UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C.  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, 1999                              Commission File No. 0-25914

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


                             CASTLE BANCGROUP, INC.
              (Exact name of registrant as specified in its charter)

             Delaware                                           36-3238190
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                            Identification  No.)


                            121 West Lincoln Highway
                                DeKalb, IL  60115
          (Address including zip code, of principal executive offices)

Registrant's  telephone  number,  including  area  code:         (815)  758-7007

Securities  registered  pursuant  to  Section  12(b)  of  the  Act:
                                                                            None

Securities  registered  pursuant to Section 12(g) of the Act:
                                  Common Stock, Par Value  $.33  1/3  Per  Share

   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 amendment to this
Form  10-K. [X]

   Aggregate  market  value  of  voting  stock  held  by  non-affiliates  of the
registrant  as  of April 10, 2000, based upon average market price at that date:
The  registrant's  Common  Stock  is infrequently traded.  The most recent known
trading  price  is  $11.125 per share.  Based on this price the aggregate market
value  of voting shares held by non-affiliates of the registrant is $41,678,000.

The  registrant had 4,375,008 shares of Common Stock outstanding as of April 10,
2000.

The  following  documents  are  incorporated  by  reference  in  this  report:
1.     Portions  of the registrant's Proxy Statement for the 2000 Annual Meeting
       of Stockholders  are  incorporated  by  reference  to  Part  III  hereof.


<PAGE>
                                TABLE OF CONTENTS


Part  I.

     Item  1.    Business
     Item  2.    Properties
     Item  3.    Legal  Proceedings
     Item  4.    Submission  of  Matters  to  a  Vote  of  Security  Holders

Part  II.

     Item  5.    Market  for  the  Registrant's  Common  Equity  and  Related
                 Stockholder  Matters
     Item  6.    Selected  Financial  Data
     Item  7.    Management's Discussion and Analysis of Financial Condition and
                 Results  of  Operations
     Item  7A.   Quantitative  and  Qualitative  Disclosures About Market Risk
     Item  8.    Financial  Statements  and  Supplementary  Data
     Item  9.    Changes in and Disagreements with Accountants on Accounting
                 and Financial  Disclosures

Part  III.

     Item  10.   Directors  and  Executive  Officers  of  the  Registrant
     Item  11.   Executive  Compensation
     Item  12.   Security Ownership of Certain Beneficial Owners and Management
     Item  13.   Certain  Relationships  and  Related  Transactions

Part  IV.

     Item  14.   Exhibits,  Financial  Statement Schedules and Reports on Form
                 8-K

Signatures


                                        2
<PAGE>
                                     PART I

Item  1.   Business
-------------------

     Castle  BancGroup,  Inc.  (Company)  is  a  registered bank holding company
organized  in  1984  under  Delaware law.  The operations of the Company and its
subsidiaries  consist  primarily  of  those  financial  activities common to the
commercial  financial  services  industry,  including trust and data processing.
Unless  the  context  otherwise  requires,  the  term  "Company"  as used herein
includes  the  Company  and  its  subsidiaries  on  a  consolidated  basis.
Substantially  all of the operating income of the Company is attributable to its
subsidiaries.

     The  primary  function  of  the  Company  is to coordinate the policies and
operations of its subsidiaries in order to improve and expand their products and
services  and  to  effect  operating  economies  of scale.  The Company provides
auditing,  marketing,  accounting, human resources, and data processing services
to  the  subsidiaries.  It  also  provides  management  services,  training, and
business  development  assistance.

     The  Company  is  also responsible for the identification and evaluation of
potential  financial  industry  acquisition  targets within the strategic market
area,  generally defined as the corridor bounded by Chicago's western suburbs on
the  east,  Interstate  39  on  the  west,  and southern Wisconsin on the north.

     Castle Bank N.A. (CB), First National Bank in DeKalb (FNB), and Castle Bank
Harvard,  N.A.  (CBH)  (collectively, Subsidiary Banks) are wholly owned banking
subsidiaries  of  the Company.  The Company previously operated a fourth banking
charter,  The  Bank  of Yorkville (BOY), but effective June 25, 1999 the Company
merged  BOY  with  and into CB.  The banking business of BOY now continues under
the  CB  charter.  The  Subsidiary  Banks provide banking services common to the
industry,  including  but  not  limited  to,  demand, savings and time deposits,
loans,  cash management, electronic banking services, trust services, and credit
and  debit  cards.  The Subsidiary Banks serve a diverse customer base including
individuals,  businesses,  governmental units, and institutional customers.  The
Subsidiary  Banks  have  banking  offices  in DeKalb, Sycamore, Sandwich, Plano,
Sugar  Grove,  Harvard,  and  Yorkville,  Illinois.

     CasBanc  Mortgage,  Inc.  (CMI) is an Illinois corporation and wholly owned
subsidiary  of  the  Company.  CMI  was  closed in January 2000 and is currently
winding  down  its remaining business.  Before its closure, it was a residential
mortgage  originator  and  broker that engaged in the origination of residential
mortgages,  which  were  subsequently  sold  in  the secondary market.  CMI also
provided  processing  services  and  delivery  in  the  secondary  market  for
residential  mortgage  loans  originated  by  the  Subsidiary  Banks.

     Castle  Finance  Company  (CFC) is an Illinois corporation and wholly owned
subsidiary  of  the  Company.  CFC  was  closed  in  January  1999  and  sold  a
substantial  portion of its loan portfolio in March 1999.  CFC continues to wind
down  its  remaining  business,  which  is  primarily  the collection of a small
portfolio  of  loans  that were not sold in March 1999.  Before its closure, CFC
was  a  consumer finance company that engaged in making small consumer loans, as
well  as  acting  as  an  agent  to  sell  insurance  relating  to  those loans.

Competition
-----------

     Active  competition exists in all principal areas where the Company and its
subsidiaries  operate,  not  only with other commercial banks, finance companies
and  mortgage  bankers,  but  also  with  savings  and loan associations, credit
unions,  and  other  financial  service  companies serving the Company's defined
market  area.  The  principal methods of competition between the Company and its
competitors  are price and service.  Price competition, primarily in the form of
interest  rate  competition,  is a standard practice within the Company's market
place  as  well as the financial services industry.  Service and product quality
are  also  significant  factors  in competing and allow for differentiation from
competitors.

     Deposits  in  the Subsidiary Banks are well balanced, with a large customer
base and no dominant segment of accounts.  Each Subsidiary Bank's loan portfolio
is  also  characterized by a large customer base, including loans to commercial,
agricultural  and  consumer customers, with no dominant relationships.  There is
no  readily  available  source  of  information  that  delineates the market for
financial  services  offered  by  non-bank  competitors in the Company's market.


                                        3
<PAGE>
Regulation  and  Supervision
----------------------------

     Bank  holding  companies  and  banks  are  extensively regulated under both
federal  and  state law.  To the extent that the following information describes
statutory  and  regulatory  provisions,  it  is  qualified  in  its  entirety by
reference to the particular statutes and regulations.  Any significant change in
applicable law or regulation may have an effect on the business and prospects of
the  Company  and  its  subsidiaries.

     The  Company is registered as a bank holding company under the Bank Holding
Company  Act  of 1956, as amended, and is regulated by the Board of Governors of
the  Federal  Reserve  System  (Federal  Reserve Board).  Under the Bank Holding
Company  Act, the Company is required to file annual reports and such additional
information  as  the  Federal  Reserve  Board  may  require  and  is  subject to
examination  by  the  Federal  Reserve  Board.  The  Federal  Reserve  Board has
jurisdiction  to  regulate virtually all aspects of the Company's business.  See
"The  Company's  Banking Subsidiaries" below for discussion of regulators of the
banking  subsidiaries.

     The  Bank Holding Company Act requires every bank holding company to obtain
the  prior  approval  of  the  Federal  Reserve  Board  before  merging  with or
consolidating into another bank holding company, acquiring substantially all the
assets  of any bank or acquiring directly or indirectly any ownership or control
of  more  than  5%  of  the  voting  shares  of  any  bank.

     The  Bank  Holding  Company Act also prohibits a bank holding company, with
certain  exceptions,  from  acquiring direct or indirect ownership or control of
more  than  5%  of the voting shares of any company which 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.  The Company,
however,  may  engage  in  certain  businesses determined by the Federal Reserve
Board  to  be so closely related to banking or managing and controlling banks as
to  be  a  proper  incident  thereto.  See "Financial Modernization Legislation"
below  for  a  discussion  of  expanded  activities  permissible to bank holding
companies  that  become  financial  holding  companies.

