   rate earned minus
   average rate paid) (TE) ..........                           3.45%                           3.66%                         3.21%
                                        ==========================================================================================
Net interest income (TE) ............               $40,201                          $42,944                        $40,866
                                        ==========================================================================================
Net yield on interest
   earnings assets (TE) .............                           3.85%                           4.22%                        4.03%
                                        ==========================================================================================
<FN>
Notes:  see next page for notes 1-4.
</FN>
</TABLE>

Notes to Consolidated Average Balance Sheet and Interest Rates Table:

1    Investments in debt securities are included at carrying value.
2    Federal  funds sold and  interest bearing  deposits  include  approximately
     $71,000,  $61,000 and  $114,000 in 2003,  2002 and 2001,  respectively,  of
     interest income from third party processing of cashier checks.
3    Loans are net of allowance of loan losses and include  mortgage  loans held
     for sale. Nonaccrual loans are included in the total.
4    Loan fees of  approximately  $1.706  million,  $1.269  million,  and $1.058
     million in 2003,  2002 and 2001,  respectively,  are included in total loan
     income.

                                       17
<PAGE>

The following table presents,  on a fully taxable  equivalent basis, an analysis
of changes in net interest  income  resulting from changes in average volumes of
earning  assets and interest  bearing  liabilities  and average rates earned and
paid. The change in interest due to the combined  rate/volume  variance has been
allocated  to rate and  volume  changes in  proportion  to the  absolute  dollar
amounts of change in each.

                       Analysis of Volume and Rate Changes
                                 (in thousands)
<TABLE>
                                                       2003                                2002
                                        ---------------------------------------------------------------------
                                         Increase                            Increase
                                        (Decrease)                          (Decrease)
                                           From                                From
                                         Previous     Due to      Due to     Previous     Due to      Due to
                                           Year       Volume       Rate        Year       Volume       Rate
                                        ---------------------------------------------------------------------
<S>                                     <C>          <C>          <C>        <C>         <C>         <C>
Interest Income
   Taxable investment securities .....   ($   969)   $  1,862    ($ 2,831)   ($ 1,360)   $    606    ($ 1,966)
   Tax-exempt investment securities ..       (162)         16        (178)         97         153         (56)
   Federal funds sold and interest
      bearing deposits ...............         10         158        (148)     (1,300)       (475)       (825)
   Loans .............................     (6,616)     (1,933)     (4,683)     (7,240)        306      (7,546)
                                         ---------------------------------------------------------------------
          Total interest income ......   ($ 7,737)   $    103    ($ 7,840)   ($ 9,803)   $    590    ($10,393)
                                         --------------------------------------------------------------------
Interest Expense
   Interest bearing demand
      and savings deposits ...........   ($ 1,406)   $    250    ($ 1,656)   ($ 4,339)   $    370    ($ 4,709)
   Time deposits .....................     (3,238)       (492)     (2,746)     (5,778)       (550)     (5,228)
   Federal funds purchased, repurchase
      agreements and notes payable ...        (75)        371        (446)     (1,381)       (199)     (1,182)
   Federal Home Loan Bank advances
      and other borrowings ...........       (275)       (241)        (34)       (383)       (341)        (42)
                                         ---------------------------------------------------------------------
      Total interest expense .........   ($ 4,994)   ($   112)   ($ 4,882)   ($11,881)   ($   720)   ($11,161)
                                         --------------------------------------------------------------------
Net Interest Income (TE) .............   ($ 2,743)   $    215    ($ 2,958)   $  2,078    $  1,310    $    768
                                         ====================================================================
</TABLE>

Total average  earning  assets  increased  from $1.016 billion in 2002 to $1.043
billion in 2003,  but  generated  lower  interest  income  mainly as a result of
reduced  interest  rates in 2003 compared to 2002.  Average  taxable  investment
securities  increased  $42.871  million,  but  generated  $969,000 less interest
income,  of which  $2.831  million was due to lower  rates,  offset  somewhat by
$1.862  million  due to an increase in volume.  Average  federal  funds sold and
interest-bearing  deposits  increased $11.184 million and generated $10,000 more
interest income.  Average tax-exempt investment securities increased $467,000 in
2003, but generated  $162,000 less interest income, of which $178,000 was due to
a decrease in rates,  offset slightly by $16,000 due to higher volume.  Somewhat
offsetting  these increases in average  balances was a decrease in average loans
of  $27.880  million,  resulting  in a  decrease  in  interest  income of $6.616
million,  of which $4.683  million was due to lower rates and $1.933 million was
attributable to a decrease in volume.

Total average  earning  assets  increased  from $1.013 billion in 2001 to $1.016
billion  in 2002,  but  generated  lower  levels  of  interest  income  due to a
significant  decrease in interest rates during 2002.  Average taxable investment
securities increased $11.385 million, but generated $1.360 million less interest
income,  of which  $1.966  million was due to lower  rates,  offset  somewhat by
$606,000 due to an increase in volume.  Average loans increased  $3.721 million,
but generated $7.240 million less interest  income,  of which $7.546 million was
due to lower rates,  offset slightly by a $306,000  increase  attributable to an
increase in volume.  Average tax-exempt  investment  securities increased $2.298
million in 2002, resulting in an increase of $97,000 in interest income. Of this
increase,  $153,000 was due to an increase in volume, offset somewhat by $56,000
due to lower rates.  Somewhat offsetting these increases in average balances was
a  decrease  in average  federal  funds sold and  interest-bearing  deposits  of
$13.924 million,  resulting in a decrease in interest income in this category of
$1.300 million.  Of this decrease,  $825,000 was due to lower rates and $475,000
was due to a decrease in volume.

                                       18
<PAGE>

The Company  establishes  interest  rates on loans and deposits  based on market
rates - such as the 91-day  Treasury Bill rate and the prime rate - and interest
rates offered by other financial institutions in the local community.  The level
of risk and the value of collateral  also are evaluated  when  determining  loan
rates.  Rates were  generally  lower in 2003 compared to 2002.  The average rate
earned on loans  decreased  71 basis points from 7.14% in 2002 to 6.43% in 2003.
The yield on  tax-exempt  investment  securities  decreased 35 basis points from
6.63% in 2002 to  6.28% in 2003.  The  yield on  taxable  investment  securities
decreased  98 basis  points from 4.75% for the year ended  December  31, 2002 to
3.77% for the year ended  December 31, 2003. The yield on federal funds sold and
interest-bearing  deposits decreased 49 basis points from 1.71% in 2002 to 1.22%
in 2003.

The total  actual  balance of loans at  December  31,  2003 was  higher  than at
December  31, 2002.  Commercial,  financial  and  agricultural  loans  increased
$15.750 million from 2002 to 2003 as a result of the favorable rate environment.
Real estate loans increased $5.170 million from 2002 to 2003, primarily due to a
$32.106 million  increase in commercial real estate loans aided by the favorable
rate  environment,   offset  somewhat  by  a  decrease  of  $26.936  million  in
residential  real estate  loans.  The  decrease in real estate  loans was caused
primarily by long-term fixed rate loans being refinanced and  subsequently  sold
on the  secondary  market.  Installment  and consumer  loans  decreased  $18.276
million from 2002 to 2003. This was primarily due to alternative funding sources
available to  consumers,  such as special  financing  offered by the  automobile
manufacturers' captive financing companies.

Average rates on total interest bearing  liabilities  decreased 69 basis points,
from 2.70% in 2002 to 2.01% in 2003, resulting in a decrease in interest expense
of  $4.994  million  in 2003  compared  to 2002 due to the low rate  environment
throughout  2003.  The  overall  decrease  in  interest  expense was caused by a
decrease in interest expense on all categories of interest bearing  liabilities.
The average rate paid on time deposits decreased 81 basis points,  from 4.02% in
2002 to 3.21% in 2003. This resulted in a decrease of $3.238 million in interest
expense,  of which $2.746 million was due to lower rates and $492,000 was due to
a  decrease  in  volume.  The  average  rate paid on  federal  funds  purchased,
repurchase  agreements and notes payable decreased 55 basis points from 1.70% in
2002 to 1.15% in 2003.  This  resulted  in a  decrease  in  interest  expense of
$75,000 of which $446,000 was due to lower rates,  offset somewhat by a $371,000
increase in volume. The average rate paid on interest bearing demand and savings
deposits  decreased 45 basis points,  from 1.32% in 2002 to 0.87% in 2003.  This
resulted in a decrease in interest  expense of $1.406  million in 2003, of which
$1.656 million was  attributable  to lower rates,  offset slightly by a $250,000
increase in volume. The average rate paid on Federal Home Loan Bank advances and
other borrowings decreased 11 basis points, from 5.58% in 2002 to 5.47% in 2003.
This  resulted in a decrease in interest  expense of $275,000,  of which $34,000
was due to lower rates and $241,000 was due to a decrease in volume.

Average rates on total interest bearing liabilities  decreased 144 basis points,
from 4.14% in 2001 to 2.70% in 2002, resulting in a decrease in interest expense
of $11.881  million in 2002  compared to 2001,  due to the low rate  environment
throughout  2002.  This was  caused by a  decrease  in  interest  expense on all
categories  of interest  bearing  liabilities.  The average rate paid on federal
funds  purchased,  repurchase  agreements and notes payable  decreased 170 basis
points  from 3.40% in 2001 to 1.70% in 2002.  This  resulted  in a  decrease  in
interest  expense of $1.381  million  of which  $1.182  million  was due to rate
decreases  and $199,000 was due to lower  volume.  The average rate paid on time
deposits  decreased 149 basis points,  from 5.51% in 2001 to 4.02% in 2002. This
resulted in a decrease of $5.778  million in interest  expense,  of which $5.228
million was due to lower rates and $550,000 was due to a decrease in volume. The
average rate paid on interest bearing demand and savings deposits  decreased 134
basis points,  from 2.66% in 2001 to 1.32% in 2002.  This resulted in a decrease
in  interest  expense of $4.339  million in 2002,  of which  $4.709  million was
attributable to lower rates,  offset slightly by a $370,000  increase in volume.
The average  rate paid on Federal Home Loan Bank  advances and other  borrowings
decreased 11 basis points, from 5.69% in 2001 to 5.58% in 2002. This resulted in
a decrease in interest  expense of $383,000,  of which  $42,000 was due to lower
rates and $341,000 was due to a decrease in volume.

Provision for Loan Losses

The  quality of the  Company's  loan  portfolio  is of prime  importance  to the
Company's  management  and its  board of  directors,  as loans  are the  largest
component of the Company's assets.  The Company maintains an independent  credit
administration   function,   which   performs   reviews  of  all  large   credit
relationships and all loans that present indications of additional credit risk.

                                       19
<PAGE>

Continued emphasis on loan quality was reflected in the ratio of net charge-offs
to  average  net  loans  of  0.15% in  2003,  compared  to  0.22%  in 2002.  Net
charge-offs  decreased  to  $943,000 in 2003 from  $1.450  million in 2002.  The
Company  charged  off $1.640  million in loans  during  2003  compared to $1.927
million in 2002.  This was due to decreases in charge-offs  for  installment and
consumer  loans and  residential  real  estate  loans of $249,000  and  $83,000,
respectively,  in 2003  compared  to  2002.  The  decrease  in  charge-offs  for
installment  and consumer  loans was reflective of the decrease in loan balances
in this category in 2003 compared to 2002.  These decreases were offset somewhat
by an increase in charge-offs for commercial,  financial and agricultural  loans
of $45,000.  Recoveries of previously  charged off loans increased from $477,000
in  2002  to  $697,000  in  2003,  with  the  largest  increase  in the  area of
commercial, financial and agricultural loans, which increased $207,000 from 2002
to 2003. The provision for loan losses increased  $20,000 from $1.450 million in
2002 to $1.470  million in 2003.  The  Company  continues  to  emphasize  credit
analysis and early detection of problem loans.

We believe that an improvement in employment  levels would positively impact our
levels of problem assets,  delinquencies and losses on loans.  While the economy
has shown  recent  strength  (as  measured in GDP  growth),  growth in the labor
market has been sporadic.  We are cautiously  optimistic that  long-awaited  job
recovery,  which is essential  for  sustainable  economic  growth,  is underway.
However, it is still too early to consider robust jobs growth a certainty.

Non-interest income

Non-interest  income  increased  $1.428  million,  or 7.6%,  from  2002 to 2003.
Included in this increase was an increase of $1.168 million,  or 85.4%, in gains
on sales of mortgage loans held-for-sale.  This increase resulted from a $70.294
million, or 50.6%,  increase in mortgage loans sold during 2003 compared to 2002
due to the low  interest  rate  environment  and strong  housing  market.  Other
non-interest income increased  $523,000,  or 30.6%, in 2003 compared to 2002. In
2002, other non-interest income included a write-down of approximately  $300,000
in the value of  mortgage  servicing  rights  as a result  of the sharp  rise in
prepayment speeds.  Service charges on deposit accounts increased  $172,000,  or
7.2%,  in 2003  compared to 2002.  Somewhat  offsetting  these  increases  was a
decrease in income from securities  transactions of $223,000, or 105.7%, in 2003
compared to 2002. In 2002,  income from securities  transactions  included gains
from  some  securities  sold  to  reposition  the  portfolio  in  the  low  rate
environment.  Income from trust and brokerage fees decreased $146,000,  or 2.5%,
in 2003 compared to 2002.  Remittance  processing income decreased  $66,000,  or
0.9%, during 2003 compared to 2002.

Non-interest  income  increased  $1.600  million,  or 9.3%,  from  2001 to 2002.
Included in this increase was an increase of $702,000,  or 13.4%, in income from
trust and brokerage  fees from $5.227 million in 2001 to $5.929 million in 2002.
This was  primarily  the result of the adoption of a uniform  trust fee schedule
throughout  the Company in 2002 that  resulted in the  recognition  of increased
fees as well as a $29.000  million  increase in assets under  management in 2002
compared  to 2001.  Gains on sales of  mortgage  loans  held-for-sale  increased
$540,000,  or 65.2%,  from  $828,000  in 2001 to $1.368  million  in 2002.  This
increase resulted from a $34.743 million,  or 33.4%,  increase in mortgage loans
sold during  2002  compared to 2001 due to the low  interest  rate  environment.
Service  charges  on  deposit  accounts  increased  $156,000,  or 7.0%,  in 2002
compared to 2001. Income from securities  transactions  increased  $101,000,  or
91.8%,  in 2002  compared  to  2001.  This  was the  result  of the sale of some
securities to reposition the portfolio in the low rate  environment.  Remittance
processing  income  increased  $90,000,  or 1.3%,  during 2002 compared to 2001.
Other non-interest income increased $11,000, or 0.6%, in 2002 compared to 2001.

                                       20
<PAGE>

Non-interest expense

During 2003, non-interest expense decreased $820,000, or 2.5% to $32.341 million
in 2003 from $33.161  million in 2002.  Salaries and employee  benefits  expense
decreased $476,000,  or 2.5%,  equipment expense decreased  $390,000,  or 14.0%,
data processing  expense  decreased  $192,000,  or 8.3% and service charges from
correspondent  banks  decreased  $1,000,  or  0.1%.  Somewhat  offsetting  these
decreases were  increases in other  non-interest  expense of $121,000,  or 2.5%,
occupancy expense of $113,000, or 4.8% and office supplies expense of $5,000, or
0.4%. During 2002,  non-interest expense increased $2.875 million, or 9.5%, from
$30.286  million in 2001.  $2.5 million of this increase was due to the reversal
of  a   reconciliation   liability.   During  1999,  the  Company   investigated
reconciliation differences,  which involved the Company's subsidiary,  FirsTech,
Inc. in connection with its commercial  remittance  processing  services.  After
consultation  with its professional  advisors,  the Company's Board of Directors
directed  that a  liability  in the amount of $2.5  million be  recorded  in the
fourth quarter of 1999.  Investigation of these differences was completed during
the fourth quarter of 2001. It was determined that no liability  existed and the
$2.5 million  liability was reversed in  non-interest  expense in 2001. In 2002,
there was no reconciliation liability effect. During 2002, salaries and employee
benefits expense increased $960,000,  or 5.4%, data processing expense increased
$357,000,  or 18.4%,  occupancy expense increased $79,000,  or 3.4%, and service
charges from correspondent banks increased $47,000, or 5.3%. Somewhat offsetting
these  increases  were  decreases  in equipment  expense of $626,000,  or 18.4%,
office supplies expense of $274,000, or 17.9%, and other non-interest expense of
$168,000, or 3.4%.

Salaries and employee benefits expense decreased $476,000, or 2.5%, from $18.721
million  in 2002 to  $18.245  million  in 2003.  Contributing  to  salaries  and
employee  benefits expense in 2002 was $529,000 in salaries and benefits related
to organizational  restructuring  that resulted in the termination of employment
contracts.  In 2002, salaries and employee benefits increased $960,000, or 5.4%,
from  $17.761  million in 2001.  Contributing  to the  increase in 2002 were the
salaries and benefits expense related to the restructuring.

Equipment expense decreased  $390,000,  or 14.0%, from $2.779 million in 2002 to
$2.389 million in 2003.  Equipment expense decreased largely due to efficiencies
gained from restructuring and the merger of BankIllinois and First Trust Bank of
Shelbyville in June 2002. In 2002,  equipment  expense  decreased  $626,000,  or
18.4%,  from  $3.405  million  in  2001.  This  decrease  was due,  in part,  to
conversion  to third party  service  bureau data  processing  from in-house data
processing at the Company's Decatur bank during 2001.

Data processing expense decreased $192,000, or 8.3%, from $2.300 million in 2002
to $2.108 million in 2003.  Contributing to data processing expense in 2002 were
conversion  to a new system and  software  upgrade at the  Company's  remittance
processing  subsidiary  FirsTech,  and  costs  to  merge  First  Trust  Bank  of
Shelbyville and BankIllinois  computer records. In 2002, data processing expense
increased $357,000, or 18.4%, from $1.943 million in 2001.  Contributing to this
increase were a computer system conversion at the Company's Decatur bank late in
the first quarter of 2001 from  in-house data  processing to third party service
bureau data processing, conversion to a new system and a software upgrade at the
Company's remittance processing subsidiary FirsTech,  costs to merge First Trust
Bank of Shelbyville and BankIllinois computer records, as well as a continuation
in development of the Company's internet services during 2002 compared to 2001.

Service  charges  from  correspondent  banks  decreased  $1,000,  or 0.1%,  from
$932,000  in  2002  to  $931,000  in  2003.  In  2002,   service   charges  from
correspondent  banks  increased  $47,000,  or 5.3%,  from $885,000 in 2001. This
increase was mainly due to a reduction in monthly earnings credits, which offset
a portion of the charges, due to the falling rate environment.  Earnings credits
are typically  indexed to a key government rate, like the monthly average 91-day
Treasury bill rate. The average 91-day T-bill rate dropped from 3.43% in 2001 to
1.64% in 2002.

Other non-interest  expense increased $121,000,  or 2.5%, from $4.792 million in
2002 to $4.913 million in 2003. In 2002, other  non-interest  expense  decreased
$168,000, or 3.4%, from $4.960 million in 2001.

Occupancy  expense increased  $113,000,  or 4.8%, from $2.376 million in 2002 to
$2.489 million in 2003. In 2002,  occupancy expense increased $79,000,  or 3.4%,
from $2.297 million in 2001.