     Deposits  of  all  the  Subsidiary Banks are insured by the Federal Deposit
Insurance  Corporation  (FDIC)  and are subject to the provisions of the Federal
Deposit Insurance Act.  Under the FDIC's risk-based insurance assessment system,
each insured bank is placed in one of nine risk categories based on its level of
capital  and  other  relevant  information.  Each  insured  bank's  insurance
assessment  rate  is  then  determined by the risk category in which it has been
classified  by the FDIC.  There is currently a 27 basis point spread between the
highest  and  lowest  assessment rates, so that banks classified as strongest by
the FDIC are subject in 2000 to no insurance assessment, and banks classified as
weakest  by  the  FDIC  are subject to an insurance assessment rate of .27%.  In
addition  to  its  insurance assessment, each insured bank is subject in 2000 to
quarterly  debt  service  assessments  in  connection  with  bonds  issued  by a
government  corporation that financed the federal savings and loan bailout.  The
first  quarter  2000  debt  service  assessment  was  .0212%.

     National  banking  regulations restrict the amount of dividends that a bank
may  pay to its stockholders.  Generally, the regulations provide that dividends
are  limited to net earnings for the current and two preceding years, reduced by
dividends  paid  and  transfers  to  permanent  capital.  At  December 31, 1999,
subject  to  minimum  regulatory capital guidelines, the Subsidiary Banks could,
without  prior  approval  of  regulatory  authorities,  declare  dividends  of
approximately  $6,659,000.

The  Company's  Banking  Subsidiaries
-------------------------------------

     The  Subsidiary  Banks  are  nationally chartered banks and Federal Reserve
members,  and  are therefore subject to regulation and examination by the Office
of  the  Comptroller of the Currency, as well as the Federal Reserve Board.  All
of  the  Subsidiary  Banks  are subject to the provisions of the Federal Deposit
Insurance  Act  and  examination  by  the  FDIC. The examinations by the various
regulatory  authorities  are  designed  for  the  protection of bank depositors.

     The  federal  laws  and  regulations generally applicable to the Subsidiary
Banks  regulate,  among  other  things,  the  scope  of  their  business,  their
investments,  their  reserve  against  deposits,  the  nature  and amount of and
collateral  for  loans,  and  the  location  of  banking  offices  and  types of
activities  which  may  be  performed  at  such  offices.

     Subsidiary  banks  of  a  bank  holding  company  are  subject  to  certain
restrictions under the Federal Reserve Act and the Federal Deposit Insurance Act
on  loans  and  extensions of credit to the bank holding company or to its other
subsidiaries,  investments  in the stock or other securities of the bank holding
company or its other subsidiaries, or advances to any borrower collateralized by
such  stock  or  other  securities.


                                        4
<PAGE>
Capital  Requirements
---------------------

     All  federal  bank  regulatory  agencies  have  adopted  risk-based capital
guidelines.  These  guidelines  establish  required  levels  of capital that are
monitored  by  certain  ratios.   Capital is divided into two components; Tier 1
capital  which  includes  common  stock,  additional  paid-in  capital, retained
earnings  and certain types of perpetual preferred stock less goodwill, and Tier
2  capital  which  includes,  among  other things, limited life preferred stock,
subordinated debt, limited amounts of unrealized gains on equity securities, and
the allowance for possible loan losses. These components of capital are compared
to  both total assets as reported on the balance sheet and assets that have been
adjusted  to compensate for associated risk to the organization.  The guidelines
require  a tangible leverage capital ratio (defined as Tier 1 capital to average
assets)  of  3.00%  for  bank  holding  companies  and  banks  that meet certain
specified  criteria,  including having the highest regulatory rating.  All other
banking  organizations  are  required  to  maintain a leverage ratio of at least
4.00%.  The  Company  had  a  tangible  leverage  capital  ratio  of 7.26% as of
December 31, 1999.  The guidelines require a total capital ratio (defined as the
total  of both Tier 1 and Tier 2 capital to risk weighted assets) of 8.00%.  The
Company  had  a  total  capital  to  risk  weighted assets ratio of 11.11% as of
December 31, 1999. The guidelines also require a Tier 1 ratio (defined as Tier 1
capital  to  risk  weighted assets) of 4.00%.  The Company had a Tier 1 ratio of
9.91%  as  of  December  31,  1999.  The  regulatory requirements are considered
minimums  and  actual ratios should be commensurate with the level and nature of
all  risks  of a company (as determined by the regulatory agencies).  Regulators
generally  expect  organizations  that  are  experiencing internal growth or are
making  acquisitions  to maintain capital levels substantially above the minimum
supervisory  levels  and comparable to peer groups, without significant reliance
on  intangible  assets.  Management intends to continue its emphasis on a strong
capital  position.

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  authorities.  In particular, the Federal Reserve Board
influences  conditions  in  the money and capital markets, which affect interest
rates  and  growth  in bank credit and deposits.  Federal Reserve Board monetary
policies  have  had  a significant effect on the operating results of commercial
banks  in  the past and this is expected to continue in the future.  The general
effect,  if any, of such policies on future business and earnings of the Company
and  its  Subsidiary  Banks  cannot  be  predicted.

Financial  Modernization  Legislation
-------------------------------------

     On  November  12,  1999,  President  Clinton  signed  into  law  the
Gramm-Leach-Bliley  Act  (GLB Act).  The GLB Act significantly changes financial
services  regulation  by  expanding  permissible  non-banking activities of bank
holding  companies  and removing barriers to affiliations among banks, insurance
companies,  securities  firms  and other financial services entities.  These new
activities  and  affiliations  can  be  structured  through  a  holding  company
structure  or, subject to certain limitations, through a financial subsidiary of
a  bank.  The GLB Act establishes a system of federal and state regulation based
on  functional  regulation,  meaning  that  primary  regulatory  oversight for a
particular  activity  will  generally reside with the federal or state regulator
having  the  greatest  expertise  in  the  area.  Banking is to be supervised by
banking  regulators,  insurance  by  state  insurance  regulators and securities
activities  by  the  SEC  and  state  securities  regulators.  The  GLB Act also
establishes  a  minimum federal standard of financial privacy and adopts various
other  provisions  designed  to  improve  the  delivery of financial services to
consumers  while  maintaining  an  appropriate  level of safety in the financial
services  industry.


                                        5
<PAGE>
     The  GLB  Act repeals the anti-affiliation provisions of the Glass-Steagall
Act  and  revises  the  Bank  Holding  Company  Act to permit qualifying holding
companies,  called  "financial holding companies," to engage in, or to affiliate
with  companies  engaged  in,  a  full  range  of financial activities including
banking,  insurance  activities  (including  insurance  portfolio  investing),
securities  activities,  merchant  banking  and  additional  activities that are
"financial  in  nature,"  incidental  to  financial  activities  or,  in certain
circumstances,  complementary to financial activities.  A bank holding company's
subsidiary banks must be "well-capitalized" and "well-managed" and have at least
a  "satisfactory" Community Reinvestment Act rating for the bank holding company
to  elect  status  as a financial holding company.  The Company, at present, has
not  elected  status  as  a  "financial  holding  company."

     A  significant  component  of  the GLB Act's focus on functional regulation
relates  to the application of federal securities laws and SEC oversight to bank
securities  activities  previously  subject  to  blanket exemptions. Among other
things,  the  GLB  Act amends the definitions of "broker" and "dealer" under the
Securities  Exchange  Act  of  1934  to  remove the blanket exemption for banks.
Following  effectiveness  of these amendments, which are not effective until May
12,  2001,  banks will no longer be able to rely solely on their status as banks
to  avoid registration as broker-dealers.  Instead, banks will need to carefully
consider their securities activities in light of a new set of limited exemptions
designed  to  allow  banks to continue, without broker-dealer registration, only
those  activities  traditionally  considered  to  be  primarily banking or trust
activities.  The  GLB  Act  also  amends, effective May 12, 2001, the Investment
Advisers Act of 1940 to require the registration of banks that act as investment
advisers  for  mutual  funds.

Employees
---------

     As  of  December  31, 1999, the Company and its subsidiaries had a total of
361  full-time  equivalent  employees.  None of these employees are subject to a
collective  bargaining  agreement.


                                        6
<PAGE>
Item  2.  Properties
--------------------

     The  following  table  sets  forth  information  related  to  the Company's
properties  utilized  in  the Company's business.  These properties are suitable
and  adequate  for  the  Company's  business  needs.
<TABLE>
<CAPTION>
                                                                                                   Approximate   Owned/
Entity                        Description             Address                     City / State     Square Feet   Lease
----------------------------  ----------------------  --------------------------  ---------------  -----------  --------
<S>                           <C>                     <C>                         <C>              <C>          <C>
FNB                           Main bank               141 West Lincoln Highway    DeKalb, IL            19,600  Owned
FNB                           Drive-in facility       141 West Lincoln Highway    DeKalb, IL             1,200  Owned
FNB                           Branch facility         1007 North First Street     DeKalb, IL             1,800  Owned
FNB                           Branch facility         511 West State Street       Sycamore, IL           9,400  Owned(1)
FNB                           Branch facility         1602 East Sycamore Road     DeKalb, IL             2,300  Owned
FNB                           Commercial building     121 West Lincoln Highway    DeKalb, IL            15,000  Owned(2)
CB                            Main bank               100 West Church Street      Sandwich, IL          13,000  Owned
CB                            Branch facility         606 Countryside Center      Yorkville, IL         21,100  Owned
CB                            Branch facility         91 Sugar Lane, Suite C      Sugar Grove, IL        1,000  Leased
CB                            Branch facility         505 West Route 34           Plano, IL              2,400  Leased
CBH                           Main bank               201 West Diggins Street     Harvard, IL           11,700  Owned
CBH                           Branch facility         1265 South Division Street  Harvard, IL            3,500  Owned
CMI                           Main / Mortgage office  1315 West 22nd Street       Oak Brook, IL         10,400  Leased
CMI                           Mortgage office         847 North Center Street     Naperville, IL         3,200  Owned(3)
----------------------------
<FN>
(1)  FNB  owns  the building and approximately 60% of the underlying land and has a long-term lease with option to buy the
remaining  land.
(2)  FNB  owns  the  building  and  leases  the  entire  space to the Company.  The facility houses all administrative and
operational  functions  of  the  Company.
(3)  CMI  entered  into  a  sale  agreement as of March 24, 2000, to sell the property located at 847 North Center Street,
Naperville,  Illinois.
</TABLE>

Item  3.  Legal  Proceedings
----------------------------

     Neither  the  Company  nor  any subsidiary is a party to, and none of their
property  is  subject to, any material legal proceedings at this time.  However,
the  Company  and  its  subsidiaries  are  from  time to time parties to routine
litigation  incidental  to  their  businesses.

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

     No  matters,  through  the  solicitation  of  proxies  or  otherwise,  were
submitted  to  a  vote of security holders during the quarter ended December 31,
1999.


                                        7
<PAGE>
                                     PART II

Item  5.  Market  for  the  Registrant's  Common  Equity and Related Stockholder
--------------------------------------------------------------------------------
Matters
-------

     Since  June  29,  1998 the Company's stock has been traded over-the-counter
and  has been quoted on the OTC Bulletin Board, under the symbol "CTBG."  Before
June  29,  1998,  there  was no established market for the company's stock.  The
Company  completed in May 1999 a 2-for-1 stock split in the form of a 100% stock
dividend.  All  information  presented  herein  reflects  the  stock split.  The
following  table  reflects  the  quarterly  high  and low bid quotations for the
Company's  stock  since  June  29,  1998:

<TABLE>
<CAPTION>
1999                    High     Low
----------------------------------------
<S>                   <C>      <C>
Fourth Quarter     $    16.25    12.25
Third Quarter           16.375   16.25
Second Quarter          16.125   15.00
First Quarter           15.00    14.50

1998                  High     Low
----------------------------------------
Fourth Quarter     $    14.50    13.50
Third Quarter           13.75    12.00
Second Quarter          12.00    12.00
</TABLE>

     These  quotations  are  based  on  information  provided  by  the company's
principal market maker, and reflect inter-dealer prices, without retail mark-up,
mark-down  or  commission and may not necessarily represent actual transactions.

     The  approximate number of record holders of Common Stock of the Company as
of  April  10,  2000  was  1,016.

     Cash  dividends  on  the  above  referenced  common  stock  are  declared
semi-annually.  Dividends  declared  for  the  years ended December 31, 1999 and
1998  were  as  follows:

<TABLE>
<CAPTION>
----------------------------------------

                              1999  1998
                             -----  ----
<S>                          <C>    <C>
First semi-annual dividend   $0.07  0.06
Second semi-annual dividend   0.09  0.07
                             -----  ----
Total                        $0.16  0.13
                             =====  ====
</TABLE>

     The  amount  of  dividends  payable  by  the Company on its common stock is
limited  by  the  provisions  of  its  long-term  debt agreement.  Dividends are
limited  to  50% of the net earnings, less dividends paid, in the previous eight
quarters.  As  of  December  31, 1999, the Company was limited to $1,213,000 for
dividend  purposes,  beyond  dividends  already  paid  in  1998  and  1999.


                                        8
<PAGE>
Item  6.  Selected  Financial  Data
-----------------------------------

     The  following  information  relating to per common share data reflects the
May  1999  2-for-1  stock  split  in  the  form  of  a  100%  stock  dividend.

     Five  Year  Summary  of  Selected  Consolidated  Financial  Data

For  years  ended December 31 (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                        1999      1998     1997     1996      1995
--------------------------------------------------  ---------  -------  -------  --------  --------
<S>                                                 <C>        <C>      <C>      <C>       <C>
Interest income                                     $ 38,250    40,604   39,034   36,307    32,501
Interest expense                                      18,809    19,961   19,589   17,912    15,830
--------------------------------------------------  ---------  -------  -------  --------  --------
Net interest income before provision for possible
  loan losses                                         19,441    20,643   19,445   18,395    16,671
Provision for possible loan losses                       695       713    1,128    1,113       478
--------------------------------------------------  ---------  -------  -------  --------  --------
Net interest income after provision for possible
  loan losses                                         18,746    19,930   18,317   17,282    16,193
Other operating income                                 5,233     5,382    4,228    4,294     4,070
Investment securities gains (losses)                     250       154      210       41      (284)
Other operating expenses                              18,373    19,165   18,284   17,773    15,404
--------------------------------------------------  ---------  -------  -------  --------  --------
Earnings before income taxes                           5,856     6,301    4,471    3,844     4,575
Income tax expense                                     1,809     2,142    1,461    1,287     1,347
--------------------------------------------------  ---------  -------  -------  --------  --------
Net earnings from continuing operations             $  4,047     4,159    3,010    2,557     3,228
--------------------------------------------------  ---------  -------  -------  --------  --------
Discontinued operations                             $ (3,786)      576        3     (713)      136
--------------------------------------------------  ---------  -------  -------  --------  --------
Net earnings                                        $    261     4,735    3,013    1,844     3,364
--------------------------------------------------  ---------  -------  -------  --------  --------
Net earnings applicable to common stock             $    261     4,712    2,811    1,643     3,026

Per common share
  Basic
    Net earnings from continuing operations         $   0.93      0.96     0.68     0.57      0.71
    Discontinued operations                            (0.87)     0.13     0.00    (0.17)     0.03
    Net earnings                                        0.06      1.09     0.68     0.40      0.74
  Diluted
    Net earnings from continuing operations             0.92      0.95     0.67     0.56      0.70
    Discontinued operations                            (0.86)     0.13     0.00    (0.17)     0.03
    Net earnings                                        0.06      1.08     0.67     0.39      0.73
  Cash dividends                                        0.16      0.13     0.11     0.10      0.09
Financial position - year-end
  Investment securities available for sale          $126,159   132,060  129,479  133,072   135,566
  Mortgage loans held for sale                        14,892    66,755   44,286   19,959    12,519
  Net loans                                          359,451   322,058  308,540  285,380   251,274
  Allowance for possible loan losses                   4,636     4,750    4,646    3,774     3,298
  Non-interest bearing deposits                       52,274    50,371   42,589   43,233    41,467
  Interest bearing deposits                          408,143   404,621  382,728  361,695   345,646
  Other borrowings                                    39,486    54,497   49,307   29,738    17,591
  Preferred stock                                          0         0      300    2,600     2,600
  Total stockholders' equity                          37,408    41,545   36,862   34,962    34,347
  Total assets                                       540,850   558,282  517,183  474,243   444,580
==================================================  =========  =======  =======  ========  ========
</TABLE>


                                        9
<PAGE>
Item  7. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of  Operations
--------------

     The  following  discussion  is  management's  analysis  of the consolidated
financial  condition  and  results  of  operations of the Company, which may not
otherwise  be  apparent  from  the consolidated financial statements included in
this  report at Item 8.  Reference should be made to those statements, the notes
thereto  and  the selected financial data presented elsewhere in this report for
an  understanding  of  the  following  discussion  and  analysis.