Office supplies expense  increased  $5,000, or 0.4%, from $1.261 million in 2002
to $1.266 million in 2003. In 2002, office supplies expense decreased  $274,000,
or 17.9%,  from $1.535 million in 2001.  Included in office supplies  expense in
2001 were  additional  printing  and mailing  expenses and  additional  supplies
purchased  to announce  and  support a computer  system  conversion  to move the
Company's subsidiaries toward the same data processing system.

                                       21
<PAGE>

Income Tax Expense

Income tax expense increased  $321,000,  or 3.8%, from $8.520 million in 2002 to
$8.841  million in 2003.  In 2002,  income tax expense  increased  $784,000,  or
10.1%,  from  $7.736  million in 2001,  which was mainly due to an  increase  in
taxable  income.  This was mainly due to an  increase  in  taxable  income.  The
Company's  effective  tax rate was  34.7%,  32.9% and 32.4% for the years  ended
December 31, 2003, 2002 and 2001, respectively.

The tax  effects  of  temporary  differences,  which  gave  rise to  significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2003 and  2002,  are  shown in note 11 in the  Notes to  Consolidated  Financial
Statements.

Financial Condition

Total assets increased $31.446 million, or 2.8%, from $1.123 billion at December
31, 2002 to $1.154  billion at December 31, 2003.  Increases in  investments  in
debt and equity  securities,  other assets,  and loans were  somewhat  offset by
decreases in cash and due from banks,  federal  funds sold and interest  bearing
deposits, mortgage loans held-for-sale, accrued interest receivable and premises
and equipment.

Cash and due from banks  decreased  $13.845  million,  or 23.2%, at December 31,
2003 compared to December 31, 2002.  This was primarily due to a smaller  dollar
amount of deposit  items in process of  collection at December 31, 2003 compared
to December 31, 2002.

Federal funds sold and interest bearing deposits  decreased $12.998 million,  or
30.2%,  at December 31, 2003  compared to December 31, 2002.  Federal funds sold
and interest  bearing  deposits  fluctuate with loan demand,  deposit volume and
investment opportunities.

Total  investments in debt and equity securities  increased $54.516 million,  or
17.2%,  at December  31, 2003  compared to December 31, 2002 due to increases in
all  categories.  Investments in debt and equity  securities  available-for-sale
increased $25.298 million,  or 10.5%,  investments in debt and equity securities
held-to-maturity  increased  $28.493  million,  or  41.6%,  and  investments  in
non-marketable  equity securities increased $725,000,  or 10.3%, at December 31,
2003 compared to December 31, 2002.

Loans, net of loan allowance, increased $2.117 million, or 0.3%, at December 31,
2003 compared to December 31, 2002. Commercial, financial and agricultural loans
increased  $15.750 million from 2002 to 2003. Real estate loans increased $5.170
million  from 2002 to 2003,  primarily  due to a  $32.106  million  increase  in
commercial real estate loans offset somewhat by a decrease of $26.936 million in
residential  real estate  loans.  The  increases in  commercial,  financial  and
agricultural loans and commercial real estate loans were primarily the result of
the  favorable  rate   environment  and  the  Company's   emphasis  on  business
development.  The decrease in residential real estate loans was caused primarily
by long-term  fixed rate loans being  refinanced  and  subsequently  sold on the
secondary market.  Installment and consumer loans decreased $18.276 million from
2002 to 2003  primarily  due to a decrease  in  indirect  consumer  loans due to
competition from  alternative  funding sources  available to consumers,  such as
special  financing  offered  by  the  auto   manufacturer's   captive  financing
companies.

Mortgage loans held-for-sale decreased $2.340 million, or 78.7%, at December 31,
2003 compared to December 31, 2002.  This decrease was  reflective of a decrease
in demand at the end of 2003 as compared to 2002.

The increase in year-end assets was primarily the result of funds provided by an
increase in total  deposits of $29.886  million,  or 3.4%,  at December 31, 2003
compared to December 31, 2002. This was due to the increase in interest  bearing
deposits of $31.614  million,  or 4.5%,  offset somewhat by a decrease of $1.728
million,  or  1.1%,  in  non-interest  bearing  deposits.  Also,  federal  funds
purchased,  repurchase  agreements  and notes payable were $22.347  million,  or
27.7%,  higher,  and Federal Home Loan Bank advances and other  borrowings  were
$2.174 million,  or 7.8%, higher at December 31, 2003 than at December 31, 2002.
Somewhat offsetting these increases was a decrease of $23.020 million in capital
primarily due to the repurchase of stock in the 2003 tender offer and payment of
cash dividends, somewhat offset by net income.

Average assets were $26.378 million, or 2.4%, higher in 2003 than 2002. Included
in  the  increase  in  average  assets  were  increases  in  taxable  investment
securities of $42.871 million, or 16.3%, federal funds sold and interest bearing
deposits of $11.184 million,  or 43.7%, other assets of $1.699 million, or 9.4%,
and tax-exempt  investment securities of $467,000, or 0.8%. These increases were
somewhat offset by average decreases of $27.880 million,  or 4.1%, in net loans,
a decrease of $1.064 million, or 5.6%, in premises and equipment, and a decrease
of $899,000, or 1.9%, in cash and due from banks.

                                       22
<PAGE>

Shifts in funding  sources  occurred as total average  federal funds  purchased,
repurchase agreements and notes payable increased $26.414 million, or 38.5%, and
total average deposits increased $9.594 million,  or 1.1%, while average Federal
Home Loan Bank advances and other borrowings decreased $4.397 million, or 13.4%,
in 2003 from 2002.  Included in the increase in average  deposits was a shift in
the average deposit mix in 2003 versus 2002.  Average savings  increased $23.578
million,  or 9.0%, and average  non-interest  bearing savings  increased  $5.852
million, or 10.4%. Somewhat offsetting these increases were decreases in average
time deposits of $12.616 million, or 3.6%, average  non-interest  bearing demand
deposits  of $3.655  million,  or 3.9%,  and  average  interest  bearing  demand
deposits of $3.565 million, or 3.9%.

Investment Securities

The carrying value of investments in debt and equity securities was as follows:

                          Carrying Value of Securities1
                                 (in thousands)

December 31,                                    2003         2002         2001
--------------------------------------------------------------------------------
Securities available-for-sale:
   U.S. Treasury ........................     $     --     $  3,066     $  8,577
   Federal agencies .....................      220,199      185,469      191,325
   Mortgage-backed securities ...........       23,007       30,884       28,279
   State and municipal ..................       17,317       16,168       15,642
   Corporate and other obligations ......           --        1,008        3,099
   Marketable equity securities .........        5,391        4,021       19,574
                                              ----------------------------------
         Total ..........................     $265,914     $240,616     $266,496
                                              ==================================
Securities held-to-maturity:
   Federal agencies .....................     $ 10,704     $  1,750     $  1,750
   Mortgage-backed securities ...........       50,029       23,595       19,842
   State and municipal ..................       36,323       43,218       42,226
                                              ----------------------------------
         Total ..........................     $ 97,056     $ 68,563     $ 63,818
                                              ==================================
Non-marketable equity securities:
   FHLB and FRB stock2 ..................     $  4,259     $  3,963     $  3,766
   Other equity investments .............        3,497        3,068        1,342
                                              ----------------------------------
         Total ..........................     $  7,756     $  7,031     $  5,108
                                              ==================================
         Total securities ...............     $370,726     $316,210     $335,422
                                              ==================================

1    Investment  securities   available-for-sale  are  carried  at  fair  value.
     Investment securities held-to-maturity are carried at amortized cost.

2    FHLB and FRB are  commonly  used  acronyms  for Federal  Home Loan Bank and
     Federal Reserve Bank, respectively.

The  unrealized  gain  on  securities  available-for-sale,  net of  tax  effect,
decreased $1.835 million to a gain of $1.941 million at December 31, 2003 from a
gain of $3.776 million at December 31, 2002.

                                       23
<PAGE>

The  following  table  shows  the  maturities  and  weighted-average  yields  of
investment securities at December 31, 2003:

            Maturities and Weighted Average Yields of Debt Securities
                             (dollars in thousands)
<TABLE>
                                                                         December 31, 2003
------------------------------------------------------------------------------------------------------------------------------------
                                     1 Year              1 to 5           5 to 10             Over
                                     or Less              Years            Years            10 years           Total
                                     Amount    Rate      Amount    Rate    Amount     Rate    Amount   Rate    Amount    Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>      <C>        <C>    <C>         <C>   <C>        <C>    <C>        <C>
Securities available-for-sale:
   Federal agencies .............   $ 55,508   4.35%    $163,690   3.20%  $  1,001    3.01%   $   --     --   $220,199   3.49%
   Mortgage-backed securities1 ..      1,708   3.51%      21,127   4.50%       138    6.56%       34   3.53%    23,007   4.44%
   State and municipal ..........      2,766   2.90%       8,768   4.30%     4,674    5.02%    1,109   5.11%    17,317   4.32%
   Marketable equity securities2          --     --           --     --         --      --        --     --      5,391     --
                                    ------------------------------------------------------------------------------------------------
         Total ..................   $ 59,982            $193,585          $   5,813           $1,143          $265,914
                                    ================================================================================================
Average Yield ...................              4.26%               3.39%              4.71%            5.06%             3.63%
                                    ================================================================================================
Securities held-to-maturity:
   Federal agencies .............   $    512   2.00%    $  5,267   2.94%  $  4,925    4.53%   $   --     --   $ 10,704   3.63%
   Mortgage-backed securities1 ..     36,843   0.05%      12,404   4.32%       322    3.95%      460   6.20%    50,029   1.19%
   State and municipal ..........     12,992   3.92%      20,453   4.07%     2,373    4.83%      505   5.25%    36,323   4.08%
                                    ------------------------------------------------------------------------------------------------
         Total ..................   $ 50,347            $ 38,124          $  7,620            $  965          $ 97,056
                                    ================================================================================================
Average Yield ...................              1.06%               4.00%              4.60%            5.70%             2.54%
                                    ================================================================================================
Non-marketable equity securities2
   FHLB and FRB stock ...........         --     --           --     --          --     --         --    --   $  4,259     --
   Other equity investments .....         --     --           --     --          --     --         --    --      3,497     --
                                    ------------------------------------------------------------------------------------------------
         Total ..................   $     --     --     $     --     --   $      --     --    $    --    --   $  7,756     --
                                    ================================================================================================
<FN>
1    Expected   maturities  may  differ  from  contractual   maturities  because
     borrowers may have the right to call or prepay  obligations with or without
     call or  prepayment  penalties  and certain  securities  require  principal
     repayments prior to maturity.
2    Due to the nature of these  securities,  they do not have a stated maturity
     date or rate.
</FN>
</TABLE>

Loans

The following tables present the amounts and percentages of loans at December 31
for the years indicated according to the categories of commercial, financial and
agricultural; real estate; and installment and consumer loans.

                           Amount of Loans Outstanding
                             (dollars in thousands)
<TABLE>
                                           2003       2002       2001       2000       1999
                                         ----------------------------------------------------
<S>                                      <C>        <C>        <C>        <C>        <C>
Commercial, financial and agricultural   $249,795   $234,045   $246,042   $219,541   $188,430
Real estate ..........................    348,997    343,827    316,693    319,412    293,761
Installment and consumer .............     77,253     95,529    119,585    129,775    128,085
                                         ----------------------------------------------------
    Total loans ......................   $676,045   $673,401   $682,320   $668,728   $610,276
                                         ====================================================
</TABLE>


                         Percentage of Loans Outstanding
<TABLE>
                                              2003      2002      2001      2000      1999
                                            -----------------------------------------------
<S>                                         <C>       <C>       <C>       <C>       <C>
Commercial, financial and agricultural       36.95%    34.75%    36.06%    32.83%    30.88%
Real estate ..........................       51.62%    51.06%    46.41%    47.76%    48.13%
Installment and consumer .............       11.43%    14.19%    17.53%    19.41%    20.99%
                                            -----------------------------------------------
    Total ............................      100.00%   100.00%   100.00%   100.00%   100.00%
                                            ===============================================
</TABLE>

                                       24
<PAGE>

The Company's loan portfolio totaled approximately  $676.045 million at December
31, 2003, representing 58.6% of total assets at that date. Total loans increased
$2.644  million,  or 0.4%,  from  December  31, 2002 to  December  31, 2003 with
increases in commercial,  financial and agricultural loans and real estate loans
of $15.750  million  and $5.170  million,  respectively,  offset  somewhat  by a
decrease in installment and consumer loans of $18.276 million.

Total  loans  decreased  $8.919  million,  or 1.3%,  from  December  31, 2001 to
December  31, 2002,  with  decreases in  installment  and consumer  loans and in
commercial,  financial  and  agricultural  loans of $24.056  million and $11.997
million,  respectively,  offset  somewhat by an increase in real estate loans of
$27.134 million.

The balance of loans  outstanding as of December 31, 2003 by maturities is shown
in the following table:

                Maturity of Loans Outstanding
                   (dollars in thousands)
<TABLE>
                                                       December 31, 2003
                                                     --------------------
                                          1 Year        1-5       Over 5
                                         or Less       Years      Years       Total
                                         --------------------------------------------
<S>                                      <C>         <C>         <C>         <C>
Commercial, financial and agricultural   $162,793    $ 70,707    $ 16,295    $249,795
Real estate ..........................     64,723     166,210     118,064    $348,997
Installment and consumer .............     27,626      40,804       8,823    $ 77,253
                                         --------------------------------------------
     Total ...........................   $255,142    $277,721    $143,182    $676,045
                                         ============================================
Percentage of total loans outstanding       37.74%      41.08%      21.18%     100.00%
                                         ============================================
</TABLE>

As of December 31,  2003,  commercial,  financial  and  agricultural  loans with
maturities  of  greater  than one year were  comprised  of  $35.119  million  in
fixed-rate loans and $51.883 million in floating-rate  loans.  Real estate loans
with  maturities  greater than one year at December 31, 2003  included  $103.173
million in fixed-rate loans and $181.101 million in floating-rate loans.

Allowance for Loan Losses and Loan Quality

The following table summarizes  changes in the allowance for loan losses by loan
categories for each period and additions to the allowance for loan losses, which
have been charged to operations.

                            Allowance for Loan Losses
                             (dollars in thousands)
<TABLE>

                                               2003         2002        2001        2000       1999
                                              -------------------------------------------------------
<S>                                           <C>         <C>         <C>         <C>         <C>
Allowance for loan losses at
   beginning of year ......................   $ 9,259     $ 9,259     $ 8,879     $ 8,682     $ 8,852
                                              -------------------------------------------------------
Charge-offs during period:
   Commercial, financial and agricultural .   $  (148)    $  (103)    $(1,165)    $   (99)    $  (506)
   Residential real estate ................       (42)       (125)        (27)        (34)       --
   Installment and consumer ...............    (1,450)     (1,699)     (1,481)     (1,119)       (750)
                                              -------------------------------------------------------
          Total ...........................   $(1,640)    $(1,927)    $(2,673)    $(1,252)    $(1,256)
                                              -------------------------------------------------------
Recoveries of loans previously charged off:

   Commercial, financial and agricultural .   $   452     $   245     $   179     $   463     $   268
   Residential real estate ................        46          31          37           9          53
   Installment and consumer ...............       199         201         167         173         192
                                              -------------------------------------------------------
          Total ...........................   $   697     $   477     $   383     $   645     $   513
                                              -------------------------------------------------------
               Net charge-offs ............   $  (943)    $(1,450)    $(2,290)    $  (607)    $  (743)
Provision for loan losses .................     1,470       1,450       2,670         804         573
                                              -------------------------------------------------------
Allowance for loan losses at end of year ..   $ 9,786     $ 9,259     $ 9,259     $ 8,879     $ 8,682
                                              =======================================================
Ratio of net charge-offs to
   average net loans ......................     0.15%       0.22%       0.34%       0.10%       0.14%
                                              =======================================================
</TABLE>

                                       25
<PAGE>

Management  reviews  criteria  such  as the  customer's  historic  loan  payment
performance,  financial  statements,  financial  ratios,  cash flow,  net worth,
collateral and guaranties,  as well as local and national economic  factors,  in
determining  whether loans should be written off as  uncollectible.  The Company
records a loss if it is  probable  that a loss will  occur and the amount can be
reasonably estimated.

The  Company's  risk  of loan  loss  is  dependent  on  many  factors:  economic
conditions,  the  extent  and  values  of  underlying  collateral,   significant
concentrations  of loans within the  portfolio,  the ability and  willingness of
borrowers to perform  according to loan terms and  management's  competence  and
judgment in overseeing lending,  collecting and loan-monitoring  activities. The
risk of loss from commercial,  financial and agricultural loans is significantly
impacted  by  economic  factors  and how these  factors  affect  the  particular
industries involved.

An analysis of the  allowance for loan loss adequacy is performed on a quarterly
basis by the  Company's  credit  administration  department.  This  analysis  is
reported to executive  management  and  discussed at a quarterly  meeting  where
specific allocations for problem credits, charge-offs and monthly provisions for
loan losses are reviewed and revised, as necessary.  The results are reported to
the board of directors.  The analysis  includes  assessment of the allowance for
loan loss adequacy  based on historic loan losses and current  quality grades of
specific  credits  reviewed,  credit  concentrations,   current  delinquent  and
nonperforming  loans,  current economic  conditions,  peer group information and
results of recent audits or regulatory  examinations.  In 2002,  charge-offs  in
commercial,  financial and agricultural  loans decreased to $103,000 compared to
$1.165  million in 2001,  primarily due to the  charge-off  of two  agricultural
credits totaling $847,000.  The level of charge-offs of installment and consumer
loans in 2001,  2002, and 2003 were reflective of the significant  growth of the
indirect loan portfolio in 1999 and 2000.

The  following  table shows the  allocation  of the allowance for loan losses to
each loan category.

                   Allocation of the Allowance for Loan Losses
                                 (in thousands)
<TABLE>
                                             2003     2002     2001     2000    1999
                                            ------------------------------------------
<S>                                          <C>     <C>      <C>      <C>      <C>
Allocated:
   Commercial, financial and agricultural   $5,973   $5,732   $5,487   $3,426   $3,476
   Residential real estate ..............      153      345      419      855      799
   Installment and consumer .............    2,428    1,763    2,000    1,649    1,289
                                            ------------------------------------------
          Total allocated allowance .....   $8,554   $7,840   $7,906   $5,930   $5,564
Unallocated allowances ..................    1,232    1,419    1,353    2,949    3,118
                                            ------------------------------------------
          Total .........................   $9,786   $9,259   $9,259   $8,879   $8,682
                                            ==========================================
</TABLE>

The allocated  portion of the allowance for loan losses increased  $714,000 from
$7.840  million at December 31, 2002 to $8.554  million at December 31, 2003. Of
this  increase,  the  allowance for  installment  and consumer  loans  increased
$665,000 from $1.763  million at December 31, 2002 to $2.428 million at December
31, 2003, and the allowance for  commercial,  financial and  agricultural  loans
increased $241,000 from $5.732 million to $5.973 million during the same period.
Somewhat  offsetting  these  increases  was a  decrease  in  the  allowance  for
residential  real estate loans of $192,000 from $345,000 at December 31, 2002 to
$153,000 at December 31, 2003 as residential  real estate loans decreased during
2003.  The  portion  of the  allowance  for loan  losses  that  was  unallocated
decreased by $187,000 to $1.232 million at December 31, 2002 from $1.419 million
a year  earlier.  The  unallocated  amount is determined  based on  management's
judgment,   which  considers,  in  addition  to  the  other  factors  previously
discussed, the risk of error in the specific allocation.

Management   believes  that   nonperforming  and  potential  problem  loans  are
appropriately  identified  and monitored  based on the  extensive  loan analysis
performed by the credit administration  department, the internal loan committees
and the  board of  directors.  Historically,  there  has not been a  significant
amount of loans  charged  off which had been  previously  identified  as problem
loans by the credit administration department or the loan committees.

                                       26
<PAGE>

The  following  table  presents the aggregate  amount of loans  considered to be
nonperforming  for the periods  indicated.  Nonperforming  loans  include  loans
accounted for on a nonaccrual basis,  accruing loans  contractually  past due 90
days or more as to interest or  principal  payments and loans which are troubled
debt  restructurings as defined in Statement of Financial  Accounting  Standards
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings."

                               Nonperforming Loans
                                 (in thousands)


                                       2003     2002     2001     2000     1999
                                      ------------------------------------------
Nonaccrual loans1 .................   $  399   $1,392   $3,341   $  602   $  112
                                      ==========================================
Loans past due 90 days or more ....   $  621   $  829   $1,774   $  846   $  440
                                      ==========================================
Renegotiated loans ................   $   18   $   20   $   67   $   88   $  104
                                      ==========================================



1    Includes $269,000, $628,000, $3,216,000,  $505,000 and $112,000 at December
     31,  2003,  2002,  2001,  2000  and  1999,  respectively,  of  loans  which
     management  does not  consider  impaired  as  defined by the  Statement  of
     Financial  Accounting  Standards  No. 114,  "Accounting  by  Creditors  for
     Impairments of a Loan" (SFAS 114).

                           Other Nonperforming Assets
                                 (in thousands)

                                        2003     2002     2001     2000     1999
                                        ----------------------------------------

Other real estate owed ............     $ --     $ 58     $ --     $  7     $246
                                        ========================================
Nonperforming other assets ........     $ 55     $ 94     $153     $192     $132
                                        ========================================

There  were no other  interest  earning  assets  that  would be  required  to be
disclosed as being nonperforming if such other assets were loans.

At December 31, 2003, the Company had approximately  $7.730 million in potential
problem loans, excluding  nonperforming loans. Potential problem loans are those
loans  identified  by  management  as being  worthy of  special  attention,  and
although  currently  performing,  may have some underlying  weaknesses.  None of
these potential  problem loans were considered  impaired as defined in SFAS 114.
The $7.730 million of potential problem loans have either had timely payments or
are  adequately  secured and loss of principal or interest is  determined  to be
unlikely.

Loans over 90 days past due,  which are not well  secured  and in the process of
collection,  are placed on nonaccrual status.  There were $399,000 of nonaccrual
loans at December  31, 2003  compared to $1.392  million at December  31,  2002.
Loans past due 90 days or more but still accruing interest decreased by $208,000
in 2003 to a balance of $621,000 at December 31, 2003, from $829,000 at December
31, 2002. These loans are well secured and in the process of collection.

The following table  categorizes  nonaccrual loans as of December 31, 2003 based
on levels of performance  and also details the allocation of interest  collected
during  the period in 2003 in which the loans  were on  nonaccrual.  Substantial
performance,  yet  contractually  past due,  includes  borrowers  making sizable
periodic  payments  relative to the required  periodic  payments due. A borrower
that is not making substantial payments but is making periodic payments would be
included in the limited performance category.

                    Nonaccrual and Related Interest Payments
                                 (in thousands)
<TABLE>
                                                                  Cash Interest Payments Applied As:
                                        -------------------------------------------------------------
                                        At December 31, 2003                Recovery of    Reduction
                                         Book    Contractual   Interest    Prior Partial       of
                                        Balance    Balance      Income      Charge-offs     Principal
                                        -------------------------------------------------------------
<S>                                     <C>      <C>           <C>        <C>              <C>
Contractually past due with:
   Substantial performance .........     $237       $241         $ 23           $--           $  4
   Limited performance .............        5         11           --            --              1
   No performance ..................      157        176           --            --             --
                                         ------------------------------------------------------------
Total ..............................     $399       $428         $ 23           $--           $  5
                                         ============================================================
</TABLE>
                                       27
<PAGE>

The difference  between the book balance and the contractual  balance represents
charge-offs made since the loans were funded.

Management  believes that the allowance for loan losses at December 31, 2003 was
adequate  to  absorb  credit  losses in the total  loan  portfolio  and that the
policies and procedures in place to identify  potential  problem loans are being
effectively  implemented.  However, there can be no assurance that the allowance
for loan losses will be adequate to cover all losses.

Premises and Equipment

Total premises and equipment decreased $727,000 in 2003 from 2002. This decrease
was primarily due to depreciation  expense of $2.453 million  somewhat offset by
$1.726 million of purchases.

Other Assets

Other assets increased $5.608 million in 2003 from 2002. This increase  included
an  investment  of  $2.268  million  in a  low-income  housing  development  and
increases  in cash value life  insurance,  deferred  tax assets,  and  servicing
rights.

Deposits

The  following  table shows the average  balance and  weighted  average  rate of
deposits at December 31 for the years indicated:

              Average Balance and Weighted Average Rate of Deposits
                             (dollars in thousands)

<TABLE>
                                2003                     2002                    2001
                          --------------------------------------------------------------------
                                       Weighted                Weighted               Weighted
                           Average     Average     Average     Average     Average    Average
                           Balance       Rate      Balane        Rate      Balance      Rate
                          --------------------------------------------------------------------
<S>                       <C>          <C>        <C>          <C>        <C>        <C>
Demand
   Non-interest bearing   $ 89,935        --      $ 93,590        --      $102,136       --
   Interest bearing ...     87,351       0.73%      90,916       1.04%     107,992      2.06%
Savings
   Non-interest bearing     62,056        --        56,204        --        42,810       --
   Interest bearing ...    284,641       0.91%     261,063       1.41%     229,493      2.94%
Time
   $100,000 and more ..    113,604       3.22%     121,591       3.89%     110,966      4.73%
   Under $100,000 .....    224,133       3.21%     228,762       4.09%     249,624      5.85%
                          -------------------------------------------------------------------
         Totals .......   $861,720                $852,126                $843,021
                          ===================================================================
</TABLE>

In analyzing  its deposit  activity,  management  has noted that  average  total
deposits  increased  $9.594  million,  or 1.1%,  during  2003.  Included in this
increase were shifts in the average deposit mix in 2003 versus 2002.  There were
increases in average interest  bearing savings  deposits of $23.578 million,  or
9.0%, and average  non-interest  bearing savings deposits of $5.852 million,  or
10.4%.  Somewhat  offsetting  these  increases  were  decreases  in average time
$100,000 and over of $7.987  million,  or 6.6%,  average time under  $100,000 of
$4.629 million, or 2.0%, average  non-interest bearing demand deposits of $3.655
million,  or 3.9%, and average  interest  bearing demand of $3.565  million,  or
3.9%.

The table below sets forth the  maturity of deposits  greater  than  $100,000 at
December 31, 2003:

                  Maturity of Time Depsoits of $100,000 or More
                                 (in thousands)
<TABLE>
                                                                                            Total Time
                                   State of Illinois   Brokered                            Deposits of
Maturity at December 31, 2003:       Time Deposits       CDs         CDs        IRAs    $100,000 or More
--------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>         <C>        <C>       <C>
3 months or less ........               $  7,000        $  7,000   $ 22,676   $    940     $ 37,616
3 to 6 months ...........                  3,000              --     11,893        737       15,630
6 to 12 months ..........                     --              --     23,692        619       24,311
Over 12 months ..........                     --           5,000     28,520      2,840       36,360
                                        -----------------------------------------------------------
        Total ...........               $ 10,000        $ 12,000   $ 86,781   $  5,136     $113,917
                                        ===========================================================
</TABLE>
                                       28
<PAGE>

Federal Funds Purchased, Repurchase Agreements and Notes Payable

This category  includes federal funds purchased,  which are generally  overnight
transactions, securities sold under repurchase agreements, which mature from one
day to three years from the date of sale and U.S.  Treasury  demand  notes.  The
table in note 8 in the  Notes to  Consolidated  Financial  Statements  shows the
balances of federal funds purchased,  repurchase agreements and notes payable at
December 31, 2003 and 2002, the average balance for the years ended December 31,
2003, 2002 and 2001, and the maximum month-end value during each year.

Fair Values of Financial Instruments

The estimated  fair values of financial  instruments  for which no listed market
exists and the fair values of investment  securities,  which are based on listed
market  quotes at December  31, 2003 and 2002,  are  disclosed in note 17 in the
Notes to Consolidated Financial Statements.

Capital

Total  shareholders'  equity declined  $23.020 million from $134.470  million at
December  31, 2002 to $111.450  million at December  31,  2003.  Included in the
decrease were net treasury stock transactions of $30.157 million,  primarily due
to the  completion of the $32.395  million tender offer during the third quarter
of 2003,  offset  partially  by the exercise of stock  options by employees  and
directors of the Company.  Cash dividends declared of $7.567 million, a decrease
in  accumulated  other  comprehensive  income of $1.835  million,  and a $66,000
decrease from stock appreciation rights also contributed to the overall decrease
in  capital.  Somewhat  offsetting  the  decreases  in capital was net income of
$16.605 million for the year ended December 31, 2003.

Financial  institutions are required by regulatory  agencies to maintain minimum
levels of capital based on asset size and risk characteristics.  Currently,  the
Company  and the Banks are  required  by their  primary  regulators  to maintain
adequate capital based on two measurements:  the total assets leverage ratio and
the risk-weighted assets ratio.

Based on  Federal  Reserve  guidelines,  a bank  holding  company  generally  is
required to  maintain a leverage  ratio of 3% plus an  additional  cushion of at
least 100 to 200 basis points.  The  Company's  total assets  leverage  ratio at
December 31, 2003 and 2002 was 9.6% and 11.8%, respectively. The leverage ratios
for  the  individual  banks  are  disclosed  in  note  19 in  the  Notes  to the
Consolidated  Financial  Statements.  All are well above the regulatory minimum.
The decrease in the total  assets  leverage  ratio in 2003  compared to 2002 was
primarily due to the completion of the tender offer in the third quarter of 2003

The minimum  risk-weighted  assets ratio for bank  holding  companies is 8%. The
Company's  total  risk-weighted  assets  ratio at December 31, 2003 and 2002 was
14.5% and  18.0%,  respectively  --  significantly  higher  than the  regulatory
minimum. The individual banks' total risk-weighted assets ratio are disclosed in
note 19 in the Notes to Consolidated Financial Statements. All are significantly
higher than the regulatory  minimum.  The decrease in the  risk-weighted  assets
ratio in 2003 compared to 2002 was primarily due to the completion of the tender
offer in the third quarter of 2003.

Inflation and Changing Prices

Changes  in  interest  rates  and a bank's  ability  to react to  interest  rate
fluctuations have a much greater impact on a bank's balance sheet and net income
than inflation. A review of net interest income,  liquidity and rate sensitivity
should  assist in the  understanding  of how well the Company is  positioned  to
react to changes in interest rates.

                                       29
<PAGE>

Liquidity and Cash Flows

The Company  requires  cash to fund loan growth and  deposit  withdrawals.  Cash
flows  fluctuate  with changes in economic  conditions,  current  interest  rate
trends  and as a result of  management  strategies  and  programs.  The  Company
monitors the demand for cash and  initiates  programs and policies as considered
necessary to meet funding gaps.

The Company was able to adequately  fund loan demand and meet liquidity needs in
2003. A review of the  consolidated  statement of cash flows in the accompanying
financial  statements  shows  that  the  Company's  cash  and  cash  equivalents
decreased  $26.843  million from  December  31, 2002 to December  31, 2003.  The
decrease  in 2003  resulted  from  cash  used in  investing  activities,  offset
somewhat by cash  provided by operating  and  financing  activities.  There were
differences  in sources and uses of cash during 2003 compared to 2002.  Cash was
used by investing  activities in 2003 compared to cash provided in 2002. Funding
of new loans  increased in 2003 compared to 2002 as net loans  increased  $3.647
million in 2003 compared to a $7.172 million  decrease in 2002. Also, there were
more net  purchases of  investments  in debt and equity  securities  compared to
proceeds from maturities,  calls and sales of the same in 2003 compared to 2002.
Principal paydowns from mortgage-backed  securities were slightly higher in 2003
compared to 2002, reflective of the ongoing low interest rate environment.  Less
cash was provided by operating  activities  in 2003  compared to 2002.  Cash was
provided by financing activities in 2003 compared to cash used in 2002. This was
mainly  due to  increases  in  deposits,  federal  funds  purchased,  repurchase
agreements and notes payable and net FHLB and other  borrowings in 2003 compared
to decreases in 2002. Somewhat offsetting these increases was a decrease in cash
due to the use of more funds to complete the 2003 tender  offer  compared to the
tender offer completed in 2002.

The Company's future short-term cash requirements are expected to continue to be
provided by investment maturities, sales of loans and deposits. Cash required to
meet longer-term  liquidity  requirements will mostly depend on future goals and
strategies of management,  the  competitive  environment,  economic  factors and
changes  in  the  needs  of  customers.   No  additional  outside  borrowing  is
anticipated.  The Company  expects to maintain  FHLB  advances  near the current
level. If current sources of liquidity cannot provide needed cash in the future,
the Company can obtain funds from several sources. The Company is able to borrow
funds  on a  temporary  basis  from  the  Federal  Reserve  Bank,  the  FHLB and
correspondent banks to meet short-term requirements.  With sound capital levels,
the Company has several options for longer-term  cash needs,  such as for future
expansion and acquisitions.

Management is not aware of any current  recommendations by the Company's primary
regulators  which if implemented  would have a material  effect on the Company's
liquidity, capital resources or operations.

The following table summarizes significant  obligations and other commitments at
December 31, 2003 (in thousands):
<TABLE>
                                                                        Short and Long-Term    Operating
Years Ended December 31,                       Time Deposits                Borrowings1          Leases             Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                     <C>                    <C>                <C>
2004                                              $ 203,731                   $ 15,023           $ 201             $218,955
2005                                                 83,902                         93             143             $ 84,138
2006                                                 22,018                      7,221             134             $ 29,373
2007                                                 17,720                      2,620             115             $ 20,455
2008                                                 12,549                      5,023               2             $ 17,574
Thereafter                                                6                          -               -                  $ 6
----------------------------------------------------------------------------------------------------------------------------
Total                                             $ 339,926                   $ 29,980           $ 595            $ 370,501
============================================================================================================================
Commitments to extend credit:
Commitments                                                                                                       $ 237,615
Standby letters of credit                                                                                            20,192
----------------------------------------------------------------------------------------------------------------------------
<FN>

1    Fixed rate  callable  FHLB  advances  are  included  in the period of their
     modified  duration  rather than in the period in which they are due.  Short
     and  long-term  borrowings  include  fixed rate  callable  advances  of $15
     million maturing in fiscal year 2008.
</FN>
</TABLE>
                                       30
<PAGE>

Interest Rate Sensitivity

The concept of interest  sensitivity attempts to gauge exposure of the Company's
net  interest  income to adverse  changes  in market  driven  interest  rates by
measuring  the  amount  of  interest-sensitive   assets  and  interest-sensitive
liabilities  maturing or subject to  repricing  within a specified  time period.
Liquidity  represents the ability of the Company to meet the day-to-day  demands
of deposit customers balanced by its investments of these deposits.  The Company
must also be prepared to fulfill  the needs of credit  customers  for loans with
various  types of  maturities  and  other  financing  arrangements.  One way the
Company  monitors its interest rate sensitivity and liquidity is through the use
of  static  gap  reports,  which  measure  the  difference  between  assets  and
liabilities maturing or repricing within specified time periods.

The following table shows the company's  interest rate  sensitivity  position at
various intervals at December 31, 2003:

       Rate Sensitivity of Earning Assets and Interest Bearing Liabilities
                                 (in thousands)
<TABLE>
                                                         1 - 30      31 - 90       91 - 180     181 - 365      Over
                                                          Days         Days           Days         Days        1 year        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>          <C>          <C>          <C>
Interest earning assets:
   Federal funds sold and interest bearing deposits   $   30,004    $       --    $       --   $       --   $       --   $   30,004
   Debt and equity securities1 ....................       18,827        17,580        36,175       45,559      252,585      370,726
   Loans2 .........................................      251,811        39,834        31,184       68,270      285,578      676,677
                                                      -----------------------------------------------------------------------------
          Total interest earning assets ...........   $  300,642    $   57,414    $   67,359   $  113,829   $  538,163   $1,077,407
                                                      -----------------------------------------------------------------------------
Interest bearing liabilities:
   Savings and interest bearing demand deposits ...   $   44,039    $    1,568    $    2,352   $    4,710   $  178,957   $  231,626
   Money market savings deposits ..................      164,745            --            --           --           --      164,745
   Time deposits ..................................       24,727        47,317        46,850       84,837      136,195      339,926
   Federal funds purchased, repurchase agreements
      and notes payable ...........................      101,184             9           422          897          486      102,998
   FHLB Advances and other borrowings .............        7,268        10,115            --           --       12,597       29,980
                                                      -----------------------------------------------------------------------------
          Total interest bearing liabilities ......   $  341,963    $   59,009    $   49,624   $   90,444   $  328,235   $  869,275
                                                      =============================================================================
Net asset (liability) funding gap .................   $  (41,321)   $   (1,595)   $   17,735   $   23,385   $  209,928   $  208,132
                                                      -----------------------------------------------------------------------------
Repricing gap .....................................         0.88          0.97          1.36         1.26         1.64         1.24
Cumulative repricing gap ..........................         0.88          0.89          0.94         1.00         1.24         1.24
                                                      =============================================================================
<FN>

1    Debt and equity securities include securities available-for-sale.

2    Loans include mortgage loans held-for-sale.
</FN>
</TABLE>

Included  in the 1-30 day  category  of  savings  and  interest  bearing  demand
deposits is non-core  deposits plus a percentage,  based upon  industry-accepted
assumptions,  of the core  deposits.  "Core  deposits"  are the  lowest  average
balance  of the prior  twelve  months for each  product  type  included  in this
category. "Non-core deposits" are the difference between the current balance and
core   deposits.   The  time   frames   include   a   percentage,   based   upon
industry-accepted assumptions, of the core deposits as follows:
<TABLE>
                                         1-30 Days    31-90 Days   91-180 Days    181-365 Days    Over 1 Year
                                         --------------------------------------------------------------------
<S>                                      <C>          <C>          <C>            <C>             <C>
Savings and interest bearing
   demand deposits  ................       0.45%         0.85%        1.25%          2.45%          95.00%
</TABLE>

At December 31, 2003, the Company tended to be slightly liability  sensitive due
to the levels of savings and interest  bearing demand  deposits,  time deposits,
federal funds purchased,  repurchase  agreements and notes payable. As such, the
effect of a decrease in the prime rate of 100 basis  points  would  increase net
interest  income by  approximately  $413,000 in 30 days and  $429,000 in 90 days
assuming no  management  intervention.  A rise in interest  rates would have the
opposite  effect  for the  same  periods.  The  Company's  Asset  and  Liability
Management  Policy states that the  cumulative  ratio of  rate-sensitive  assets
("RSA") to rate-sensitive liabilities "(RSL") for the 12-month period shall fall
within the range of 0.75-1.25.  As of December 31, 2003,  the Company's  RSA/RSL
was 1.00, which was within the established guidelines.