Forward-Looking  Statements
---------------------------

     Certain  statements  in  this  Annual  Report  on  Form  10-K  constitute
"forward-looking  statements"  within  the  meaning  of  Section  21E  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act").  For example,
forward-looking  statements  may  be made with respect to the Company's earnings
prospects,  pricing  and  fee  trends,  credit quality and outlook, new business
results,  expansion  plans, and anticipated expenses.  The Company intends these
forward-looking  statements  to  be  subject  to  the safe harbor created by the
Exchange  Act  and  is  including  this  statement to avail itself of these safe
harbor  provisions.  Forward-looking  statements,  which  are  based  on certain
assumptions  and  describe  future  plans,  strategies  and  expectations of the
Company,  are  identified  by  statements  containing  words and phrases such as
"may," "project," "are confident," "should be," "will be," "predict," "believe,"
"plan,"  "expect,"  "estimate,"  "anticipate"  and  similar  expressions.  These
forward-looking  statements  reflect the Company's current views with respect to
future  events  and financial performance, but are subject to many uncertainties
and factors relating to the Company's operations and business environment, which
could  change  at  any  time  and  which  could  cause  actual results to differ
materially  from  those  expressed or implied by the forward-looking statements.

     There  are  inherent difficulties in predicting factors that may affect the
accuracy  of forward-looking statements.  Potential risks and uncertainties that
may  affect  the  Company's  operations,  performance,  development and business
results  include  the  following:

-     the risk of adverse changes in business conditions in the banking industry
      generally  and  in  the specific Midwestern markets in which the Company's
      subsidiary  banks  operate;
-     changes  in  the  legislative  and  regulatory  environment that result in
      increased  competition  or  operating  expenses;
-     changes  in the interest rates and changes in monetary and fiscal policies
      and the corresponding effect on the Company's interest rate spread and net
      interest  margin;
-     effects  on  the  Company's  liquidity  if CMI is required to repurchase a
      significant amount of the fraudulent loans originated  and  sold by CMI as
      described  below;
-     increased competition from other financial and non-financial institutions;
-     the  competitive  impact  of  technological advances in the conduct of the
      banking  business;  and
-     other  risks set forth from time to time in the Company's filings with the
      Securities  and  Exchange  Commission.

     These  risks  and  uncertainties  should  be  considered  in  evaluating
forward-looking  statements,  and  undue  reliance  should not be placed on such
statements.  The  Company does not assume any obligation to update or revise any
forward-looking  statements  subsequent  to  the  date  on  which they are made.

Results  of  Operations
-----------------------

     The  Company's  net earnings totaled $261,000 in 1999, down from $4,735,000
in  1998.  This  represents  a  decrease  of $4,474,000, or 94.5%.  Net earnings
totaled  $3,013,000  for  1997.  The  decrease  in  net  earnings  is  primarily
attributable  to discontinued operations, which produced a loss of $3,786,000 in
1999,  as  compared  to  earnings  of  $576,000 in 1998 and $3,000 in 1997.  The
discontinued  operations  relate  to  the  Company's  mortgage  banking segment.

     The Company's Quarterly Report on Form 10-Q for the quarter ended September
30,  1999  disclosed  certain  irregularities  in  the  origination  and sale of
mortgage  loans  by  CMI.  The  Company has originated and sold in the secondary
mortgage  market,  through  CMI,  a  substantial  amount  of one- to four-family
mortgage  loans.  These  mortgage  loans  are sold to investors in the secondary
mortgage  market with recourse back to CMI, meaning that CMI may be obligated to
repurchase  these  loans from investors under certain circumstances, which could
include the fraud and other irregularities uncovered by the Company as discussed
below.


                                       10
<PAGE>
     In  the  fourth  quarter  of  1999,  the  Company uncovered fraud and other
irregularities in CMI's underwriting and documentation of certain mortgage loans
originated  and  sold  by  CMI, which may ultimately result in the purchasers of
these  loans  putting them back to CMI under the recourse provisions of the loan
sale agreements and result in losses on such loans if and when they are put back
to  CMI.  The  Company  has  engaged  in  an  extensive  investigation  of  the
irregularities  at CMI, which investigation has been performed by both employees
of  the  Company  and  its  subsidiaries  as  well as outside consultants.  This
investigation  revealed  frauds  committed  by both CMI employees at several CMI
branches  and  third parties doing business with CMI.  For example, false asset,
income  and/or  employment  information  was provided by CMI loan originators or
loan  processors  to  make it appear that an applicant would qualify for a loan.
At  times,  an  appraisal  company  working with employees of CMI provided false
appraisals.  These appraisals inflated the value of the property, and thus, made
it  appear  that  loans  were  secured  fully  when, in fact, they were not.  In
addition,  on  some loans originated by CMI, persons that appear to be unrelated
to  CMI  committed a title fraud.  This fraud resulted in mortgages being issued
to  persons  who  did not have good title to the properties being mortgaged.  In
each  case,  however,  the  seller  had obtained a valid title insurance policy.
Based  on  the  results of the investigation to date, it appears that this fraud
was  limited to CMI employees, and third parties working with such employees, at
three  CMI  offices.  No  fraud  was  uncovered  at  other CMI offices or at the
Subsidiary  Banks.

     During its ongoing investigation into the fraud and other irregularities at
CMI,  the  Company  decided  to  discontinue  the mortgage banking segment.  All
offices  of  CMI,  which  had not been previously closed, were closed in January
2000.  A  discussion  of  the  discontinuance  and  the  creation  of  a reserve
liability  for  possible  losses  on  the  loans  affected  by the fraud and the
irregularities  is  included  below.

     The  Company's  net  earnings  from  continuing  operations in 1999 totaled
$4,047,000, a 2.7% decrease from 1998 net earnings from continuing operations of
$4,159,000.  Net  earnings  from  continuing operations for 1997 was $3,010,000.
Net  earnings  from  continuing  operations  in  1999  was adversely impacted by
$514,000  in losses related to the sale of a substantial portion of the CFC loan
portfolio  and  other  related  charges  involved  in closing that business.  In
addition,  an  increase  in  interest  rates  in  1999 reduced the Company's net
interest  income  as  well  as  its  mortgage  loan  origination income from the
Subsidiary  Banks.  Those  decreases were partially offset by decreases in other
operating  expenses.

     Net  earnings  applicable to common stock was $261,000 for 1999, $4,712,000
for  1998,  and  $2,811,000  for  1997.  Net earnings applicable to common stock
differs from net earnings due to dividends paid on preferred stock.   There were
no  dividends paid on preferred stock in 1999 as compared to $23,000 in 1998 and
$202,000  in  1997.  The  Company  redeemed $2,300,000 of its preferred stock in
1997  and  the  remaining  $300,000  in  1998.

     Basic  earnings  per share from continuing operations decreased to $.93 for
1999  as  compared to $.96 for 1998 and $.68 for 1997.  Basic earnings per share
decreased  to  $.06  for  1999  as compared to $1.09 for 1998 and $.68 for 1997.
Basic earnings (loss) per share from discontinued operations was ($.87) in 1999,
$.13  in  1998,  and  $.00 in 1997.  Per common share data reflects the May 1999
2-for-1  stock  split in the form of a 100% stock dividend.  The following table
highlights significant factors that have contributed to the changes in basic net
earnings  per  share:


                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                     Changes in Basic Net Earnings per Share
<S>                                                               <C>            <C>
                                                                  1998 to 1999  1997 to 1998
----------------------------------------------------------------  ------------  ------------
Prior period basic earnings per share                             $       1.09   $      0.68
Changes due to
  Net interest income                                                    (0.31)         0.09
  Provision for possible loan losses                                      0.00          0.11
----------------------------------------------------------------  -------------  ------------
    Net interest income after provision for possible loan losses         (0.31)         0.20
----------------------------------------------------------------  -------------  ------------
  Other operating income
    Investment securities gains (losses), net                             0.02         (0.01)
    Mortgage loan origination income                                     (0.18)         0.15
    Other operating income items                                          0.14          0.07
----------------------------------------------------------------  -------------  ------------
  Total other operating income                                           (0.02)         0.21
----------------------------------------------------------------  -------------  ------------
  Other operating expenses
    Salaries and employee benefits                                        0.28          0.04
    Net occupancy and furniture expenses                                  0.02          0.00
    Outside services                                                     (0.01)        (0.06)
    Goodwill amortization                                                 0.02          0.00
    Other operating expense items                                        (0.06)        (0.01)
----------------------------------------------------------------  -------------  ------------
  Total other operating expenses                                          0.21         (0.03)
  Income tax expenses                                                     0.08         (0.14)
  Discontinued operations                                                (1.00)         0.13
  Preferred stock dividends                                               0.01          0.04
----------------------------------------------------------------  -------------  ------------
  Current period basic earnings per share                         $       0.06   $      1.09
================================================================  =============  ============
</TABLE>

     The  Company's  banking segment posted net earnings of $6,752,000 for 1999,
as  compared  to $6,214,000 for 1998 and $5,393,000 for 1997.  Earnings for 1999
increased 8.6% from 1998.  The increase is primarily attributable to lower other
operating  expenses  of $828,000, partially offset by a $262,000 decrease in net
interest  income  after  provision  for  possible  loan  losses.