                                       31
<PAGE>

In addition to managing  interest  sensitivity and liquidity  through the use of
gap reports,  the Company has provided for emergency  liquidity  situations with
informal agreements with correspondent banks, which permit the Company to borrow
federal  funds on an unsecured  basis.  The Company has a $10 million  unsecured
line  of  credit  with a  correspondent  bank.  Als0,  the  Company  can  borrow
approximately  $52.973  million  from the  Federal  Home  Loan Bank on a secured
basis.

The Company uses financial  forecasting/budgeting/reporting software packages to
perform  interest  rate  sensitivity  analysis for all product  categories.  The
Company's  primary  focus of its  analysis  is on the  effect of  interest  rate
increases and decreases on net interest  income.  Management  believes that this
analysis  reflects the  potential  effects on current  earnings of interest rate
changes.  Call criteria and prepayment  assumptions are taken into consideration
for investments in debt and equity  securities.  All of the Company's  financial
instruments  are analyzed by a software  database,  which  includes  each of the
different  product  categories,  which  are  tied to key  rates  such as  prime,
Treasury  Bills,  or the federal funds rate.  The  relationships  of each of the
different  products to the key rate that the product is tied to is proportional.
The software reprices the products based on current offering rates. The software
performs interest rate sensitivity analysis by performing rate shocks of plus or
minus 200 basis points in 100 basis point increments.

The following  table shows  projected  results at December 31, 2003 and December
31,  2002 of the  impact on net  interest  income  from an  immediate  change in
interest  rates.  The results are shown as a  percentage  change in net interest
income over the next twelve months.

                           +200          +100            -100            -200
                           -----------------------------------------------------
December 31, 2003 .....    11.7%          5.9%           (5.9%)          (11.7%)
December 31, 2002 .....     7.6%          3.8%           (3.9%)          (7.8%)

The foregoing computations are based on numerous assumptions, including relative
levels of market  interest  rates,  prepayments  and deposit  mix.  The computed
estimates  should not be relied upon as a projection of actual results.  Despite
the  limitations  on  preciseness  inherent  in these  computations,  management
believes that the information provided is reasonably indicative of the effect of
changes in interest  rate levels on the net  earning  capacity of the  Company's
current  mix of  interest  earning  assets  and  interest  bearing  liabilities.
Management  continues to use the results of these  computations,  along with the
results of its computer model projections, in order to maximize current earnings
while  positioning  the Company to minimize  the effect of a prolonged  shift in
interest rates that would adversely affect future results of operations.

At the present time, the most  significant  market risk affecting the Company is
interest rate risk.  Other market risks such as foreign  currency  exchange risk
and commodity price risk do not occur in the normal business of the Company. The
Company also is not currently using trading activities or derivative instruments
to control interest rate risk.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This document (including  information  incorporated by reference) contains,  and
future  oral and  written  statements  of the  Company  and its  management  may
contain,  forward-looking  statements,  within  the  meaning of such term in the
Private Securities  Litigation Reform Act of 1995, with respect to the financial
condition,  results of operations,  plans,  objectives,  future  performance and
business of the  Company.  Forward-looking  statements,  which may be based upon
beliefs,  expectations  and  assumptions  of  the  Company's  management  and on
information currently available to management, are generally identifiable by the
use of  words  such as  "believe",  "expect",  "anticipate",  "plan",  "intend",
"estimate",   "may",  "will",  "would",  "could",  "should",  or  other  similar
expressions.   Additionally,   all  statements  in  this   document,   including
forward-looking  statements,  speak  only as of the date they are made,  and the
Company  undertakes  no  obligation  to  update  any  statement  in light of new
information or future events.

                                       32
<PAGE>

The Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain.  Factors which could have a material adverse
effect  on  the  operations  and  future   prospects  of  the  Company  and  its
subsidiaries include, but are not limited to, the following:

o    The  strength of the United  States  economy in general and the strength of
     the local economies in which the Company  conducts its operations which may
     be less  favorable  then expected and may result in, among other things,  a
     deterioration in the credit quality and value of the Company's assets.

o    The economic impact of past and any future terrorist  attacks,  acts of war
     and threats  thereof,  and the  response  of the United  States to any such
     threats and attacks.

o    The effects of, and changes in, federal,  state and local laws, regulations
     and policies  affecting  banking,  securities,  insurance  and monetary and
     financial matters.

o    The effects of changes in interest rates  (including the effects of changes
     in the rate of prepayments of the Company's assets) and the policies of the
     Board of Governors of the Federal Reserve System.

o    The ability of the Company to compete with other financial  institutions as
     effectively  as  the  Company   currently   intends  due  to  increases  in
     competitive pressures in the financial services sector.

o    The inability of the Company to obtain new customers and to retain existing
     customers.

o    The timely  development and acceptance of products and services,  including
     products and services offered through alternative delivery channels such as
     the Internet.

o    Technological  changes  implemented  by the Company  and by other  parties,
     including  third  party  vendors,  which  may be  more  difficult  or  more
     expensive than anticipated or which may have unforeseen consequences to the
     Company and its customers.

o    The  ability of the  Company to develop and  maintain  secure and  reliable
     electronic systems.

o    The ability of the Company to retain key  executives  and employees and the
     difficulty  that the Company may experience in replacing key executives and
     employees in an effective manner.

o    Consumer  spending  and saving  habits  which may  change in a manner  that
     affects the Company's business adversely.

o    Business  combinations and the integration of acquired businesses which may
     be more difficult or expensive than expected.

o    The costs, effects and outcomes of existing or future litigation.

o    Changes in accounting  policies and  practices,  as may be adopted by state
     and federal  regulatory  agencies and the  Financial  Accounting  Standards
     Board.

o    The  ability  of the  Company  to  manage  the  risks  associated  with the
     foregoing as well as anticipated.

These risks and uncertainties should be considered in evaluating forward-looking
statements  and  undue  reliance  should  not  be  placed  on  such  statements.
Additional information concerning the Company and its business,  including other
factors  that  could  materially  affect the  Company's  financial  results,  is
included in the Company's filings with the Securities and Exchange Commission.

Item 7a.  Quantitative and Qualitative Disclosures about Market Risk

See the "Interest Rate  Sensitivity"  section  contained in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.

Item 8.  Financial Statements and Supplementary Data

The financial statements begin on page 34.

                                       33
<PAGE>


                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                        December 31, 2003, 2002 and 2001


<PAGE>

                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES




                                TABLE OF CONTENTS



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

INDEPENDENT AUDITOR'S REPORT

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

CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Balance Sheets

  Consolidated Statements of Income

  Consolidated Statements of Changes in Shareholders' Equity

  Consolidated Statements of Cash Flows

  Notes to Consolidated Financial Statements

                                       34
<PAGE>



                          Independent Auditor's Report


The Board of Directors
Main Street Trust, Inc.
Champaign, Illinois

We have  audited the  accompanying  consolidated  balance  sheets of Main Street
Trust,  Inc. and  subsidiaries as of December 31, 2003 and 2002, and the related
consolidated  statements of income,  changes in shareholders'  equity,  and cash
flows for each of the three years in the period ended  December 31, 2003.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial position of Main
Street Trust,  Inc. and  subsidiaries  as of December 31, 2003 and 2002, and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2003, in conformity  with  accounting  principles
generally accepted in the United States of America.


/s/ McGladrey & Pullen, LLP
---------------------------

Champaign, Illinois
February 6, 2004
                                       35
<PAGE>


                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 2003 and 2002
                        (in thousands, except share data)

<TABLE>
                                                                      2003              2002
                                                                   --------------------------
<S>                                                                <C>            <C>
Assets

Cash and due from banks ........................................   $    45,899    $    59,744
Federal funds sold and interest bearing deposits ...............        30,004         43,002
                                                                   --------------------------
        Cash and cash equivalents ..............................        75,903        102,746
                                                                   --------------------------
Investments in debt and equity securities:

  Available-for-sale, at fair value ............................       265,914        240,616
  Held-to-maturity, at cost (fair value of $96,628 and $70,489
    at December 31, 2003 and 2002, respectively) ...............        97,056         68,563
  Non-marketable equity securities .............................         7,756          7,031
                                                                   --------------------------
    Total investments in debt and equity securities ............       370,726        316,210
                                                                   --------------------------
Loans, net of allowance for loan losses of $9,786 and $9,259
  at December 31, 2003 and 2002, respectively ..................       666,259        664,142
Mortgage loans held for sale ...................................           632          2,972
Premises and equipment .........................................        17,622         18,349
Accrued interest receivable ....................................         6,430          7,315
Other assets ...................................................        16,602         10,994
                                                                   --------------------------
        Total assets ...........................................   $ 1,154,174    $ 1,122,728
                                                                   ==========================

Liabilities and Shareholders' Equity

Liabilities:
  Deposits:
    Non-interest bearing .......................................   $   162,175    $   163,903
    Interest bearing ...........................................       736,297        704,683
                                                                   --------------------------
        Total deposits .........................................       898,472        868,586

  Federal funds purchased, repurchase agreements and notes
    payable ....................................................       102,998         80,651
  Federal Home Loan Bank advances and other borrowings .........        29,980         27,806
  Accrued interest payable .....................................         1,669          2,252
  Other liabilities ............................................         9,605          8,963
                                                                   --------------------------
        Total liabilities ......................................     1,042,724        988,258
                                                                   --------------------------

Shareholders' equity:
  Preferred stock, no par value;  2,000,000 shares authorized ..            --             --
  Common stock, $0.01 par value; 15,000,000 shares authorized;
    11,219,319 shares issued ...................................           112            112
  Paid in capital ..............................................        55,271         55,337
  Retained earnings ............................................       101,521         92,853
  Accumulated other comprehensive income .......................         1,941          3,776
                                                                   --------------------------
                                                                       158,845        152,078
  Less:  treasury stock, at cost, 1,718,950 and 755,047 shares
    at December 31, 2003 and  2002, respectively ...............       (47,395)       (17,608)
                                                                   --------------------------
        Total shareholders' equity .............................       111,450        134,470
                                                                   --------------------------
        Total liabilities and shareholders' equity .............   $ 1,154,174    $ 1,122,728
                                                                   ==========================
</TABLE>
See accompanying notes to consolidated financial statements.

                                       36
<PAGE>


                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

                        Consolidated Statements of Income

                  Years Ended December 31, 2003, 2002 and 2001
                        (in thousands, except share data)
<TABLE>
                                                                         2003            2002           2001
                                                                     -------------------------------------------
<S>                                                                  <C>             <C>            <C>
Interest income:
  Loans and fees on loans ........................................   $     41,467    $     48,080   $     55,280
  Investments in debt and equity securities
    Taxable ......................................................         11,502          12,471         13,831
    Tax-exempt ...................................................          2,270           2,375          2,347
  Federal funds sold and interest bearing deposits ...............            447             437          1,737
                                                                     -------------------------------------------
        Total interest income ....................................         55,686          63,363         73,195

Interest expense:
  Deposits .......................................................         14,070          18,714         28,831
  Federal funds purchased, repurchase agreements and notes payable          1,094           1,169          2,550
  Federal Home Loan Bank advances and other borrowings ...........          1,559           1,834          2,217
                                                                     -------------------------------------------
        Total interest expense ...................................         16,723          21,717         33,598
                                                                     -------------------------------------------

        Net interest income ......................................         38,963          41,646         39,597
Provision for loan losses ........................................          1,470           1,450          2,670
                                                                     -------------------------------------------
        Net interest income after provision for loan losses ......         37,493          40,196         36,927

Non-interest income:
  Remittance processing ..........................................          7,211           7,277          7,187
  Trust and brokerage fees .......................................          5,783           5,929          5,227
  Service charges on deposit accounts ............................          2,545           2,373          2,217
  Securities transactions, net ...................................            (12)            211            110
  Gain on sales of mortgage loans, net ...........................          2,536           1,368            828
  Other ..........................................................          2,231           1,708          1,697
                                                                     -------------------------------------------
        Total non-interest income ................................         20,294          18,866         17,266

Non-interest expense:
  Salaries and employee benefits .................................         18,245          18,721         17,761
  Occupancy ......................................................          2,489           2,376          2,297
  Equipment ......................................................          2,389           2,779          3,405
  Data processing ................................................          2,108           2,300          1,943
  Office supplies ................................................          1,266           1,261          1,535
  Service charges from correspondent banks .......................            931             932            885
  Reconciliation liability .......................................           --              --           (2,500)
  Other ..........................................................          4,913           4,792          4,960
                                                                     -------------------------------------------
        Total non-interest expense ...............................         32,341          33,161         30,286

        Income before income taxes ...............................         25,446          25,901         23,907
Income taxes .....................................................          8,841           8,520          7,736
                                                                     -------------------------------------------
        Net income ...............................................   $     16,605    $     17,381   $     16,171
                                                                     ===========================================

Per share data:
  Basic earnings per share .......................................   $       1.62    $       1.61   $       1.48
  Weighted average shares of common stock outstanding ............     10,242,929      10,792,092     10,930,736

  Diluted earnings per share .....................................   $       1.60    $       1.60   $       1.45
  Weighted average shares of common stock and dilutive potential
     common shares outstanding ...................................     10,359,836      10,878,823     11,138,290

  Dividends declared per share ...................................   $       0.76    $       0.54   $       0.45
</TABLE>
See accompanying notes to consolidated financial statements.

                                       37
<PAGE>

                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Shareholders' Equity

                  Years Ended December 31, 2003, 2002 and 2001
                        (in thousands, except share data)
<TABLE>
                                                                               Accumulated
                                                                                  Other
                                                                               Comprehensive  Treasury Stock
                                          Common Stock      Paid-in   Retained    Income     ------------------
                                       Shares      Amount   Capital   Earnings    (Loss)     Shares      Amount     Total
                                     --------------------------------------------------------------------------------------
<S>                                  <C>           <C>      <C>       <C>      <C>           <C>       <C>         <C>


Balance, December 31, 2000 ......    11,111,582    $  111   $54,222   $ 72,591    $  600     117,786   $ (2,122)   $125,402
Comprehensive Income:
  Net income ....................            --        --        --     16,171        --          --         --      16,171
  Net change in unrealized
    gain (loss) on securities
    available-for-sale, net of
    taxes of $1,172 .............            --        --        --         --     2,221          --         --       2,221
  Reclassification adjustment,
    net of tax of ($39) .........            --        --        --         --       (71)         --         --         (71)
                                                                                                                   --------
     Comprehensive income .......                                                                                    18,321
                                                                                                                   --------
Fractional shares of common stock
  purchased following
  stock dividend ................          (301)       --        (6)        --        --          --         --          (6)
Stock appreciation rights .......            --        --        23         --        --          --         --          23
Cash dividends ($0.45 per share)             --        --        --     (4,945)       --          --         --      (4,945)
Treasury stock transactions, net             --        --       (92)        (7)       --     149,997     (2,703)     (2,802)
                                     --------------------------------------------------------------------------------------
Balance, December 31, 2001 ......    11,111,281       111    54,147     83,810     2,750     267,783     (4,825)    135,993
Comprehensive Income:
  Net income ....................            --        --        --     17,381        --          --         --      17,381
  Net change in unrealized
    gain (loss) on securities
    available-for-sale, net of
    taxes of $1,159 .............            --        --        --         --     1,153          --         --       1,153
  Reclassification adjustment,
    net of tax of ($84) .........            --        --        --         --      (127)         --         --        (127)
                                                                                                                   --------
     Comprehensive income .......                                                                                    18,407
                                                                                                                   --------
Stock appreciation rights .......            --        --       (31)        --        --          --         --         (31)
Cash dividends ($0.54 per share)             --        --        --     (5,752)       --          --         --      (5,752)
Issuance of new shares of common
  stock .........................       108,038         1     1,221         --        --          --         --       1,222
Treasury stock transactions, net             --        --        --     (2,586)       --     487,264    (12,783)    (15,369)
                                     --------------------------------------------------------------------------------------
Balance, December 31, 2002 ......    11,219,319       112    55,337     92,853     3,776     755,047    (17,608)    134,470
Comprehensive Income:
  Net income ....................            --        --        --     16,605        --          --         --      16,605
  Net change in unrealized
    gain (loss) on securities
    available-for-sale, net of
    taxes of ($1,228) ...........            --        --        --         --    (1,842)         --         --      (1,842)
  Reclassification adjustment,
    net of tax of $5 ............            --        --        --         --         7          --         --           7
                                                                                                                   --------
     Comprehensive income .......                                                                                    14,770
                                                                                                                   --------
Stock appreciation rights .......            --        --       (66)        --        --          --         --         (66)
Cash dividends ($0.76 per share)             --        --        --     (7,567)       --          --         --      (7,567)
Treasury stock transactions, net             --        --        --       (370)       --     963,903    (29,787)    (30,157)
                                     --------------------------------------------------------------------------------------
Balance, December 31, 2003 ......    11,219,319    $  112    $55,271  $101,521    $1,941   1,718,950   $(47,395)   $111,450
                                     ======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                       38
<PAGE>

                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                  Years Ended December 31, 2003, 2002 and 2001
                                 (in thousands)
<TABLE>

                                                                             2003          2002         2001
                                                                          -----------------------------------
<S>                                                                       <C>          <C>          <C>
Cash flows from operating activities:
Net income ............................................................   $  16,605    $  17,381    $  16,171
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization .......................................       2,453        2,647        2,731
  Amortization (accretion) of bond premiums, net ......................       2,249        1,188          (78)
  Provision for loan losses ...........................................       1,470        1,450        2,670
  Deferred income taxes ...............................................        (637)      (1,016)      (1,643)
  Securities transactions, net ........................................          12         (211)        (110)
  Federal Home Loan Bank stock dividend ...............................        (296)        (187)        (240)
  Undistributed earnings from non-marketable equity securities ........        (172)        --           --
  Gain on sales of mortgage loans, net ................................      (2,536)      (1,368)        (828)
  Proceeds from sales of mortgage loans originated for sale ...........     209,192      138,898      104,155
  Mortgage loans originated for sale ..................................    (204,316)    (131,727)    (110,012)
  Other, net ..........................................................      (3,281)       1,309       (2,351)
                                                                          ---------=-------------------------
        Net cash provided by operating activities .....................      20,743       28,364       10,465
                                                                          -----------------------------------

Cash flows from investing activities:
  Net (increase) decrease in loans ....................................      (3,647)       7,172      (15,882)
  Proceeds from maturities and calls of investments in debt securities:
    Held-to-maturity ..................................................      15,217        2,956       32,239
    Available-for-sale ................................................     163,034      116,835      140,054
  Proceeds from sales of investments in debt and equity securities:
    Available-for-sale ................................................      11,085       44,732       29,567
  Purchases of investments in debt and equity securities:
    Held-to-maturity ..................................................     (63,526)     (25,158)     (21,744)
    Available-for-sale ................................................    (222,498)    (150,268)    (223,994)
    Other equity securities ...........................................        (830)      (1,970)        (750)
  Principal paydowns from mortgage-backed securities:
    Held-to-maturity ..................................................      18,923       17,272        9,948
    Available-for-sale ................................................      18,738       16,012        6,127
  Return of principal on other equity securities ......................         490          106           31
  Purchases of premises and equipment .................................      (1,726)      (1,737)      (1,116)
                                                                          -----------------------------------
        Net cash (used in) provided by investing activities ...........     (64,740)      25,952      (45,520)
                                                                          -----------------------------------

Cash flows from financing activities:
  Net increase (decrease) in deposits .................................      29,886      (15,523)      44,177
  Net increase (decrease) in federal funds purchased,
    repurchase agreements, and notes payable ..........................      22,347       (4,556)      15,549
  Advances from Federal Home Loan Bank and other borrowings ...........       2,268       13,000        5,000
  Payments on Federal Home Loan Bank and other borrowings .............         (94)     (20,089)     (11,083)
  Cash dividends paid .................................................      (7,142)      (5,634)      (4,540)
  Issuance of new shares of common stock, net .........................        --          1,222           --
  MSTI stock transactions, net ........................................     (30,111)     (15,369)      (2,808)
                                                                          -----------------------------------
        Net cash provided by (used in) financing activities ...........      17,154      (46,949)      46,295
                                                                          -----------------------------------
        Net (decrease) increase in cash and cash equivalents ..........     (26,843)       7,367       11,240
Cash and cash equivalents at beginning of year ........................     102,746       95,379       84,139
                                                                          -----------------------------------
Cash and cash equivalents at end of period ............................   $  75,903    $ 102,746    $  95,379
                                                                          ===================================

Supplemental  disclosures of cash flow information:
  Cash paid during the period for:
    Interest ..........................................................   $  17,306    $  22,855    $  34,792
    Income taxes ......................................................       8,937        9,061        8,775
  Real estate acquired through or in lieu of foreclosure ..............          60          297           --
  Dividends declared not paid .........................................       1,995        1,570        1,452
</TABLE>
See accompanying notes to consolidated financial statements.

                                       39
<PAGE>


                             MAIN STREET TRUST, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

1. Organization

Main Street Trust,  Inc. is a holding company whose  subsidiaries  BankIllinois,
The First National Bank of Decatur and FirsTech, Inc., (the "Company") provide a
full range of banking  services to individual  and corporate  customers  located
within  Champaign,  Decatur,  and  Shelbyville,  Illinois,  and the  surrounding
communities.  The  subsidiaries  are subject to competition from other financial
institutions  and  nonfinancial   institutions   providing  financial  products.
Additionally,  the Company is subject to the  regulations of certain  regulatory
agencies and undergo periodic examinations by those regulatory agencies.

2. Summary of Significant Accounting Policies

The  consolidated  financial  statements  of the Company  have been  prepared in
conformity with accounting principles generally accepted in the United States of
America and conform to predominant  practices within the banking  industry.  The
preparation  of  the  consolidated   financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires   management  to  make   estimates  and   assumptions,   including  the
determination  of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosure or in satisfaction of loans, that affect
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of the consolidated  financial statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

The  significant  accounting  policies used by the Company in the preparation of
the consolidated financial statements are summarized below:

(a)  Principles of Consolidation and Financial Statement Presentation

     The consolidated  financial  statements include the accounts of Main Street
     Trust,  Inc. and its wholly  owned  subsidiaries,  BankIllinois,  The First
     National  Bank of Decatur,  (the  "Banks")  and  FirsTech,  Inc.,  a retail
     payment processing  company.  During 2002, First Trust Bank of Shelbyville,
     previously a bank  subsidiary,  was merged into  BankIllinois.  Significant
     intercompany   accounts   and   transactions   have  been   eliminated   in
     consolidation.

     Property  held in fiduciary or agency  capacities  for its customers is not
     included in the accompanying  consolidated balance sheets, since such items
     are not assets of the Company.

     The  Company  currently  operates  in two  industry  segments.  The primary
     business involves providing banking services to central Illinois. The Banks
     offer a full  range  of  financial  services  to  business  and  individual
     customers.  These services  include  demand,  savings,  time and individual
     retirement accounts;  commercial,  consumer (including automobile loans and
     personal  lines of credit),  agricultural,  and real estate  lending;  safe
     deposit and night depository services; farm management;  full service trust
     departments  that  offer  a wide  range  of  services  such  as  investment
     management,  acting as trustee, serving as guardian,  executor or agent and
     miscellaneous  consulting;  discount  brokerage  services and  purchases of
     installment  obligations from retailers,  primarily without  recourse.  The
     other  industry  segment  involves  retail  payment  processing.   FirsTech
     provides  the  following  services to  electric,  water and gas  utilities,
     telecommunication   companies,   cable   television  firms  and  charitable
     organizations:  retail lockbox  processing of payments delivered by mail on
     behalf of the biller;  processing of payments delivered by customers to pay
     agents such as grocery stores,  convenience stores and currency  exchanges;
     and  concentration  of payments  delivered by the Automated  Clearing House
     network,  money  management  software such as Quicken and through  networks
     such as Visa e-Pay and MasterCard RPS.

     Company  information is provided for informational  purposes only, since it
     is not  considered a separate  segment for  reporting  purposes.  Effective
     January 1, 2003, certain  administrative,  audit,  compliance,  accounting,
     finance, property management, human resources, courier, information systems
     and other support services  previously included in the budgets of the Banks
     were moved to the Company. During this process,  approximately 80 full time
     equivalent  employees  were  moved from the Banks to the  Company.  The net
     expenses  of these  functions  are now  allocated  to the  subsidiaries  by
     charging a monthly management fee.

                                       40
<PAGE>

     The  following  is a summary  of  selected  data for the  various  business
     segments as of and for the year ending December 31:
<TABLE>
                                 Banking     Remittance
                                 Services     Services     Company     Eliminations     Total
------------------------------------------------------------------------------------------------
<S>                             <C>          <C>          <C>          <C>            <C>
2003
 Total interest income ......   $   55,288   $       46   $      466    $     (114)   $   55,686
 Total interest expense .....       16,816           --           21          (114)       16,723
 Provision for loan losses ..        1,470           --           --            --         1,470
 Total non-interest income ..       13,314        7,294        4,653        (4,967)       20,294
 Total non-interest expense .       26,486        5,014        5,808        (4,967)       32,341
 Income before income tax ...       23,830        2,326         (710)           --        25,446
 Income tax expense .........        8,185          942         (286)           --         8,841
 Net income .................       15,645        1,384         (424)           --        16,605
 Total assets ...............    1,136,418        3,740      118,241      (104,225)    1,154,174
 Depreciation and amortization       1,542          429          482            --         2,453

2002
 Total interest income ......   $   63,207   $       88   $      210    $     (142)   $   63,363
 Total interest expense .....       21,843           --           16          (142)       21,717
 Provision for loan losses ..        1,450           --           --            --         1,450
 Total non-interest income ..       12,259        7,396          (60)         (729)       18,866
 Total non-interest expense .       27,298        5,051        1,541          (729)       33,161
 Income before income tax ...       24,875        2,433       (1,407)           --        25,901
 Income tax expense .........        8,110          974         (564)           --         8,520
 Net income .................       16,765        1,459         (843)           --        17,381
 Total assets ...............    1,110,691        6,774      137,243      (131,980)    1,122,728
 Depreciation and amortization       2,105          512           30            --         2,647

2001
 Total interest income ......   $   73,122   $      135   $      111    $     (173)   $   73,195
 Total interest expense .....       33,771           --           --          (173)       33,598
 Provision for loan losses ..        2,670           --           --            --         2,670
 Total non-interest income ..       10,669        7,543         (148)         (798)       17,266
 Total non-interest expense .       26,964        5,565       (1,445)         (798)       30,286
 Income before income tax ...       20,386        2,113        1,408            --        23,907
 Income tax expense .........        6,355          790          591            --         7,736
 Net income .................       14,031        1,323          817            --        16,171
 Total assets ...............    1,143,675        7,208      138,392      (137,764)    1,151,511
 Depreciation and amortization       2,152          549           30            --         2,731
</TABLE>

(b)  Investments in Debt and Equity Securities

     Debt securities  classified as held-to-maturity  are those securities which
     the  Company  has the  ability  and  intent to hold until  maturity.  These
     securities  are carried at amortized  cost,  in which the  amortization  of
     premiums and accretion of discounts, which are recognized as adjustments to
     interest income,  are recorded using methods which approximate the interest
     method.  These  methods  consider the timing and amount of  prepayments  of
     underlying   mortgages  in  estimating  future  cash  flows  on  individual
     mortgage-related  securities.  Unrealized  holding  gains  and  losses  for
     held-to-maturity  securities  are excluded from earnings and  shareholders'
     equity.

     Debt and  equity  securities  classified  as  available-for-sale  are those
     securities  that the Company  intends to hold for an  indefinite  period of
     time but not  necessarily  to  maturity.  Any  decision  to sell a security
     classified  as  available-for-sale  would  be  based  on  various  factors,
     including  significant movements in interest rates, changes in the maturity
     mix of the Company's  assets and liabilities,  liquidity needs,  regulatory
     capital   considerations,    and   other   similar   factors.    Securities
     available-for-sale  are carried at fair value. The difference  between fair
     value and cost,  adjusted  for  amortization  of premium and  accretion  of
     discounts,  results  in an  unrealized  gain or loss.  Unrealized  gains or
     losses are reported as accumulated other  comprehensive  income (loss), net
     of the  related  deferred  tax  effect.  Gains or  losses  from the sale of
     securities  are  determined  using  the  specific   identification  method.
     Premiums and discounts are  recognized  in interest  income using  methods,
     which approximate the interest method over their contractual lives.

                                       41
<PAGE>

     A decline in the market value of any available-for-sale or held-to-maturity
     security  below  cost that is deemed  other  than  temporary  is charged to
     earnings  and  results  in the  establishment  of a new cost  basis for the
     security.   Declines   in  the   fair   value   of   held-to-maturity   and
     available-for-sale  securities below their cost that are deemed to be other
     than temporary are reflected in earnings as realized losses.  In estimating
     other-than-temporary impairment losses, management considers (1) the length
     of time and the extent to which the fair value has been less than cost, (2)
     the financial  condition and near-term prospects of the issuer, and (3) the
     intent and  ability of the Company to retain its  investment  in the issuer
     for a period of time  sufficient to allow for any  anticipated  recovery in
     fair value.

     Non-marketable  equity  securities  include  other  investments  which  are
     carried at fair value as well as Federal  Reserve Bank stock and the Banks'
     required  investment  in the capital  stock of the  Federal  Home Loan Bank
     which are carried at cost which approximates fair value.

(c)  Loans

     Loans are stated at the principal amount outstanding,  net of the allowance
     for loan losses.  Interest is credited to income as earned,  based upon the
     principal amount outstanding.

     The accrual of interest on loans is  discontinued  when,  in the opinion of
     management,  the  borrower  is unable to meet  payments as they become due.
     Interest  accrued in the current year is reversed  against interest income,
     and prior  years'  interest is charged to the  allowance  for loan  losses.
     Interest  income on impaired  loans is  recognized  to the extent  interest
     payments are received and the principal is considered fully collectible.

     Mortgage  loans held for sale are carried at the lower of aggregate cost or
     estimated market value. Gains or losses on sales of loans held for sale are
     computed  using the  specific-identification  method and are  reflected  in
     income at the time of sale.

     The fair market value of servicing  rights on mortgage  loans that are sold
     with servicing  retained is capitalized.  The capitalized  servicing rights
     are amortized  against  income based on the  estimated  lives of the loans.
     Capitalized servicing rights are evaluated for impairment based on the fair
     value of the servicing rights and any impairment is reflected in income.

(d)  Allowance for Loan Losses

     The  allowance  for loan  losses is  increased  by  provisions  charged  to
     operations and is reduced by loan charge-offs  less recoveries.  Management
     utilizes an approach,  which  provides  for general and specific  valuation
     allowances,  that is based on current  economic  conditions,  past  losses,
     collection experience, risk characteristics of the portfolio, assessment of
     collateral  values by  obtaining  independent  appraisals  for  significant
     properties, and such other factors which, in management's judgment, deserve
     current recognition in estimating loan losses, to determine the appropriate
     level of the allowance for loan losses.

     The allowance for loan losses related to impaired loans that are identified
     for  evaluation is based on discounted  cash flow using the loan's  initial
     effective  interest  rate or the fair value,  less  selling  costs,  of the
     collateral for collateral dependent loans.

     Loans are categorized as "impaired" when,  based on current  information or
     events,  it is  probable  that the  Company  will be unable to collect  all
     amounts due,  including  principal  and interest,  in  accordance  with the
     contractual   terms  of  the  loan  agreement.   The  Company  reviews  all
     non-accrual and  substantially  delinquent  loans, as well as problem loans
     identified  by  management,  for  impairment as defined  above.  A specific
     reserve amount will be established  for impaired loans in which the present
     value of the expected cash flows to be generated is less than the amount of
     the loan recorded on the Company's books. As an alternative to discounting,
     the  Company  may use the  "fair  value"  of any  collateral  supporting  a
     collateral-dependent  loan in reviewing the necessity  for  establishing  a
     specific loan loss reserve  amount.  Specific  reserves will be established
     for  accounts  having a  collateral  deficiency  estimated to be $50,000 or
     more. The Company's  general  reserve is maintained at an adequate level to
     cover accounts having a collateral  deficiency of less than $50,000.  Loans
     evaluated  as groups or  homogeneous  pools of loans will be excluded  from
     this analysis.

                                       42
<PAGE>

     The Company utilizes their data processing system to identify loan payments
     not made by their  contractual  due date and  calculate  the number of days
     each loan exceeds the contractual due dates. The accrual of interest on any
     loan  is  discontinued  when,  in  the  opinion  of  management,  there  is
     reasonable doubt as to the collectibility of interest or principal.

     Management  believes  the  allowance  for loan losses is adequate to absorb
     probable  credit losses inherent in the loan  portfolio.  While  management
     uses available  information to recognize loan losses,  future  additions to
     the allowance for loan losses may be necessary based on changes in economic
     conditions.  In addition,  various regulatory agencies, as an integral part
     of their  examination  process,  periodically  review the  adequacy  of the
     allowance  for loan  losses.  Such  agencies  may  require  the  Company to
     recognize  additions  to the  allowance  for  loan  losses  based  on their
     judgments  of   information   available  to  them  at  the  time  of  their
     examination.

(e)  Premises and Equipment

     Premises and equipment are stated at cost less accumulated depreciation and
     amortization.  Depreciation  and  amortization  applicable to furniture and
     equipment  and  buildings  and  leasehold  improvements  is  charged to the
     related occupancy or equipment expense using  straight-line and accelerated
     methods over the estimated useful lives of the assets.  Estimated lives are
     3 to 39 years for buildings and leasehold improvements and 3 to 7 years for
     furniture and equipment.  Maintenance and repairs are charged to operations
     as incurred.

(f)  Other Real Estate

     Other  real  estate,   included  in  other   assets  in  the   accompanying
     consolidated  balance  sheets,  is initially  recorded at fair value, if it
     will be held and used,  or at its fair  value less costs to sell if it will
     be disposed of. If, subsequent to foreclosure,  the fair value is less than
     the  carrying  amount,  the carrying  value is reduced  through a charge to
     income.  Expenses  incurred in  maintaining  the  properties are charged to
     operations. The Company had no other real estate owned at December 31, 2003
     and $58,000 at December 31, 2002.

(g)  Income Taxes

     Deferred tax assets and liabilities are recognized for the estimated future
     tax  consequences   attributable  to  differences   between  the  financial
     statement  carrying  amounts of existing  assets and  liabilities and their
     respective  tax bases.  Deferred  tax assets and  liabilities  are measured
     using  enacted  tax rates in effect for the year in which  those  temporary
     differences are expected to be recovered or settled. The effect on deferred
     tax assets and liabilities of a change in tax rates is recognized in income
     in the period that includes the enactment date.

(h)  Earnings Per Share

     Basic earnings per share is computed by dividing net income by the weighted
     average  number of common stock shares  outstanding.  Diluted  earnings per
     share is computed by dividing net income by the weighted  average number of
     common stock and dilutive potential common shares  outstanding.  Options to
     purchase shares of the Company's common stock and stock appreciation rights
     are the only dilutive  potential common shares. The weighted average number
     of dilutive  potential common shares is calculated using the treasury stock
     method.

     Earnings per share has been computed as follows:
<TABLE>
                                                             2003          2002          2001
                                                          ---------------------------------------
<S>                                                       <C>           <C>           <C>
Net Income ............................................   $16,605,000   $17,381,000   $16,171,000
Shares:
  Weighted average common shares outstanding ..........    10,242,929    10,792,092    10,930,736
  Dilutive effect of outstanding options, as determined
    by the application of the treasury stock method ...       116,907        86,731       207,554
                                                          ---------------------------------------
  Weighted average common shares outstanding,
    as adjusted .......................................    10,359,836    10,878,823    11,138,290
                                                          =======================================
Basic earnings per share ..............................   $      1.62   $      1.61   $      1.48
                                                          =======================================
Diluted earnings per share ............................   $      1.60   $      1.60   $      1.45
                                                          ===========   ===========   ===========
</TABLE>

(i)  Cash and Cash Equivalents

     For purposes of the  consolidated  statements of cash flows,  cash and cash
     equivalents  include  cash and due from  banks and  federal  funds sold and
     interest bearing  deposits.  Generally,  federal funds are sold for one-day
     periods.  Cash flows from loans,  deposits,  and federal  funds  purchased,
     repurchase agreements and notes payable are reported net.

                                       43
<PAGE>

(j)  Reclassification

     Certain amounts in the 2001 and 2002 consolidated financial statements have
     been   reclassified   to   conform   with  the  2003   presentation.   Such
     reclassifications  have no  effect on  previously  reported  net  income or
     shareholders' equity.

(k)  Stock Option Plans

     The  Company  has five  stock-based  compensation  plans which have been in
     existence for all periods presented,  and which are more fully described in
     Note 13. As permitted under accounting principles generally accepted in the
     United  States of America,  grants of options under the plans are accounted
     for under the recognition and measurement  principles of APB Opinion No 25,
     Accounting  for Stock  Issued to  Employees,  and related  interpretations.
     Because  options  granted  under the plans had an  exercise  price equal to
     market  value  of the  underlying  common  stock  on  the  grant  date,  no
     stock-based  employee  compensation  cost is  included in  determining  net
     income.  The  following  table  illustrates  the  effect on net  income and
     earnings  per share if the Company  had applied the fair value  recognition
     provisions  of  FASB  Statement  No.  123,   Accounting   for   Stock-Based
     Compensation, to stock-based employee compensation.
<TABLE>
                                                        2003           2002           2001
                                                   --------------------------------------
<S>                                                <C>           <C>           <C>
Net income on common stock:
  As reported ..................................   $   16,605    $   17,381    $   16,171
Deduct total stock-based compensation expense
  determined under the fair value method for all
  awards, net of related tax effects ...........         (263)         (290)         (293)
                                                   --------------------------------------
     Pro forma .................................   $   16,342    $   17,091    $   15,878
                                                   ======================================
Basic earnings per share:
  As reported ..................................   $     1.62    $     1.61    $     1.48
  Pro forma ....................................         1.60          1.58          1.45
Diluted earnings per share:
  As reported ..................................   $     1.60    $     1.60    $     1.45
  Pro forma ....................................         1.58          1.57          1.43
</TABLE>

     The fair value of the stock options  granted has been  estimated  using the
     Black-Scholes  option-pricing  model with the  following  weighted  average
     assumptions.  The Black-Scholes  option-pricing model was developed for use
     in  estimating  the fair  value of traded  options,  which  have no vesting
     restrictions.  In  addition,  such  models  require  the use of  subjective
     assumptions,  including  expected stock price  volatility.  In management's
     opinion,  such valuation models may not necessarily provide the best single
     measure of option value.