     The Company's mortgage banking segment, posted a net loss of $3,786,000 for
1999,  as  compared  to  earnings  of  $576,000  for  1998  and $3,000 for 1997.
Following  the  discovery  of  the  irregularities and fraud at CMI as discussed
above,  in  January  2000,  the Company formally adopted a plan to liquidate the
mortgage  banking segment, which is comprised entirely of the operations of CMI.
The  mortgage  banking  segment  does not include the Subsidiary Banks' mortgage
lending activities, which are a component of continuing operations.  As a result
of  the  decision  to  discontinue  the  mortgage  banking  segment, all related
operating  activity was reclassified and reported as discontinued operations for
financial  reporting  purposes.

     The  closure  of  CMI  is  accounted  for  as  a discontinued operation, in
accordance  with  APB  30,  because, among other criteria, it represented both a
separate  major  line  of  business  and a class of customer.  CMI represented a
distinct  segment and served a customer base from a market distinct from that of
the  Subsidiary  Banks.

     The  mortgage  lending  activities  of  the  Subsidiary  Banks represent an
integral,  inseparable  component of the banking segment.  CMI provided mortgage
brokerage  services  to  the  Subsidiary  Banks  that  will  now  be provided by
independent  third  parties.  The banking segment will continue to originate and
sell  mortgage  loans into the secondary market and hold mortgage loans for sale
on  its  balance  sheet.  The  mortgage loan origination income presented on the
Company's Consolidated Statements of Earnings represents the income derived from
the  mortgage  lending  activities  of  the  banking segment.  The mortgage loan
origination  income  produced by CMI is presented as a component of discontinued
operations  in the Consolidated Statements of Earnings.  The mortgage loans held
for  sale  presented  on  the  Company's  Consolidated  Balance Sheets represent
mortgages  currently  held  for  sale  by  the Subsidiary Banks.  These balances
relate to both mortgages originated in the banking segment, as well as mortgages
originated by CMI and subsequently sold to the Subsidiary Banks to hold for sale
to  third party investors.  The Company expects the level of mortgage loans held
for  sale  to  decrease since CMI will no longer be originating loans to sell to
the  Subsidiary  Banks  to  hold  for sale.  Mortgage loans held for sale by CMI
(i.e.,  those  not  sold  to  the  Subsidiary  Banks) are presented in assets of
discontinued  operations  on  the  Consolidated  Balance  Sheets.


                                       12
<PAGE>
     The  loss  from  discontinued operations of $3,786,000 in 1999 represents a
loss from operating activities, which includes a pre-tax charge of $2,300,000 to
establish  a reserve liability for possible losses on loans previously sold, and
a  pre-tax  charge  of  $1,341,000  to write-off the remaining carrying value of
intangible  assets  related  to  the  mortgage  banking  segment.  The  reserve
liability  is included in other liabilities in the Consolidated Balance Sheet as
of  December  31,  1999 at Item 8.  While the Company's management believes that
the  reserve should be adequate to cover such losses, the reserve is an estimate
based  on,  among  other  things,  information  gathered  during  the  Company's
investigation  of  the fraud relating to amount of loans that may be affected by
the  fraud and assumptions relating to the likelihood that CMI would be required
to  repurchase  loans from the investors and the diminution in the value of such
loans  if  such  loans are repurchased by CMI.  Actual results could differ from
the  Company's estimates.  The Company has notified its insurance carrier of the
fraud  discussed  above.

     In  addition  to  the charges discussed above, the mortgage banking segment
experienced  an  increase  in  other  operating  expenses  of $3,975,000 in 1999
associated  with  the  expansion  of retail mortgage origination offices, higher
commission  structures  and  other costs.  These charges and increased operating
expenses,  all  net  of  their applicable tax effects, primarily account for the
change  from  net earnings from discontinued operations of $576,000 in 1998 to a
net  loss  from  discontinued  operations  of  $3,786,000  for  1999.

     The first quarter 2000 financial statements will include additional charges
for  2000  operating  activities of CMI and the loss on disposal of the mortgage
banking  segment.  The  Company  estimates  that  the  first  quarter charge for
discontinued  operations  will  total  $837,000,  net of tax effect of $582,000.
Included  in  this charge are accruals for operating losses during the phase-out
period,  accruals for salary and severance payments, write-downs of the value of
fixed  assets,  accruals  for  lease  liabilities, and other items.  For further
discussion  of  discontinued operations, see note 18 to the Financial Statements
included  in  Item  8.

     Segment  information  presented under "Other" (see note 16 to the Financial
Statements included in Item 8) includes the holding company and consumer finance
business.  This  segment produced a net loss of $2,705,000 for 1999, compared to
net  losses  of  $2,055,000  and $2,383,000 in 1998 and 1997, respectively.  The
increase  in  net losses for 1999 is primarily due to net losses associated with
CFC  regarding  a  sale of a substantial portion of its loan portfolio and other
related  charges  involved  in  closing  that  business.

     The  Company's  return on average equity for 1999 was 0.64%, as compared to
11.95%  in  1998  and 8.43% in 1997.  Return on average assets was 0.05% in 1999
versus  0.92%  in 1998 and 0.62% in 1997.  The decrease in these ratios for 1999
were primarily due to the discontinued operations and losses at CFC as described
above.

Net  Interest  Income
---------------------

     Net  interest  income  before  provision  for  possible  loan  losses,  the
Company's primary source of earnings, totaled $19,441,000 in 1999, a $1,202,000,
or  5.8%  decrease  over  1998.  This  decrease can primarily be attributed to a
$1,056,000  decrease  in  net interest income before provision for possible loan
losses at CFC associated with the sale of a substantial portion of its portfolio
in  March of 1999.   In addition, an increase in interest rates in 1999 caused a
narrowing  of  the  net interest margin due to the Company's one year cumulative
liability  repricing  difference.  Net  interest  income  before  provision  for
possible  loan  losses  increased  $1,198,000 in 1998 as compared to 1997, which
represented  a  6.2%  increase.

     Management  believes  that  net  interest margins may continue to narrow as
competitive  pressures  in  the market place expand.  Competition from financial
institutions  and  non-traditional  competitors,  as  well  as  general economic
trends,  will continue to impact future earnings.  Earning asset mix, as well as
the  net  interest  margin, are monitored and evaluated by management to develop
strategies  to  help  maintain  and  improve  earnings.

     On  a tax equivalent basis, net interest income decreased to $20,486,000 in
1999  from  $21,237,000 in 1998 and increased from $19,892,000 in 1997.  The tax
equivalent net interest margin decreased in 1999, averaging 4.15% as compared to
4.40%  in  1998  and  4.37%  in  1997.


                                       13
<PAGE>
     Total  average  earning  assets  in  1999 were $493,478,000, an increase of
$10,453,000  or 2.5% over 1998.  Average earning assets as a percentage of total
average  assets  decreased slightly to 93.7% during 1999 as compared to 94.0% in
1998  and  93.9%  in  1997.  The net average loan portfolio represented 68.9% of
total  average  earning  assets  in  1999, an increase from 64.4% in 1998 and an
increase  from  66.3% in 1997.  Mortgage loans held for sale represented 5.0% of
average  earning  assets  in 1999, a decrease from 7.2% in 1998.  Mortgage loans
held  for  sale  represented  4.6%  of average earning assets in 1997.  In 1999,
average  total  interest-bearing  liabilities were $431,738,000, a $5,931,000 or
1.4%  increase  over  1998.  This  increase  can  be  attributed to a $9,636,000
increase  in  average  interest-bearing  deposits,  offset  by  a  decrease  of
$3,705,000  in  average  other  borrowings.  The  proportion  of  average
interest-bearing  liabilities  to  average  earning  assets in 1999 decreased to
87.5%  as  compared  to  88.2%  in  1998.