                                         2003            2002            2001
                                        ----------------------------------------
Number of options granted ......        135,000         158,000         169,050
Risk-free interest rate ........          3.64%           5.20%           5.05%
Expected life, in years ........           8.00            8.00            6.97
Expected volatility ............          13.35%         10.34%          14.10%
Expected dividend yield ........           2.42%          2.80%           2.23%

3. Cash and Due from Banks

The  compensating  balances held at  correspondent  banks were  $35,630,000  and
$47,424,000 at December 31, 2003 and 2002, respectively. The Banks maintain such
compensating  balances with  correspondent  banks to offset charges for services
rendered by those  banks.  In addition,  the Banks were  required by the Federal
Reserve Bank to maintain reserves in the form of cash on hand or balances at the
Federal  Reserve  Bank.  The  balance  of  reserves  held  was  $10,369,000  and
$8,312,000 at December 31, 2003 and 2002, respectively.

                                       44
<PAGE>

4. Investments in Debt and Equity Securities

The amortized cost and fair values of investments in debt and equity  securities
(in thousands) were as follows:
<TABLE>
                                                                                                Available-for-Sale
                                                                                   ------------------------------------------
                                                                                                Gross       Gross
                                                                                   Amortized  Unrealized  Unrealized   Fair
                                                                                      Cost      Gains       Losses     Value
                                                                                   ------------------------------------------
<S>                                                                                <C>        <C>         <C>        <C>
December 31, 2003
  U.S. Treasury and other
    government agencies .........................................................   $217,773   $  2,917   $    491   $220,199
  Mortgage-backed securities ....................................................     23,196        518        707     23,007
  Obligations of state and political subdivisions ...............................     16,319        999          1     17,317
  Other .........................................................................      5,391        981        981      5,391
                                                                                    -----------------------------------------
                                                                                    $262,679   $  5,415   $  2,180   $265,914
                                                                                    =========================================
December 31, 2002
  U.S. Treasury and other
    government agencies .........................................................   $182,726   $  5,815   $      6   $188,535
  Mortgage-backed securities ....................................................     29,987        927         30     30,884
  Obligations of state and political subdivisions ...............................     15,248        922          2     16,168
  Other .........................................................................      6,375        322      1,668      5,029
                                                                                    -----------------------------------------
                                                                                    $234,336   $  7,986   $  1,706   $240,616
                                                                                    =========================================

                                                                                                  Held-to-Maturity
                                                                                    -----------------------------------------
                                                                                                Gross       Gross
                                                                                   Amortized  Unrealized  Unrealized   Fair
                                                                                      Cost      Gains       Losses     Value
                                                                                   ------------------------------------------
December 31, 2003
  U.S. Treasury and other
    government agencies .........................................................   $ 10,704   $      3   $    154   $ 10,553
  Mortgage-backed securities ....................................................     50,029         81      1,789     48,321
  Obligations of state and political subdivisions ...............................     36,323      1,433          2     37,754
                                                                                    -----------------------------------------
                                                                                    $ 97,056   $  1,517   $  1,945   $ 96,628
                                                                                    =========================================
December 31, 2002
  U.S. Treasury and other
    government agencies .........................................................   $  1,750   $      4   $     --   $  1,754
  Mortgage-backed securities ....................................................     23,595        184         48     23,731
  Obligations of state and political subdivisions ...............................     43,218      1,787          1     45,004
                                                                                    -----------------------------------------
                                                                                    $ 68,563   $  1,975   $     49   $ 70,489
                                                                                    =========================================
</TABLE>

                                       45
<PAGE>

Continuous gross unrealized  losses of investments in debt and equity securities
(in thousands) which are classified as temporary were as follows:
<TABLE>
                                        Continuous           Continuous
                                      Unrealized Losses   Unrealized Losses
                                      Existing for Less   Existing Greater
                                       Than 12 months      Than 12 months            Total
                                     ------------------  -------------------   ------------------
                                      Fair   Unrealized    Fair   Unrealized    Fair   Unrealized
                                      Value    Losses      Value    Losses      Value    Losses
                                     ------------------------------------------------------------
<S>                                  <C>     <C>         <C>      <C>          <C>     <C>
Available-for-Sale:
  U.S. Treasury and other
    government agencies ..........   $56,784   $   491   $    --   $    --     $56,784   $   491
  Mortgage-backed securities .....     9,854       707        --        --       9,854       707
  Obligations of state and
    political subdivisions .......     1,114         1        --        --       1,114         1
                                     ---------------------------------------------------------
        Subtotal, debt securities    $67,752   $ 1,199   $    --   $    --     $67,752   $ 1,199
  Other ..........................      --        --       1,433       981       1,433       981
                                     ---------------------------------------------------------
        Total temporarily impaired
        securities ...............   $67,752   $ 1,199   $ 1,433   $   981     $69,185   $ 2,180
                                     =========================================================

Held-to-Maturity:
  U.S. Treasury and other
    government agencies ..........   $ 8,094   $   154   $    --   $    --     $ 8,094   $   154
  Mortgage-backed securities .....    38,654     1,789        --        --      38,654     1,789
  Obligations of state and
    political subdivisions .......       346         2        --        --         346         2
                                     ---------------------------------------------------------
        Total temporarily impaired
        securities ...............   $47,094   $ 1,945   $    --   $    --     $47,094   $ 1,945
                                     =========================================================
</TABLE>

The  $981,000  continuous  unrealized  loss  greater  than 12  months  on  other
securities is made up of 10 stocks and is believed to be a temporary  loss.  The
loss on these stocks at December 31, 2002 was $1,331,000 compared to $981,000 at
December 31, 2003, an  improvement of $350,000.  Management  believes the market
value of these  stocks  will  continue to improve as the  economy  continues  to
recover.  Unrealized  losses on debt  securities are generally due to changes in
interest rates and, as such, are considered, by the Company, to be temporary.

A summary of  non-marketable  equity  securities  (in thousands) at December 31,
2003 and 2002 is as follows:

                                                             2003          2002
                                                            --------------------
Federal Home Loan Bank Stock, at cost ..............        $4,028        $3,732
Federal Reserve Bank Stock, at cost ................           231           231
Other investments, at fair value ...................         3,497         3,068
                                                            --------------------
                                                            $7,756        $7,031
                                                            ====================

Realized gains and (losses) (in thousands) on sales and maturities for the years
ended December 31, 2003, 2002 and 2001 were as follows:

                                                2003         2002         2001
                                              ----------------------------------
Gross gains .............................     $   173      $ 1,016      $   563
Gross (losses) ..........................        (185)        (805)        (453)
                                              ---------------------------------
Net gains (losses) ......................     $   (12)     $   211      $   110
                                              =================================
Applicable income taxes (benefit) .......     $    (5)     $    84      $    39
                                              =================================

                                       46
<PAGE>

Investments in debt and equity  securities with a carrying value of $244,099,000
and $212,414,000  were pledged at December 31, 2003 and 2002,  respectively,  to
secure  public  deposits,  repurchase  agreements,  and for  other  purposes  as
required or permitted by law.

The amortized cost and fair value of  investments in debt and equity  securities
(in thousands) at December 31, 2003, by contractual  maturity,  are shown below.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay  obligations with or without call or prepayment
penalties and certain securities require principal repayments prior to maturity.
Therefore,  these securities and equity securities with no stated maturities are
not included in the following maturity summary.
<TABLE>
                                        Available-For-Sale       Held-To-Maturity
                                        ------------------------------------------
                                        Amortized     Fair    Amortized    Fair
                                           Cost       Value     Cost       Value
                                        ------------------------------------------
<S>                                     <C>         <C>        <C>        <C>
Due in one year or less ..............   $ 57,433   $ 58,274   $ 13,504   $ 13,692
Due after one year through five years     170,361    172,458     25,720     26,687
Due after five years through ten years      5,277      5,675      7,298      7,360
Due after ten years ..................      1,021      1,109        505        568
                                         -----------------------------------------
                                         $234,092   $237,516   $ 47,027   $ 48,307
Mortgage-backed securities ...........     23,196     23,007     50,029     48,321
Marketable equity securities .........      5,391      5,391         --         --
Non-marketable equity securities .....      7,756      7,756         --         --
                                         -----------------------------------------
          Total debt securities ......   $270,435   $273,670   $ 97,056   $ 96,628
                                         =========================================
</TABLE>

5. Loans

A summary of loans (in thousands),  by classification,  at December 31, 2003 and
2002 is as follows:

                                                           2003           2002
                                                         -----------------------

Commercial, financial, and agricultural ..........       $249,795       $234,045
Real estate ......................................        348,997        343,827
Installment and consumer .........................         77,253         95,529
                                                         -----------------------
                                                         $676,045       $673,401
Less:
     Allowance for loan losses ...................          9,786          9,259
                                                         -----------------------
                                                         $666,259       $664,142
                                                         =======================

The Company makes  commercial,  financial,  and agricultural;  real estate;  and
installment and consumer loans to customers  located in central Illinois and the
surrounding  communities.  As such, the Company is susceptible to changes in the
economic environment in central Illinois.

During  2003,  2002 and  2001,  the  Company  sold  approximately  $209,192,000,
$138,898,000 and $104,155,000,  respectively,  of residential  mortgage loans in
the  secondary  market with  servicing  released on  approximately  $50,595,000,
$49,040,000  and  $52,511,000,   respectively.   Gross  gains  of  approximately
$2,542,000,  $1,385,000 and $856,000,  and gross losses of approximately $6,000,
$17,000 and $28,000,  were  realized on the sales  during  2003,  2002 and 2001,
respectively.   Capitalized  mortgage  servicing  rights  totaled  $949,000  and
$544,000 at December 31, 2003 and 2002, respectively.

Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
consolidated financial statements.  The unpaid balances of these loans consisted
of the following (in thousands) at December 31, 2003, 2002 and 2001:

                                                  2003        2002        2001
                                                --------------------------------
Fannie Mae .................................    $191,505    $137,888    $107,950
Freddie Mac ................................      10,287       6,250       4,216
Illinois Housing Development Authority .....       1,219       1,655       2,288

                                       47
<PAGE>

In the  normal  course  of  business,  loans  are made to  directors,  executive
officers,  and  principal  shareholders  of the Company and to parties which the
Company or its directors,  executive officers, and shareholders have the ability
to  significantly  influence  its  management  or  operating  policies  (related
parties). The terms of these loans, including interest rates and collateral, are
similar to those prevailing for comparable transactions with other customers and
do not involve more than a normal risk of  collectibility.  Activity  associated
with loans (in thousands) made to related parties during 2003 was as follows:

                                                                         2003
                                                                       --------
Balance, January 1 .....................................               $ 49,617
New loans ..............................................                 40,503
Repayments .............................................                (51,527)
                                                                       --------
Balance, December 31 ...................................               $ 38,593
                                                                       ========

At  December  31,  2003,  one to four  family  real  estate  mortgage  loans  of
approximately  $75,115,000 were pledged to secure advances from the Federal Home
Loan Bank, and  approximately  $25,057,000 of consumer loans were pledged to the
Federal Reserve Bank to secure potential future borrowings from the Fed Discount
Window.

Activity in the allowance for loan losses (in thousands) for 2003, 2002 and 2001
was as follows:

                                                    2003       2002      2001
                                                  -----------------------------

Balance, beginning of year ....................   $ 9,259    $ 9,259    $ 8,879
Provision charged to expense ..................     1,470      1,450      2,670
Loans charged off .............................    (1,640)    (1,927)    (2,673)
Recoveries on loans previously charged off ....       697        477        383
                                                  -----------------------------
Balance, end of year ..........................   $ 9,786    $ 9,259    $ 9,259
                                                  =============================

The following table presents summary data on nonaccrual and other impaired loans
(in thousands) at December 31, 2003, 2002 and 2001:

                                                          2003    2002     2001
                                                         -----------------------

Impaired loans on nonaccrual .........................   $  130   $ 764   $  125
Impaired loans continuing to accrue interest .........      288      --       --
                                                         ------   -----   ------
Total impaired loans .................................   $  418   $ 764   $  125
                                                         ======   =====   ======
Other non-accrual loans not classified
   as impaired .......................................   $  269   $ 628   $3,216
                                                         ======   =====   ======
Loans contractually past due 90 days or
   more, still accruing interest and not classified
   as impaired .......................................   $  590   $ 829   $1,774
                                                         ======   =====   ======
Allowance for loan losses on impaired loans ..........   $   63   $ 115   $   19
                                                         ======   =====   ======
Impaired loans for which there is no related
   allowance for loan losses .........................   $   --   $  --   $   --
                                                         ======   =====   ======
Average recorded investment in impaired
   loans .............................................   $  847   $ 515   $  142
                                                         ======   =====   ======
Interest income recognized from impaired
   loans .............................................   $   13   $  --   $   --
                                                         ======   =====   ======
Cash basis interest income recognized from
   impaired loans ....................................   $   10   $   6   $    5
                                                         ======   =====   ======
                                       48
<PAGE>

6. Premises and Equipment

A summary of premises and equipment (in thousands) at December 31, 2003 and 2002
is as follows:

                                                               2003        2002
                                                             -------------------

Land ...................................................     $ 4,818     $ 4,788
Furniture and equipment ................................      14,951      14,889
Buildings and leasehold improvements ...................      23,947      23,388
                                                             -------------------
                                                             $43,716     $43,065
Less: accumulated depreciation and amortization ........      26,094      24,716
                                                             -------------------
                                                             $17,622     $18,349
                                                             ===================

Depreciation and amortization expense was $2,453,000,  $2,647,000 and $2,731,000
for 2003, 2002 and 2001, respectively.

The  Company  leases   various   operating   facilities   and  equipment   under
noncancellable  operating  lease  arrangements.  These leases  expire at various
dates through March 2008 and have renewal  options to extend the lease terms for
various  dates.  The rental  expense for these  operating  leases was  $218,000,
$240,000 and $239,000 in 2003, 2002 and 2001, respectively.

Minimum  annual  rental  payments   required  under  the  operating  leases  (in
thousands),  which  have  initial  or  remaining  terms in excess of one year at
December 31, 2003 are as follows:

2004                                                                 $    201
2005                                                                      143
2006                                                                      134
2007                                                                      115
2008                                                                        2
                                                                     --------
                                                                     $    595
                                                                     ========

7. Deposits

The  aggregate  amount of time  certificate  of  deposits  in  denominations  of
$100,000 or more was  $113,917,000  and  $118,173,000  at December  31, 2003 and
2002,  respectively.  As of December 31, 2003, the scheduled  maturities of time
deposits (in thousands) were as follows:

2004                                                              $ 203,731
2005                                                                 83,902
2006                                                                 22,018
2007                                                                 17,720
2008                                                                 12,549
Thereafter                                                                6
                                                                  ---------
                                                                  $ 339,926
                                                                  =========

8. Federal Funds Purchased, Repurchase Agreements, and Notes Payable

A summary of short-term  borrowings (in thousands) at December 31, 2003 and 2002
is as follows:

                                                             2003         2002
                                                           ---------------------
Federal funds purchased ..............................     $  1,550     $  3,700
U.S. Treasury demand notes ...........................        1,000        1,000
Securities sold under agreements to repurchase .......      100,448       75,951
                                                           ---------------------
                                                           $102,998     $ 80,651
                                                           =====================
                                       49
<PAGE>

Information  relating to  short-term  borrowings  (dollars in  thousands)  is as
follows:

                                                    2003       2002       2001
                                                  ------------------------------
Federal funds purchased:
  Average daily balance .......................   $  5,004   $  4,599   $  4,629
  Maximum balance at month-end ................   $  7,550   $ 21,300   $ 12,090
  Weighted average interest rate at year-end ..      0.56%      0.50%      1.29%
  Weighted average interest rate for the year .      0.81%      1.70%      4.36%

Securities sold under agreements to repurchase:

  Average daily balance .......................   $ 89,261   $ 62,298   $ 68,061
  Maximum balance at month-end ................   $100,448   $ 75,951   $ 77,281
  Weighted average interest rate at year-end ..      1.06%      1.36%      2.27%
  Weighted average interest rate for the year .      1.17%      1.71%      3.32%

U.S. Treasury demand notes:
  Average daily balance .......................   $    764   $  1,459   $  2,228
  Maximum balance at month-end ................   $  1,000   $  4,437   $  5,186
  Weighted average interest rate at year-end ..      0.72%      1.14%      2.70%
  Weighted average interest rate for the year .      0.91%      1.58%      4.12%

The securities  underlying the agreements to repurchase are under the control of
the Banks.

9. Federal Home Loan Bank Advances and Other Borrowings

A summary  of  Federal  Home  Loan Bank  (FHLB)  advances  and other  borrowings
(dollars in thousands) at December 31, 2003 is as follows:
<TABLE>
                                                            December 31
                                 ----------------------------------------------------------------
                                                    2003                                   2002
                                 ----------------------------------------------------     -------
                                                                             Weighted
                                   FHLB            Other                      Average
                                 Advances       Borrowings      Total          Rate        Total
                                 ----------------------------------------------------------------
<S>                              <C>            <C>            <C>          <C>           <C>
Maturing in year ending:
2003                             $     --         $    --      $    --           --%      $    23
2004                                   --              23           23         4.25%           23
2005                                   --              93           93         3.17%           23
2006                                5,000           2,221        7,221         4.81%        5,023
2007                                2,597              23        2,620         6.82%        2,691
2008                               20,000              23       20,023         5.23%       20,023
                                 ----------------------------------------------------------------
                                 $ 27,597         $ 2,383     $ 29,980         5.26%     $ 27,806
                                 ================================================================
</TABLE>

The terms of a security  agreement  with the FHLB require the Banks to pledge as
collateral for advances both qualifying  first mortgage loans in an amount equal
to at least  167% of these  advances  and all  stock of the FHLB.  Advances  are
subject to restrictions or penalties in the event of prepayment. The Banks had a
total remaining borrowing capacity with the FHLB of approximately $52,973,000 at
December 31, 2003 at a rate equal to the FHLB current advance rates.

The other  borrowings  include  $2.268  million to finance  an  investment  in a
low-income housing development and $115,000 for the purchase of land.  Principal
of $70,000 is due August 22, 2005 with the remaining balance due August 22, 2006
on the  low-income  housing  development  investment.  Interest  is based on the
one-month  LIBOR rate plus 1.70%.  The loan rate at December 31, 2003 was 2.82%.
The land was originally purchased in 1999 at a cost of $266,000,  with principal
of $23,000 and annual  interest due March 8th of each year until the balance has
been  paid in full.  Interest  is based on the  prime  rate at March 8th of each
year. The rate at December 31, 2003 was 4.25%.

10. Line of Credit

The Company has an unsecured  line of credit of  $10,000,000  from a third party
lender. As of December 31, 2003, the entire line was available.