Provisions  for  Possible  Loan  Losses
---------------------------------------

     The  adequacy  of each Subsidiary Bank's allowance for possible loan losses
is  determined  by  calculating  the  allocated  and unallocated portions of the
allowance  using  a  combination  of  internal  loan  classifications,  weighted
historical  charge-off  experience,  and  an  evaluation  of estimated losses on
existing  problem  credits.  The  allowance is maintained to cover the allocated
requirement  plus  an  unallocated portion, which considers economic conditions,
industry  concentrations,  peer-group comparisons, lending staff experience, and
other  risk  factors.

     The  coverage  of  the allowance for possible loan losses to non-performing
loans  and  loans  past due 90 days or more and still accruing was 137.2% at the
end  of 1999 versus 168.6% and 104.4% at the end of 1998 and 1997, respectively.
This  decrease in coverage was primarily due to an increase in non-accrual loans
from  $2,262,000  at  the  end  of  1998  to  $2,685,000 at the end of 1999. The
allowance  for  loan losses as a percentage of total outstanding loans decreased
to  1.27%  at  December 31, 1999 as compared to 1.45% at December 31, 1998.  The
allowance level was at 1.48% of total loans at December 31, 1997.  The decreased
percentage  is  due, in part, to an increase in loans outstanding as well as the
sale  of a substantial portion of the CFC loan portfolio, which had an allowance
of  5% attributed to its loan portfolio at December 31, 1998.  The allowance for
possible  loan  losses  does  not include amounts for the CMI irregularities and
fraud  discussed  above.  The  reserve  liability  for  possible losses on loans
previously  sold by CMI, as discussed above, is included in other liabilities in
the  Consolidated  Balance  Sheet  as  of  December  31,  1999  at  Item  8.

     Gross  charge-offs  decreased  $467,000 from 1998 to 1999, primarily due to
consumer charge-offs, which decreased $400,000.  The ratio of net charge-offs to
average  total  loans  outstanding decreased during 1999 to 0.11% as compared to
0.19% in 1998.  The net charge-off ratio during 1997 was 0.10%.  The decrease in
this  ratio  was  primarily  due  to  the  decrease  in  consumer charge-offs as
described  above,  partially  offset  by  a  decrease  in recoveries of $227,000
primarily  due  to  commercial/agricultural  and  consumer  loans.

     The provision for possible loan losses is based on management's analysis of
risk  in  the  loan  portfolio,  which  takes  into account portfolio growth and
historical  charge-offs,  among  many  other  factors.  The  provision  totaled
$695,000  in  1999  as  compared  to $713,000 in 1998, an $18,000 decrease.  The
provision  for  possible  loan  losses  decreased  $415,000  from  1997 to 1998.
Management's  analysis  of the allowance for possible loan losses indicates that
the  level  at December 31, 1999 of 1.27% of total outstanding loans is adequate
to  cover  the  risk  of  losses  inherent  in  the  loan  portfolio.

     Non-performing  assets (defined as loans 90 days or more past due but still
accruing  interest,  loans  in  non-accrual status, restructured loans and other
real estate owned) totaled $3,579,000, or 0.66% of total assets, at December 31,
1999.  This  represents  an increase from $2,817,000 or 0.50% of total assets at
December 31, 1998. Non-performing assets at December 31, 1997 were $4,452,000 or
0.86%  of  total  assets.


                                       14
<PAGE>
Other  Operating  Income
------------------------

     Total  other  operating  income  is  comprised of mortgage loan origination
income  from  Subsidiary  Banks,  trust services, deposit service charges, other
customer  service  charges,  and other miscellaneous income.  Excluding security
gains and losses, other operating income totaled $5,233,000 for 1999, a decrease
from  $5,382,000  in  1998 and an increase from $4,228,000 in 1997.  This change
represents  a 2.8% decrease from 1998 to 1999, which can be primarily attributed
to  a  decrease  in  mortgage  loan  origination income from Subsidiary Banks of
$781,000, partially offset by increases in trust fees and other service charges.
Mortgage  loan  origination income from Subsidiary Banks increased $707,000 from
1997  to 1998.  The decreased mortgage loan activity at the Subsidiary Banks was
a result of the unfavorably high interest rate environment in effect for fifteen
and  thirty  year  mortgages  on  one-to-four-family  residential  properties.

     Trust  fees  increased  7.4% to $826,000 in 1999 as compared to $769,000 in
1998  and  $662,000  in 1997.  The Company continues to focus on growth of trust
services  in  light of corporate goals to diversify revenue sources.  The market
value  of  assets  managed  by the bank's trust department was $154.5 million at
December  31,  1999 as compared to $163.9 million and $155.7 million at year-end
1998  and  1997,  respectively.

     Net  security  gains,  on  a  pre-tax  basis,  totaled  $250,000 in 1999 as
compared  to  net  gains  of  $154,000 in 1998 and $210,000 in 1997.  The entire
investment  portfolio  is  classified as available-for-sale and all sales during
the  last  three  years  were  made  from the available-for-sale classification.
During  1999  several securities were sold at a gain to take advantage of market
conditions at the time of the sale.  The portfolio is recorded at current market
value  in  the  accompanying financial statements at Item 8.  It is management's
expectation  to  classify  all  investment  securities  purchased  as
available-for-sale  for  the foreseeable future.  Changes in the market value of
these  securities  are reflected in equity, net of applicable income taxes.  The
decision  to  purchase  or  sell  a  security  is  based  on a number of factors
including,  but  not  limited  to,  the  potential for increased yield, improved
liquidity,  asset  mix  adjustment,  improvement  in  the interest rate gap, and
collateral  (pledging)  requirements  of  local  municipalities.

Other  Operating  Expenses
--------------------------

     Other  operating  expenses  totaled  $18,373,000  in  1999  as  compared to
$19,165,000  and $18,284,000 in 1998 and 1997, respectively.  As a percentage of
average  assets,  total operating expenses decreased to 3.5% in 1999 versus 3.7%
in  1998  and  3.8% for 1997.  The efficiency ratio, which measures the level of
non-interest  expense  to  total  net revenues, was 74.5% in 1999 as compared to
73.6%  and  77.2%  in  1998  and  1997,  respectively.

     Salaries  and employee benefits expense represents the largest component of
other  operating  expenses.  This  category  decreased $1,118,000, or 10.0% from
1998  to  1999.  During  1998,  this  expense  increased $274,000, or 2.5%, when
compared  to  1997.  The  decrease  for  1999 is primarily attributable to lower
bonus  awards,  profit  sharing  contributions,  and  the  closure  of  CFC.  In
addition,  the Company has been able to reduce salary and benefits expense as it
has  consolidated  certain  "back  office"  functions.  The Company employed 361
full-time equivalent (FTE) employees at December 31, 1999 as compared to 364 and
317  at  December 31, 1998 and 1997, respectively.  Of the 361 FTE's at December
31,  1999,  approximately  123 were employed at CMI, which was closed in January
2000.

     Occupancy and furniture and fixtures expenses totaled $2,734,000 in 1999, a
decrease  of  $70,000, or 2.5%, from 1998.  During 1998, occupancy and furniture
and  fixture  expenses  increased $90,000 as compared to 1997.  Outside services
and other expense increased 4.0% to $948,000 during 1999 as compared to $911,000
in  the  prior  year.  Advertising  expense  decreased  8.7% in 1999 to $400,000
versus  $438,000  in 1998.  Management continues to control overhead expenses by
emphasizing  cost  containment and by taking advantage of available economies of
scale  at  the  holding  company  level.  However, management's cost containment
measures  are  tempered  by  the  need  to  maintain consistently high levels of
customer  service  and  the  need  to  attract  and  retain  qualified  staff.


                                       15
<PAGE>
Financial  Condition
--------------------

     Total  assets at December 31, 1999 were $540,850,000, a $17,432,000 or 3.1%
decrease  over December 31, 1998 total assets of $558,282,000. This decrease can
primarily  be  attributed  to  a decrease in mortgage loans held for sale at the
Subsidiary  Banks  of  $51,863,000, partially offset by an increase in net loans
outstanding of $37,393,000.  The decrease in mortgage loans held for sale at the
Subsidiary  Banks, which represents loans originated at the Subsidiary Banks and
loans  originated  at CMI and subsequently sold to the Subsidiary Banks, was due
to  lower  production  levels  at  the  end  of 1999 versus 1998.  Cash and cash
equivalents  are continually monitored and maintained at operational minimums to
minimize  the Company's reliance on other borrowings.  Higher cash balances were
maintained at December 31, 1999 to provide for the unlikely event that more cash
would  be  requested  by  customers  concerned  over  the year 2000 date change.
Average  assets for 1999 grew by $12,747,000 or 2.5% to $526,604,000 as compared
to  $513,857,000  for  1998.