                                       50
<PAGE>

11.  Income Taxes

Federal income tax expense (in thousands) for 2003,  2002 and 2001 is summarized
as follows:

                                       2003              2002             2001
                                      -----------------------------------------

Federal .....................         $ 8,480          $ 8,707          $ 8,353
State .......................             998              829            1,026
                                      -----------------------------------------
Current .....................           9,478            9,536            9,379
Deferred ....................            (637)          (1,016)          (1,643)
                                      -----------------------------------------
Total .......................         $ 8,841          $ 8,520          $ 7,736
                                      =========================================

Actual income tax expense (in thousands) for 2003, 2002 and 2001 differ from the
"expected" income taxes (computed by applying the maximum U.S. federal corporate
income tax rate of 35% to earnings before income taxes) as follows:

                                                2003         2002         2001
                                              ---------------------------------
Computed "expected" income taxes ........     $ 8,906      $ 9,066      $ 8,367
Tax-exempt interest income, net of
  disallowed interest expense ...........        (744)        (764)        (718)
State tax, net of federal benefit .......         649          539          667
Other, net ..............................          30         (321)        (580)
                                              ---------------------------------
                                              $ 8,841      $ 8,520      $ 7,736
                                              =================================

The tax  effects  of  temporary  differences  (in  thousands)  that give rise to
significant  portions of the deferred  tax assets and deferred tax  liabilities,
included in other assets, at December 31, 2003 and 2002 are as follows:

                                                               2003       2002
                                                             ------------------
Deferred tax assets:
  Allowance for loan losses ...............................  $ 3,889    $ 3,347
  Deferred compensation ...................................    1,564      1,611
  Stock appreciation rights ...............................       36         73
  Other employee benefits .................................      279        115
  Phantom stock ...........................................      282        225
  Other ...................................................      111        148
                                                             ------------------
        Total deferred tax assets .........................  $ 6,161    $ 5,519
                                                             ------------------
Deferred tax liabilities:
   Unrealized holding gain on available-for-sale securities  $(1,294)   $(2,517)
   Premises and equipment .................................     (658)      (852)
   Mortgage servicing rights ..............................     (201)      (153)
   Deferred loan fees .....................................     (197)       (93)
   Discount accretion .....................................      (61)      (138)
   FHLB Stock Dividend ....................................     (372)      (248)
                                                             ------------------
        Total deferred tax liabilities ....................  $(2,783)   $(4,001)
                                                             ------------------
            Net deferred tax assets .......................  $ 3,378    $ 1,518
                                                             ==================

12. Retirement Plans

The  Company  has  established  a profit  sharing  plan  and a  401(k)  plan for
substantially  all employees who meet the eligibility  requirements.  The 401(k)
plan allowed for participants' contributions up to the maximum amount allowed by
IRS  regulations,  of which,  the first 6% of gross salary was available for the
Company's  50%  match.  The  profit  sharing  plan  is   non-contributory.   All
contributions  to the profit  sharing plan are at the discretion of the Company.
Total  contributions by the Company totaled $887,000,  $926,000 and $746,000 for
2003, 2002 and 2001, respectively.

Certain key officers and directors  participate in various deferred compensation
or supplemental  retirement agreements with the Company. The Company accrues the
liability  for these  agreements  based on the  present  value of the amount the
employee or  director is  currently  eligible to receive.  The Company  recorded
expenses  of  $288,000,   $281,000   and  $281,000  in  2003,   2002  and  2001,
respectively,  related to these  agreements.  At December 31, 2003 and 2002, the
Company had a recorded  liability in the amount of approximately  $3,915,000 and
$3,731,000, respectively for these plans.

                                       51
<PAGE>

Additionally, in connection with the merger, the Company assumed the outstanding
liability  for a deferred  compensation  plan for  nonemployee  directors of the
Company  which allowed  participating  directors to defer  directors'  fees in a
fixed income fund or,  alternatively,  in the form of "phantom stock units." For
directors  that  elected  to receive  phantom  stock,  a  deferred  compensation
account,  included in other  liabilities on the consolidated  balance sheet, was
credited with phantom stock units. After the merger, no additional contributions
were  allowed to these  plans,  however,  phantom  stock  units  continue  to be
increased by any dividends or stock splits declared by the Company.  At December
31,  2003 and 2002,  there were  23,205 and 23,326  phantom  stock  units with a
recorded  liability  in the  amount  of  $710,000  and  $567,000,  respectively.
Additionally,  the  Company had a recorded  liability  of $20,000 and $25,000 at
December 31, 2003 and 2002, respectively for the fixed income fund.

13. Stock Options and Related Plans

In 2000,  after  the  merger of  BankIllinois  Financial  Corporation  and First
Decatur  Bancshares,  Inc. to form the Company,  the Company established a stock
incentive  plan,  which  provides for the  granting of options of the  Company's
common stock to certain  directors,  officers and employees.  This plan provides
for the granting of both qualified and non-qualified options.  Existing director
options  granted  prior to 2003 are fully  vested  and  exercisable  on the date
granted  while  director   options   granted  in  2003  vest,  and  thus  become
exercisable,  ratably  over a one-year  period from the date  granted.  Existing
officer and employee options vest, and thus become  exercisable,  ratably over a
three-year  period from the date granted.  Under the 2000  incentive  plan,  the
Company has outstanding  options of 545,381 shares and 1,626,458 remain eligible
for grant. This is the Company's only existing stock incentive plan.

Additionally,  in  connection  with the merger,  the Company  assumed all of the
outstanding  options under First  Decatur  Bancshares,  Inc.'s and  BankIllinois
Financial  Corporation's stock option and incentive plans. There were four plans
in place at the time of the merger. All of the options granted under these prior
plans  fully  vested at the time of the merger and no  additional  options  were
available for grant after the merger.  One of the plans included the granting of
options in tandem with stock appreciation  rights ("SAR's").  As of December 31,
2003,  there were options  outstanding  for an aggregate of 36,399 shares of the
Company's common stock and 3,992 SAR's under the prior plans.

The following is a summary of the changes in options outstanding under the stock
incentive and stock option plans:
<TABLE>
                                           2003                         2002                         2001
                                    -----------------------------------------------------------------------------------
                                                   Grant                        Grant                        Grant
                                                   Price                        Price                        Price
                                    Shares         Range        Shares          Range        Shares          Range
                                   ------------------------------------------------------------------------------------
<S>                                <C>        <C>               <C>        <C>               <C>        <C>
Options outstanding,
  beginning of year ............    589,250   $ 6.92 - $19.76   868,998    $ 5.36 - $19.76   726,273    $ 5.36 - $19.76
Granted ........................    135,000   $24.80 - $24.85   158,000    $18.60 - $18.60   169,050    $17.50 - $17.50
Exercised ......................   (142,470)  $ 6.92 - $24.80  (428,553)   $ 5.36 - $19.76   (17,360)   $ 5.36 - $12.05
Options forfeited ..............         --                --    (9,195)   $17.50 - $18.60    (8,965)   $16.86 - $19.76
                                   ------------------------------------------------------------------------------------
Options oustanding, end of year     581,780   $ 6.92 - $24.85   589,250    $ 6.92 - $19.76   868,998    $ 5.36 - $19.76
                                   ====================================================================================
Options exercisable, end of year    467,769   $ 6.92 - $24.85   493,893    $ 6.92 - $19.76   784,769    $ 5.36 - $19.76
                                   ====================================================================================
Weighted average fair value
  of options granted ...........                   $3.96                        $3.36                        $3.73
                                   ====================================================================================
</TABLE>

<TABLE>

                          Options Outstanding                        Options Exercisable
-----------------------------------------------------------------------------------------
                                        Weighted
                        Outstanding     Average       Weighted    Exercisable    Weighted
       Range               as of       Remaining      Average        as of       Average
        of             December 31,   Contractual     Exercise    December 31,   Exercise
  Exercise price           2003           Life         Price          2003         Price
-----------------------------------------------------------------------------------------
<S>                    <C>            <C>            <C>          <C>            <C>
  $ 6.92 - $6.92           3,992          1.0        $  6.92         3,992        $ 6.92
  $17.50 - $19.76        442,943          6.8          18.26       404,975         18.24
  $24.80 - $24.85        134,845          9.2          24.80        58,802         24.80
                     -------------------------------------------------------------------
                         581,780          7.3        $ 19.70       467,769       $ 18.97
                     ===================================================================
</TABLE>
                                       52
<PAGE>

14. Dividend Restrictions

Without prior approval of the  Comptroller  of the Currency,  The First National
Bank of Decatur is restricted by national  banking laws as to the maximum amount
of  dividends  it can pay in any  calendar  year to The First  National  Bank of
Decatur's  retained net profits (as defined) for that year and the two preceding
years.  At  December  31,  2003,  The First  National  Bank of Decatur  had paid
dividends in excess of available retained earnings and,  therefore,  must obtain
approval from the Comptroller of the Currency before declaring future dividends.

Without  prior  approval,   BankIllinois  is  restricted  by  Illinois  law  and
regulations of the Office of Banks and Real Estate,  State of Illinois,  and the
Federal Deposit  Insurance  Corporation as to the maximum amount of dividends it
can pay to its  parent to the  balance  of the  retained  earnings  account,  as
adjusted (as defined). At December 31, 2003, BankIllinois had available retained
earnings  of  approximately  $29,378,000  for the payment of  dividends  without
obtaining prior regulatory approval.

15. Condensed Financial Information of Parent Company

Following are the condensed  balance sheets as of December 31, 2003 and 2002 and
the related  condensed  statements  of income and cash flows for the years ended
December 31, 2003, 2002 and 2001 for Main Street Trust, Inc.:

                            Condensed Balance Sheets
                            ------------------------
                                 (in thousands)

                                                            2003          2002
                                                         -----------------------
Assets:
  Cash ...........................................       $ 10,841       $  2,287
  Investment in Banks ............................         88,370        118,251
  Investment in FirsTech .........................          3,408          6,524
  Investment in other securities .................          8,655          6,875
  Other assets ...................................          6,967          3,306
                                                         -----------------------
                                                         $118,241       $137,243
                                                         =======================
Liabilities and shareholders' equity:
  Dividend payable ...............................       $  1,995       $  1,570
  Other borrowings ...............................          2,268             --
  Other liabilities ..............................          2,528          1,203
  Shareholders' equity ...........................        111,450        134,470
                                                         -----------------------
                                                         $118,241       $137,243
                                                         =======================



                Condensed Statements of Income
                ------------------------------
                        (in thousands)
<TABLE>
                                                        2003        2002        2001
                                                      --------------------------------
<S>                                                   <C>         <C>         <C>
Revenue:
  Dividends received from subsidiaries ............   $ 47,400    $ 20,000    $ 12,000
  Interest income on deposits .....................         77          54          39
  Income on securities ............................        389         152          72
  Securities transactions, net ....................       (106)       (193)       (279)
  Other ...........................................      4,759         136         131
                                                      --------------------------------
        Total revenue .............................     52,519      20,149      11,963
                                                      --------------------------------

Expenses:
  Salary and benefits .............................      4,066          --          --
  Reconciliation liability ........................         --          --      (2,500)
  Other ...........................................      1,763       1,556       1,055
                                                      --------------------------------
        Total expenses ............................      5,829       1,556      (1,445)
                                                      -------------------------------

        Income before applicable income tax expense
        (benefit) and equity in undistributed
        income of subsidiaries ....................     46,690      18,593      13,408
Applicable income tax expense (benefit) ...........       (286)       (564)        591
Equity in undistributed income of subsidiaries ....    (30,371)     (1,776)      3,354
                                                      --------------------------------
        Net income ................................   $ 16,605    $ 17,381    $ 16,171
                                                      ================================
</TABLE>
                                       53
<PAGE>

                       Condensed Statements of Cash Flows
                       ----------------------------------
                                 (in thousands)
<TABLE>
                                                          2003        2002        2001
                                                       --------------------------------
<S>                                                    <C>         <C>         <C>
Cash flows from operating activities:
   Net income ......................................   $ 16,605    $ 17,381    $ 16,171
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Equity in undistributed income of subsidiaries     30,371       1,776      (3,354)
      Depreciation .................................        482          30          30
      Other, net ...................................     (2,043)       (812)     (1,649)
                                                       --------------------------------
          Net cash provided by operating activities:     45,415      18,375      11,198
                                                       --------------------------------

Cash flows from investing activities:
   Equity securities transactions, net .............       (462)     (1,687)        (37)
   Purchases of premises and equipment .............     (1,348)         --         (12)
                                                       --------------------------------
         Net cash used in investing activities .....     (1,810)     (1,687)        (49)
                                                       --------------------------------

Cash flows from financing activities:
   Stock transactions, net .........................    (30,111)    (15,369)     (2,802)
   Fractional shares purchased following
      stock dividend and merger ....................         --          --          (6)
   Proceeds from other borrowings, net .............      2,268          --          --
   Cash dividends paid .............................     (7,142)     (5,634)     (4,540)
   Issuance of new shares of common stock ..........         --       1,222          --
   Other, net ......................................        (66)        (31)         23
                                                       --------------------------------
         Net cash used in financing activities .....    (35,051)    (19,812)     (7,325)
                                                       --------------------------------
Cash at beginning of year ..........................      2,287       5,411       1,587
                                                       --------------------------------
Cash at end of year ................................   $ 10,841    $  2,287    $  5,411
                                                       ================================
</TABLE>
                                       54
<PAGE>

16. Quarterly Results of Operations (Unaudited) (in thousands,  except per share
    data)

                       Condensed Statements of Cash Flows
                                 (in thousands)

<TABLE>
                                                       Year Ended December 31, 2003
                                                           Three Months Ended
                                            -------------------------------------------------
                                            December 31   September 30    June 30    March 31
                                            -------------------------------------------------
<S>                                         <C>           <C>             <C>        <C>
Interest income ......................         $13,406       $13,686      $14,028     $14,566
Interest expense .....................           3,913         4,008        4,282       4,520
                                            -------------------------------------------------
     Net interest income .............           9,493         9,678        9,746      10,046
Provision for losses on loans ........             480           330          330         330
                                            -------------------------------------------------
     Net interest income after
          provision for losses
          on loans ...................           9,013         9,348        9,416       9,716
Non-interest income ..................           5,104         5,420        4,934       4,836
Non-interest expense .................           7,906         8,250        8,121       8,064
                                            -------------------------------------------------
     Income before income taxes ......           6,211         6,518        6,229       6,488
Income taxes .........................           2,301         2,253        2,097       2,190
                                            -------------------------------------------------
     Net income ......................         $ 3,910       $ 4,265      $ 4,132     $ 4,298
                                            =================================================
Basic earnings per share .............         $  0.41       $  0.41      $  0.39     $  0.41
                                            =================================================

Diluted earnings per share ...........         $  0.40       $  0.40      $  0.39     $  0.41
                                            =================================================

                                                       Year Ended December 31, 2002
                                                           Three Months Ended
                                            -------------------------------------------------
                                            December 31   September 30    June 30    March 31
                                            -------------------------------------------------
Interest income ......................         $15,265       $15,871      $16,020     $16,207
Interest expense .....................           4,951         5,399        5,540       5,827
                                            -------------------------------------------------
     Net interest income .............          10,314        10,472       10,480      10,380
Provision for losses on loans ........             460           330          330         330
                                            -------------------------------------------------
     Net interest income after
          provision for losses
          on loans ...................           9,854        10,142       10,150      10,050
Non-interest income ..................           4,709         4,638        4,765       4,754
Non-interest expense .................           7,912         8,091        8,960       8,198
                                            -------------------------------------------------
     Income before income taxes ......           6,651         6,689        5,955       6,606
Income taxes .........................           2,202         2,210        1,912       2,196
                                            -------------------------------------------------
     Net income ......................         $ 4,449       $ 4,479      $ 4,043     $ 4,410
                                            =================================================
Basic earnings per share .............         $  0.42       $  0.43      $  0.36     $  0.40
                                            =================================================
Diluted earnings per share ...........         $  0.42       $  0.42      $  0.36     $  0.40
                                            =================================================
</TABLE>
                                       55
<PAGE>

17. Disclosures About Commitments and Financial Instruments

The Company is a 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.  Those instruments  involve, to varying degrees,  elements of
credit  and  interest  rate  risk  in  excess  of  amounts   recognized  in  the
consolidated  balance  sheets.  The  contractual  amounts  of those  instruments
reflect  the extent of  involvement  the Company  has in  particular  classes of
financial instruments.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby  letters of credit is  represented  by the  contractual  amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.  Management
does not anticipate any significant losses as a result of these transactions.

The following table summarizes  these financial  instruments and commitments (in
thousands) at December 31, 2003 and 2002:

                                                           2003           2002
                                                         -----------------------
Financial instruments whose contract
  amounts represent credit risk:
  Commitments ....................................       $237,615       $201,181
  Standby letters of credit ......................         20,192         11,563

The majority of  commitments  are  agreements  to extend credit to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments,   principally   variable  interest  rates,   generally  have  fixed
expiration dates or other termination  clauses and may require payment of a fee.
Since many of the  commitments  are expected to expire without being drawn upon,
the  total  commitment   amounts  do  not  necessarily   represent  future  cash
requirements.  For  commitments  to extend  credit,  the Company  evaluates each
customer's  creditworthiness  on a case-by-case  basis. The amount of collateral
obtained,  if deemed necessary by the Company upon extension of credit, is based
on  management's  credit  evaluation.  Collateral  held varies,  but may include
accounts   receivable;   inventory;   property,   plant   and   equipment;   and
income-producing  commercial properties.  Also included in commitments is $3.440
million to purchase other equity securities.

Standby  letters of credit are  conditional  commitments  issued by the Banks to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements  and,
generally,  have terms of one year or less.  The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  The Banks may hold collateral,  which include accounts
receivables, inventory, property and equipment, and income producing properties,
supporting those  commitments,  if deemed  necessary.  In the event the customer
does not perform in accordance  with the terms of the  agreement  with the third
party, the Banks would be required to fund the commitment. The maximum potential
amount of future  payments the Banks could be required to make is represented by
the contractual  amount shown in the summary above. If the commitment is funded,
the banks would be entitled to seek recovery from the customer.  At December 31,
2003 and 2002,  no amounts  have been  recorded  as  liabilities  for the Banks'
potential obligations under these guarantees.

Following is a summary of the carrying  amounts and fair values of the Company's
financial instruments at December 31, 2003 and 2002:
<TABLE>
                                                            2003                   2002
                                                    -----------------------------------------
                                                    Carrying    Fair      Carrying     Fair
                                                     Amount     Value      Amount      Value
                                                    -----------------------------------------
<S>                                                 <C>        <C>        <C>        <C>
Assets:
  Cash and cash equivalents .....................   $ 75,903   $ 75,903   $102,746   $102,746
  Investments in debt and equity securities .....    370,726    370,298    316,210    318,136
  Mortgage loans held for sale ..................        632        632      2,972      2,972
  Loans .........................................    666,259    676,584    664,142    685,675
  Accrued interest receivable ...................      6,430      6,430      7,315      7,315
  Cash surrender value of life insurance ........      5,499      5,499      5,026      5,026
Liabilities:
  Deposits ......................................   $898,472   $902,653   $868,586   $885,487
  Federal funds purchased, repurchase agreements,
      and notes payable .........................    102,998    103,028     80,651     80,692
  FHLB advances and other borrowings ............     29,980     30,133     27,806     28,963
  Accrued interest payable ......................      1,669      1,669      2,252      2,252
</TABLE>
                                       56
<PAGE>

Management's fair value estimates,  methods, and assumptions are set forth below
for the Company's financial instruments.

Cash and Cash Equivalents
-------------------------
The carrying value of cash and cash equivalents  approximates  fair value due to
the  relatively  short period of time between the  origination of the instrument
and its expected realization.

Investments in Debt and Equity Securities
-----------------------------------------
The fair value of investments in debt and equity  securities is estimated  based
on bid prices received from securities dealers.

Mortgage Loans Held For Sale
----------------------------
Fair values of  mortgage  loans held for sale are based on  commitments  on hand
from investors or prevailing market prices.