     The Company's decrease in year-end assets is also represented by a decrease
in  other  borrowings  of  $15,011,000.  Management  continues  to  view  "core"
deposits  (individual,  partnership  and corporate deposits) as the primary long
term  funding source for internal growth of the Company, but also recognizes the
growing need for alternative sources of funding.  Alternative sources of funding
will  be necessary if loans continue to grow faster than deposits in the future.
Average  deposits  increased  $16,493,000,  or  3.8%, during 1999, while average
other  borrowings  decreased  $3,705,000,  or  10.1%.  Brokered deposits totaled
$297,000  at December 31, 1999, bearing interest at 6.75% and maturing in August
2000.  Brokered  deposits  totaled  $693,000 at December 31, 1998, with interest
rates  ranging  from  6.20%  to  6.75%  and  maturities ranging from August 2000
through  October  2002.

Capital
-------

     The  Company  is  committed  to maintaining strong capital positions in the
Subsidiary Banks and on a consolidated basis.  Management monitors, analyzes and
forecasts  capital  positions for each entity to ensure that adequate capital is
available  to  support  growth  and  maintain financial soundness.  During 1999,
stockholders'  equity decreased $4,137,000 over December 31, 1998, primarily due
to  a  decrease of $4,098,000 in accumulated other comprehensive earnings.  This
decrease  represents  the  change  in  unrealized  gains/losses  on  investment
securities  available-for-sale,  which  decreased  from  a  gain  of $934,000 at
December 31, 1998 to a loss of $3,164,000 at December 31, 1999.  The decrease of
$4,098,000  represents  a  $6,431,000  gross  unrealized  loss  plus $250,000 in
realized  gains  included  in  earnings,  less  the  applicable  tax  effect  of
$2,583,000.  The decrease was primarily caused by an increase in interest rates.

     The Company issued 25,953 shares of stock through its Dividend Reinvestment
and  Stock Purchase Plan and its Stock Benefit Plan during 1999, which generated
$400,000  of  new  shareholders' equity.  The Company's Tier 1 Leverage ratio at
December 31, 1999 was 7.26%, which increased from 6.31% as of December 31, 1998.
This  ratio  exceeds  the minimum regulatory capital requirement.  The Company's
Total  Risk  Weighted  Capital ratio increased to 11.11% as of December 31, 1999
from  11.08%  as  of  December  31, 1998.  The Tier 1 Capital ratio increased to
9.91%  at  December  31,  1999  from  9.83%  at  December 31, 1998.  For further
discussion  of the regulatory capital requirements, see note 12 to the Financial
Statements  included  in  Item  8.

Liquidity
---------

     The  Company  ensures  that  the  Subsidiary  Banks  maintain  appropriate
liquidity  and  provides  access  to  secondary  sources of liquidity in case of
unusual  or  unanticipated  demand for funds.  Primary bank sources of liquidity
are  repayment of loans, high-quality marketable investment securities available
for  sale,  and  the  bank's federal funds position.  These sources of liquidity
should  be more than sufficient to satisfy liquidity needs arising in the normal
course  of  business.  The  Company  is  a secondary source of liquidity for its
Subsidiary  Banks through its discretionary access to short-term funding sources
in  case  of  unanticipated  demand  for  funds.

     As  presented  in the Consolidated Statement of Cash Flows included in Item
8,  the  Company  has  experienced  significant  changes  in its cash flows from
operating,  investing, and financing activities during 1999 as compared to prior
years.  These  fluctuations  primarily relate to increases in the loan portfolio
and  decreases  in  mortgage  loans  held-for-sale  at  the  Subsidiary Banks at
year-end,  which  have  allowed  for  decreases  in  short-term  borrowings  and
long-term  debt.


                                       16
<PAGE>
Interest  Rate  Sensitivity
---------------------------

     The  Company's  overall  success  is  largely dependent upon its ability to
manage interest rate risk.  Interest rate risk can be defined as the exposure of
the  Company's  net  interest  income  to  adverse  movements in interest rates.
Because  the  Company  has  no  trading portfolio, the Company is not exposed to
significant  market  risk  from trading activities.  Other types of market risk,
such  as foreign currency exchange and commodity price risk, do not arise in the
normal  course  of  the  Company's  business  activities.  The  Company does not
currently  use  derivatives  to  manage  market  and  interest  rate  risks.  A
derivative financial instrument includes futures, forwards, interest rate swaps,
option  contracts, and other financial instruments with similar characteristics.

     The  Company  is party to financial instruments with off-balance sheet risk
in  the  normal course of business to meet the financing needs of its customers.
These  financial  instruments  include  commitments to extend credit and standby
letters  of  credit (see note 13 included in Item 8).  These instruments involve
to  varying  degrees, elements of credit and interest rate risk in excess of the
amount  recognized  in  the  consolidated balance sheets.  Commitments to extend
credit  are agreements to lend to a customer as long as there is no violation of
any  condition  in  the  contract.  Commitments  generally have fixed expiration
dates  and  may  require collateral from the borrower if deemed necessary by the
Company.  Standby  letters  of  credit are conditional commitments issued by the
Company  to  guarantee  the  performance  of a customer to a third party up to a
stipulated  amount  and  with  specified  terms  and conditions.  Commitments to
extend  credit  and  standby  letters  of credit are not recorded as an asset or
liability  by  the  Company  until  the  instrument  is  exercised.

     The  Asset/Liability  Committee (ALCO) for each bank reviews the Subsidiary
Bank's  interest  rate  exposure on a regular basis.  The principal objective of
the Company's interest rate risk management function is to evaluate the interest
rate  risk  included  in  certain balance sheet accounts, determine the level of
risk  appropriate  given the Company's business strategy, operating environment,
capital  and  liquidity  requirements and performance objectives, and manage the
risk  consistent  with the funds management policy of the Company.  Through such
management,  the Company seeks to monitor the vulnerability of its operations to
changes  in  interest rates.  The extent of the movement of interest rates is an
uncertainty  that  could  have a negative effect on the earnings of the Company.

     Interest  rate exposure is reviewed and managed, to the extent possible, by
matching maturities of interest bearing assets and interest bearing liabilities.
The  difference between the amount of interest earning assets that are scheduled
to  mature  or  reprice  during  a  period  and  the  amount of interest bearing
liabilities  maturing  or repricing in the same period significantly affects the
Company's  interest  rate risk.  This difference is generally referred to as the
interest  sensitivity  gap.  A  positive  gap,  or  asset  sensitive  position,
indicates  there  are more rate-sensitive assets than rate-sensitive liabilities
repricing  or  maturing  within  specified  time  frames,  which generally has a
favorable  impact  on  net  interest income in periods of rising interest rates.
Conversely,  a  negative  gap,  or liability sensitive position, would generally
imply a favorable impact on net interest income in periods of declining interest
rates.  In  periods  of changing interest rates, net interest margin is not only
impacted  by  the  amounts  of repricing assets and liabilities, but also by the
rate  at  which repricings occur.  Earnings may also be impacted by variances in
repayment  of  loans  and  securities.