Loans
-----
Fair  values  are  estimated  for  portfolios  of loans with  similar  financial
characteristics.  Loans are  segregated by type such as  commercial,  commercial
real estate,  residential mortgage, and consumer.  Each loan category is further
segmented  into fixed and  adjustable  rate interest terms and by performing and
nonperforming  categories.  The fair value of performing  loans is calculated by
discounting  scheduled cash flows through the estimated maturity using estimated
market discount rates equal to rates at which loans,  similar in type,  would be
originated at December 31, 2003 and 2002.  Estimated  maturities  are based upon
the average remaining contractual lives for each loan classification. Fair value
for nonperforming loans is based on the use of discounted cash flow techniques.

Accrued Interest Receivable
---------------------------
The carrying value of accrued interest receivable approximates fair value due to
the  relatively  short period of time between the  origination of the instrument
and its expected realization.

Cash Surrender Value of Life Insurance
--------------------------------------
Life insurance agreements  reprice  periodically  with no significant  change in
credit risk. Fair values approximate carrying value for these agreements.

Deposit Liabilities
-------------------
The fair value of deposits with no stated maturity, such as non-interest bearing
and interest  bearing demand deposits and savings deposits is the amount payable
on demand.  The fair value of time deposits is based on the discounted  value of
contractual  cash flows.  The discount rate is estimated  using rates  currently
offered for deposits of similar remaining  maturities.  The fair value estimates
do not include the benefit that results  from the low-cost  funding  provided by
the deposit  liabilities  compared to the cost of borrowing  funds in the market
nor the benefit  derived  from the  customer  relationship  inherent in existing
deposits.

Federal Funds Purchased, Repurchase Agreements, and Notes Payable
-----------------------------------------------------------------
The fair value of federal  funds  purchased,  repurchase  agreements,  and notes
payable is based on the discounted value of contractual cash flows. The discount
rate is estimated  using current rates on federal  funds  purchased,  repurchase
agreements, and notes payable with similar remaining maturities.

Federal Home Loan Bank Advances and Other Borrowings
----------------------------------------------------
The fair value of FHLB advances is based on the discounted  value of contractual
cash flows.  The discount rate is estimated using rates on current FHLB advances
with similar remaining maturities.

Accrued Interest Payable
------------------------
The carrying value of accrued  interest payable  approximates  fair value due to
the  relatively  short period of time between the  origination of the instrument
and its expected realization.

                                       57
<PAGE>

Commitments to Extend Credit and Standby Letters of Credit
----------------------------------------------------------
The fair value of commitments to extend credit is generally  estimated using the
fees currently charged to enter into similar agreements, taking into account the
remaining  terms  of the  agreements  and the  present  creditworthiness  of the
counterparties.  For fixed rate loan commitments,  fair value also considers the
difference between current levels of interest rates and the committed rates. The
fair value of letters of credit is based on fees  currently  charged for similar
agreements or on the estimated  cost to terminate  them or otherwise  settle the
obligations with the counterparties.  The estimated fair value of commitments to
extend credit and standby  letters of credit  approximates  the balances of such
commitments.

18. Litigation

The Company and its  subsidiaries  are  involved in various  legal  proceedings,
claims and litigation arising out of the ordinary course of business.

It is the opinion of management that the  disposition or ultimate  resolution of
any other  claims and lawsuits  arising out of the  ordinary  course of business
will not have a material adverse effect on the consolidated  financial  position
of the Company.

19. Regulatory Capital

The Company and its subsidiary banks are subject to various  regulatory  capital
requirements  administered  by the  federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can  initiate  certain  mandatory  and  possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct  material  effect on the Company's and its  subsidiary  banks'  financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt  corrective  action,  banks must meet specific  capital  guidelines  that
involve   quantitative   measures   of   assets,   liabilities,    and   certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Company's and its subsidiary banks' capital amounts and  classification are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and its  subsidiary  banks to maintain  minimum  amounts and
ratios (set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2003,  that the Company and its subsidiary  banks exceeded all capital  adequacy
requirements to which they are subject.

As of December 31, 2003, the most recent  notifications  from primary regulatory
agencies  categorized  all the Company's  subsidiary  banks as well  capitalized
under the regulatory  framework for prompt corrective  action. To be categorized
as well capitalized,  banks must maintain minimum total capital to risk-weighted
assets,  Tier I capital to risk-weighted  assets,  and Tier I capital to average
assets ratios as set forth in the table. There are no conditions or events since
that  notification  that  management  believes have changed any of the Company's
subsidiary banks' categories.

                                       58
<PAGE>

The Company's and the Banks'  actual  capital  amounts and ratios as of December
31, 2003 and 2002 are presented in the following tables:
<TABLE>
                                                                                 To Be Well Capitalized
                                                          For Capital Adequacy   Under Prompt Corrective
                                              Actual(1)          Purposes:          Action Provisions:
                                         ---------------------------------------------------------------
                                          Amount    Ratio    Amount    Ratio      Amount     Ratio
                                         ---------------------------------------------------------------
<S>                                      <C>        <C>     <C>        <C>        <C>        <C>
As of December 31, 2003:
  Total capital
    (to risk-weighted assets)
    Consolidated .....................   $118,821   14.5%   $ 65,654    8.0%          N/A
    BankIllinois .....................   $ 60,520   11.9%   $ 40,801    8.0%     $ 51,001    10.0%
    The First National Bank of Decatur   $ 35,333   12.1%   $ 23,430    8.0%     $ 29,288    10.0%
  Tier I capital
    (to risk-weighted assets)
    Consolidated .....................   $109,035   13.3%   $ 32,827    4.0%          N/A
    BankIllinois .....................   $ 54,460   10.7%   $ 20,401    4.0%     $ 30,601     6.0%
    The First National Bank of Decatur   $ 31,670   10.8%   $ 11,715    4.0%     $ 17,573     6.0%
  Tier I capital
    (to average assets)
    Consolidated .....................   $109,035    9.6%   $ 45,336    4.0%          N/A
    BankIllinois .....................   $ 54,460    7.9%   $ 27,638    4.0%     $ 34,547     5.0%
    The First National Bank of Decatur   $ 31,670    7.4%   $ 17,215    4.0%     $ 21,519     5.0%

As of December 31, 2002:
  Total capital
    (to risk-weighted assets)
    Consolidated .....................   $138,701   18.0%   $ 61,660    8.0%          N/A
    BankIllinois .....................   $ 74,396   15.8%   $ 37,685    8.0%     $ 47,107    10.0%
    The First National Bank of Decatur   $ 48,351   16.0%   $ 24,213    8.0%     $ 30,266    10.0%
  Tier I capital
    (to risk-weighted assets)
    Consolidated .....................   $129,442   16.8%   $ 30,830    4.0%          N/A
    BankIllinois .....................   $ 68,739   14.6%   $ 18,843    4.0%     $ 28,264     6.0%
    The First National Bank of Decatur   $ 44,659   14.8%   $ 12,106    4.0%     $ 18,160     6.0%
  Tier I capital
    (to average assets)
    Consolidated .....................   $129,442   11.8%   $ 43,732    4.0%          N/A
    BankIllinois .....................   $ 68,739   10.5%   $ 26,236    4.0%     $ 32,795     5.0%
    The First National Bank of Decatur   $ 44,659   10.3%   $ 17,324    4.0%     $ 21,655     5.0%
<FN>
1    The Banks'  decreases in capital  amounts and ratios  between  December 31,
     2002 and 2003 were  primarily  due to dividends  paid to Main Street Trust,
     Inc.  which were used to fund the tender  offer that was  completed  in the
     third quarter of 2003.
</FN>
</TABLE>

                                       59
<PAGE>
Item 9.  Changes in and Disagreements on Accounting and Financial Disclosure

None.

Item 9a. Controls and Procedures

An evaluation was performed under the supervision and with the  participation of
the  Company's  management,  including  the Chief  Executive  Officer  and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of the
Company's  disclosure  controls  and  procedures  (as defined in Rule  13a-15(e)
promulgated  under the  Securities  and Exchange Act of 1934,  as amended) as of
December 31, 2003. Based on that evaluation, the Company's management, including
the Chief  Executive  Officer and Chief  Financial  Officer,  concluded that the
Company's disclosure controls and procedures were effective.  There have been no
significant  changes in the Company's internal controls or in other factors that
could significantly affect internal controls.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The  information  in the  Company's  2004  Proxy  Statement  under  the  caption
"Election of  Directors"  and under the caption  "Security  Ownership of Certain
Beneficial Owners and Management" is incorporated by reference.  The information
regarding  executive  officers not provided in the 2004 Proxy Statement is noted
below.

Executive Officers

The term of office for the executive officers of the Company is from the date of
election until the next annual organizational meeting of the Board of Directors.
In addition to the information  provided in the 2004 Proxy Statement,  the names
and ages of the  executive  officers of the Company as of December 31, 2003,  as
well as the offices of the Company and the  Subsidiaries  held by these officers
on that date,  and principal  occupations  for the past five years are set forth
below.

Name                              Position with Main Street, its subsidiaries
(Age)                             and occupation for the last five years
-----                             --------------------------------------
David B. White                    Executive Vice President and Chief Financial
(Age 52)                          Officer of Main Street, BankIllinois and The
                                  First National Bank of Decatur and
                                  Director of FirsTech; Executive Vice President
                                  and Chief Financial Officer of
                                  BankIllinois Financial and BankIllinois
                                  (1993-2000)

Christopher M. Shroyer            President, Chief Executive Officer and
(Age 38)                          Director of The First National Bank of
                                  Decatur; Executive Vice President, Lending,
                                  The First National Bank of Decatur
                                  (2000-2001); Senior Vice President, Lending,
                                  The First National Bank of Decatur
                                  (1999-2000); Vice President and Department
                                  Head, Commercial Lending, The First National
                                  Bank of Decatur (1997-1999)

Robert F. Plecki, Jr.             President and Director of BankIllinois;
(Age 43)                          Executive Vice President, Retail Banking,
                                  BankIllinois (1998-2001); Senior Vice
                                  President, Retail Banking, BankIllinois
                                  (1996-1998)

Leanne C. Heacock                 Executive Vice President, Management
(Age 38)                          Information Systems, Main Street, BankIllinois
                                  and The First National Bank of Decatur and
                                  Director of FirsTech; Executive Vice
                                  President, Management Information Systems,
                                  BankIllinois and The First National Bank of
                                  Decatur (2001-2002); Executive Vice President,
                                  Management Information Systems, BankIllinois
                                  (1999-2001); Senior Vice President, Management
                                  Information Systems, BankIllinois (1998-1999)

                                       60
<PAGE>

Section 16(a) Beneficial Ownership Compliance

Section  16(a) of the  Securities  Exchange  Act  requires  that the  directors,
executive  officers  and persons who own more than 10% of our common  stock file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission.  These  persons  are also  required to furnish us with copies of all
Section 16(a) forms they file.  Based solely on our review of the copies of such
forms  furnished  to  us  and  representations  made  by  any  reporting  person
concerning  whether a Form 5 was required to be filed for 2003, we are not aware
of any failures to comply with the filing  requirements  of Section 16(a) during
2003.

Item 11.  Executive Compensation

The  information  in the 2004  Proxy  Statement  under  the  caption  "Executive
Compensation" is incorporated by reference.

Item 12.  Security Ownership Of Certain Beneficial Owners And Management

The  information  in the  2004  Proxy  Statement  under  the  caption  "Security
Ownership  of Certain  Beneficial  Owners and  Management"  is  incorporated  by
reference.

Equity Compensation Plan Information

The table below sets forth the following information as of December 31, 2003 for
(i) all compensation plans previously  approved by our shareholders and (ii) all
compensation plans not previously approved by our shareholders:

(a)  the number of  securities  to be issued upon the  exercise  of  outstanding
     options, warrants and rights;

(b)  the weighted-average  exercise price of such outstanding options,  warrants
     and rights;

(c)  other than  securities  to be issued upon the exercise of such  outstanding
     options,  warrants and rights, the number of securities remaining available
     for future issuance under the plans.
<TABLE>
====================================================================================================================================

                                          EQUITY COMPENSATION PLAN INFORMATION

------------------------------------------------------------------------------------------------------------------------------------
                                        Number of securities to be
                                          issued upon exercise of       Weighted-average exercise     Number of securities remaining
            Plan category                   outstanding options        price of outstanding options    available for future issuance
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                            <C>                            <C>
Equity compensation plans approved
  by security holders...............             545,381(1)                      $19.79                          1,626,458
Equity compensation plans not
  approved by security holders......                   0                             --                                 --
                                        --------------------------------------------------------------------------------------------
Total.............................               545,381 (1)                     $19.79                          1,626,458
                                        ============================================================================================
<FN>
(1)  Does not include  options assumed by the Company in 2000 in connection with
     the merger of First Decatur  Bancshares,  Inc. and  BankIllinois  Financial
     Corporation  with and into the  Company.  At the time of the merger,  there
     were options issued under the Central Illinois Financial  Corporation Stock
     Option  Plan,   BankIllinois  Financial  Co.  1994  Stock  Incentive  Plan,
     BankIllinois  Financial Corporation 1996 Stock Incentive Plan and the First
     Decatur  Bancshares,  Inc.  Employee  Stock Option Plan,  each of which was
     approved by  stockholders  of the  respective  company at the time of their
     adoption.  All of the options granted under these plans fully vested at the
     time of the merger and no additional options were available for grant after
     the merger. As of December 31, 2003, there were options  outstanding for an
     aggregate of 36,399  shares of the  Company's  common stock under the prior
     plans with a weighted average exercise price of $18.35.
</FN>
</TABLE>
                                       61
<PAGE>

Item 13.  Certain Relationships And Related Transactions

The information in the 2004 Proxy Statement under the caption "Transactions with
Management" is incorporated by reference.

Item 14.  Principal Accountant Fees and Services

The  information  in the 2004 Proxy  Statement  under the  caption  "Independent
Public Accountants" is incorporated by reference.

                                     PART IV

Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

           (a)(1)     Index to Financial Statements

                      See page 34.

           (a)(2)     Financial Statement Schedules

                       N/A

           (a)(3)     Schedule of Exhibits

                      The Exhibit Index which immediately  follows the signature
                      page to this Form 10-K is incorporated by reference.

            (b)       Reports on Form 8-K

                      On December 17, 2003,  Main Street  Trust,  Inc.  issued a
                      news release  announcing  its  declaration  of a quarterly
                      dividend to its stockholders.

                      On October 27, 2003,  Main Street  Trust,  Inc.  announced
                      that its  Board of  Directors  has  reinstated  the  Stock
                      Repurchase Program, allowing the purchase of up to 500,000
                      shares  of the  Company's  outstanding  stock.  The  Stock
                      Repurchase Program had been suspended during the Company's
                      common stock tender offer,  which was completed  September
                      30, 2003.  On October 27, 2003,  Main Street  Trust,  Inc.
                      issued a news  release  announcing  its  earnings  for the
                      quarter ended September 30, 2003.

           (c)        Exhibits

                      The exhibits  required to be filed with this Form 10-K are
                      included  with this Form 10-K and are located  immediately
                      following the Exhibit Index to this Form 10-K.

                                       62
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on March 12, 2004.

By:  /s/ Van A. Dukeman                        By:  /s/ David B. White
     -----------------------------                  ----------------------------
     Van A. Dukeman                                 David B. White
     President, CEO and Director                    Executive Vice President and
                                                    Principal Financial and
                                                    Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on March 12, 2004.

/s/ Gregory B. Lykins
-----------------------------
Gregory B. Lykins                          Chairman and Director


/s/ Van A. Dukeman
-----------------------------
Van A. Dukeman                             President, CEO and Director


/s/ Phillip C. Wise
-----------------------------
Phillip C. Wise                            Executive Vice President and Director


/s/ David J. Downey
-----------------------------
David J. Downey                            Director


/s/ Larry D. Haab
-----------------------------
Larry D. Haab                              Director


/s/ Frederic L. Kenney
-----------------------------
Frederic L. Kenney                         Director


/s/ August C. Meyer, Jr.
-----------------------------
August C. Meyer, Jr.                       Director


/s/ Gene A. Salmon
-----------------------------
Gene A. Salmon                             Director


/s/ George T. Shapland
-----------------------------
George T. Shapland                         Director


/s/ Thomas G. Sloan
-----------------------------
Thomas G. Sloan                            Director


/s/ Roy V. VanBuskirk
-----------------------------
Roy V. VanBuskirk                          Director


/s/ H. Gale Zacheis
-----------------------------
H. Gale Zacheis                            Director

                                       63
<PAGE>

                             MAIN STREET TRUST, INC.

                                  EXHIBIT INDEX
                                       TO
                           ANNUAL REPORT ON FORM 10-K

<TABLE>

                                                        Incorporated
 Exhibit No.           Description                       Herein by                     Filed
                                                        Reference To                  Herewith
----------------------------------------------------------------------------------------------
<S>            <C>                          <C>                                       <C>
     3.1       Amended and Restated         Exhibit 3.1 to the Form S-4 filed
               Articles of Incorporation    with the Commission on November 30,
                                            1999 (SEC File No. 33-91759)
     3.2       Bylaws                       Exhibit 3.2 to the Form S-4 filed
                                            with the Commission on November 30,
                                            1999 (SEC File No. 33-91759)
     4.1       Specimen common stock        Exhibit 4.1 to the Form 10-K filed
               certificate                  with the Commission on March 30,
                                            2001 (SEC File No. 000-30031)
     4.2       Second Amended and           Exhibit 4.2 to the Form 10-K filed
               Restated Shareholders'       with the Commission on March 30,
               Agreement, dated as of       2001 (SEC File No. 000-30031)
               November 1, 2000
    10.1       Employment Agreement by      Exhibit 10.1 to the Form 10-K filed
               and between the Company      with the Commission on March 29,
               and Gregory B. Lykins        2002 (SEC File No. 000-30031)
    10.2       Employment Agreement by      Exhibit 10.2 to the Form 10-K filed
               and between the Company      with the Commission on March 29,
               and Van A. Dukeman           (2002 (SEC File No. 000-30031)
    10.3       Employment Agreement by      Exhibit 10.5 to the Registration
               and between the Company      Statement on Form S-4 filed with
               and David B. White           the Commission on March 15,
                                            1996, as amended (SEC File No. 33-90342)
    10.4       Employment Agreement by      Exhibit 10.4 to the Form 10-K filed
               and between the Company,     with the Commission on March 29,
               FirsTech, Inc. and Phillip   2002 (SEC File No. 000-30031)
               C. Wise
    10.5       Employment Agreement by      Exhibit 10.5 to the Form 10-K filed
               and between The First        with the Commission on March 24,
               National Bank of Decatur     2003 (SEC File No. 000-30031)
               and Chris Shroyer
    10.6       Employment Agreement by                                                   X
               and between the Company
               and Robert F. Plecki
    21.1       Subsidiaries of the                                                       X
               Registrant
    23.1       Consent of McGladrey &                                                    X
               Pullen, LLP
    31.1       Certification of Chief                                                    X
               Executive Officer Pursuant
               to Rule 13a-14(a)/15d-
               14(a)
    31.2       Certification of Chief                                                    X
               Financail Officer Pursuant
               to Rule 13a-14(a)/15d-
               14(a)
    32.1       Certification of Chief                                                    X
               Executive Officer
               Pursuant to 18 U.S.C.
               Section 1350, as adopted
               Pursuant to Section 906 of
               the Sarbanes-Oxley Act
               of 2002
    32.2       Certification of Chief                                                    X
               Executive Officer Pursuant
               to 18 U.S.C. Section 1350,
               as adopted Pursuant to
               Section 906 of the
               Sarbanes-Oxley Act of 2002

                                       64
</TABLE>