                                       17
<PAGE>
     The  following  table indicates the Company's interest sensitive assets and
liabilities  over specific time horizons as well as its interest sensitivity gap
at  December  31,  1999:
<TABLE>
<CAPTION>
                                                                                     (Dollars in thousands)

                                                           Balances  Subject  to  Repricing  Within
                                                        ---------------------------------------------------
<S>                                                     <C>         <C>        <C>        <C>       <C>
                                                                                         Over 1
                                                         90 Days    180 Days     1 Year   Year       Total
                                                        --------  ----------  ---------  ---------  -------
Interest earning cash and due from banks                $       -          -          -         -         -
Excess funds sold                                               -          -          -         -         -
Investment securities available for sale                    2,649      4,545      9,081   115,082   131,357
Mortgage loans held for sale                               14,892          -          -         -    14,892
Gross loans                                               102,156     30,697     49,931   181,635   364,419
------------------------------------------------------  ----------  ---------  ---------  --------  -------
  Total earning assets                                    119,697     35,242     59,012   296,717   510,668
------------------------------------------------------  ----------  ---------  ---------  --------  -------
Savings and other interest-bearing deposits               185,785          -          -         -   185,785
Time deposits                                              46,448     41,320     30,245   104,345   222,358
Other borrowings                                           38,486          -          -     1,000    39,486
------------------------------------------------------  ----------  ---------  ---------  --------  -------
  Total interest-bearing liabilities                      270,719     41,320     30,245   105,345   447,629
------------------------------------------------------  ----------  ---------  ---------  --------  -------
Net asset (liability) repricing difference               (151,022)    (6,078)    28,767   191,372    63,039
------------------------------------------------------  ----------  ---------  ---------  --------  -------
Cumulative asset (liability) repricing difference       $(151,022)  (157,100)  (128,333)   63,039
------------------------------------------------------  ----------  ---------  ---------  --------
Cumulative earnings assets to cumulative
  interest-bearing liabilities                               0.44       0.50       0.63      1.14
------------------------------------------------------  ----------  ---------  ---------  --------
Cumulative asset (liability) repricing difference as a
  percent of total earning assets                          -29.58%    -30.76%    -25.13%    12.35%
------------------------------------------------------  ----------  ---------  ---------  --------
</TABLE>

     The  entire  mortgage  held  for  sale  portfolio is included in the 90-day
category,  as  the vast majority of these loans will be sold to investors within
90 days.  The interest rates on lines-of-credit included in other borrowings, as
well  as  the  interest  rate  on  the majority of the Company's long-term debt,
reprice  every  90  days or are priced at LIBOR.  As a result, these liabilities
are  also  included  in  the  90-day  category in the above table.  Non-maturing
interest  bearing  NOW  and  savings accounts and certain other interest-bearing
deposit  accounts  are  contractually  subject  to  repricing within 90 days and
therefore  are  included  in  the  90-day  category  in  the above table.  Using
historical  analysis,  management believes that these deposits are less interest
rate  sensitive  and  are  less likely to reprice, regardless of the contractual
ability  to  do so.  As a result, management believes that the interest rate gap
is  overstated  in  the  short-term  as  it  relates  to  these  deposits.

     The  table  below  presents  in  tabular  form  contractual balances of the
Company's on balance sheet financial instruments in U.S. dollars at the expected
maturity  dates  as  well  as the fair value of those on balance sheet financial
instruments  for  the  period  ended  December  31, 1999.  The expected maturity
categories  take  into  consideration  the  repricing  ability of loans, and the
callable  feature of certain investments.  The Company's liabilities that do not
have  a  stated  maturity  date  are considered to be long term in nature by the
Company  and  are  reported  in  the  thereafter  column.  The  Company does not
consider  these  financial  instruments  materially  sensitive  to interest rate
fluctuations  and  historically  the balances have remained fairly constant over
various  economic  conditions.  The  weighted  average  interest  rates  for the
various  assets  and  liabilities  presented are actual as of December 31, 1999.
The  fair  value of loans takes into consideration discounted cash flows through
the  estimated maturity or repricing dates using estimated market discount rates
that  reflect  credit  risk.  The  fair  value  of  checking,  savings  and
interest-bearing  checking accounts is the amount payable upon demand.  The fair
value  of  time  deposits is based upon the discounted value of contractual cash
flows,  which  is  estimated using current rates offered for deposits of similar
remaining  terms.  The  fair value of other borrowings approximates the carrying
value  due  to  the  borrowings  interest  rate  approximating  market  rates.


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                                                          (Dollars in thousands)

                                                                                                        Fair
                                                                                     After              Value
                                       2000      2001     2002     2003     2004      2004     Total    12/31/99
                                     ---------  -------  -------  -------  -------  --------  --------  --------
<S>                                  <C>        <C>      <C>      <C>      <C>      <C>       <C>       <C>

RATE SENSITIVE ASSETS:
Mortgage loans held for sale         $ 14,892        -        -        -        -         -    14,892     14,973
  Average interest rate                  8.21%       -        -        -        -         -      8.21%
Fixed interest rate loans            $ 87,981   34,101   22,600   15,656    3,428    22,881   186,647    184,818
  Average interest rate                  8.21%    8.18%    8.09%    7.91%    7.86%     7.80%     8.11%
Variable interest rate loans         $ 94,803   20,633   28,279   18,388    3,963    11,706   177,772    175,697
  Average interest rate                  8.86%    8.24%    8.05%    8.00%    8.11%     7.94%     8.50%
Fixed interest rate securities       $ 16,275   15,672    9,913   19,561   20,276    46,839   128,536    123,338
  Average interest rate                  6.65%    6.40%    6.29%    5.77%    6.53%     6.72%     6.46%
Variable interest rate securities           -        -        -        -        -         -         -          -
  Average interest rate                     -        -        -        -        -         -         -          -
Equity securities                    $      -        -        -        -        -     2,821     2,821      2,821

RATE SENSITIVE LIABILITIES:
Non interest-bearing checking
(with no stated maturity)            $      -        -        -        -        -    52,274    52,274     52,274
  Average interest rate                     -        -        -        -        -         -         -          -
Savings and interest-bearing
checking  (with no stated maturity)         -        -        -        -        -   185,785   185,785    185,785
  Average interest rate                     -        -        -        -        -      2.91%     2.91%         -
Time deposits                        $118,013   23,740   64,749   13,098    2,758         -   222,358    222,955
  Average interest rate                  5.17%    5.34%    6.07%    5.74%    5.00%        -      5.48%         -
Other borrowings                     $ 38,486    1,000        -        -        -         -    39,486     39,486
  Average interest rate                  5.97%    4.95%       -        -        -         -      5.95%         -
</TABLE>

     The  computations  in  the  above  table are based on numerous assumptions,
including  relative  levels  of  market  interest  rates,  discount  rates, loan
prepayments,  investment  call  options,  and  deposit  decay, and should not be
relied  upon  as indicative of actual results.  Further, the computations do not
contemplate  any  actions  the  ALCO  could  undertake in response to changes in
interest  rates.  Certain  shortcomings  are  inherent in the method of analysis
presented  in  the  computation  of  the  change  in the market value of equity.
Actual  values  may  differ  from  those  projections  presented,  should market
conditions  vary  from  assumption  used.

     There  have  been  no  material  changes  in  the market risks faced by the
Company  since  December  31,  1998.

Accounting  Standards
---------------------

     In  June  1998,  the  FASB  issued SFAS No. 133, "Accounting for Derivative
Instruments  and Hedging Activities."  This statement establishes accounting and
reporting  standards  for  derivatives instruments, including certain derivative
instruments embedded in other contracts and for hedging activities.  It requires
that any entity recognize all derivatives as either assets or liabilities in the
statement  of  financial  position  and measure those instruments at fair value.
The  accounting  for  changes  in  the fair value of a derivative depends on the
intended use of the derivative and the resulting designation.  In June 1999, the
FASB  issued  SFAS  No.  137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the effective date of Statement No. 133."  This statement
defers  the  adoption  of  SFAS 133 to fiscal quarters of fiscal years beginning
after  June 15, 2000.  SFAS No. 133 is not expected to have a material impact on
the  Company's  financial  position,  results  of  operations  or  liquidity.


                                       19
<PAGE>
     The  following  supplementary  financial  information of the registrant for
each  of  the last three years (unless otherwise stated) is included on pages 21
through  27  of  this  Report:

     Table  1     Comparison  of  Average  Balance  Sheets
     Table  2     Analysis  of  Net  Interest  Income  -  Tax  Equivalent  Basis
     Table  3     Maturity  Of  Investment  Securities
     Table  4     Analysis  of Loan Portfolio and Loss Experience (for last five
                  years)
     Table  5     Allocation  of Allowance for Loan Losses (for last five years)
     Table  6     Maturity  and  Interest  Sensitivity  of  Loans
     Table  7     Average  Deposits  (for  last  five  years)
     Table  8     Other  Borrowings
     Table  9     Return  on  Equity  and  Assets  (for  last  five  years)


                                       20
<PAGE>
                                     TABLE 1
                      COMPARISON OF AVERAGE BALANCE SHEETS

The following table sets forth registrant's consolidated average daily condensed
balance  sheet  for  each  of  the  last  three  years:


<TABLE>
<CAPTION>
                                                                                        (Dollars in thousands)

                                                                     Years  ended  December  31,
                                                   -----------------------------------------------------------
                                                           1999               1998               1997
                                                   -------------------  ------------------  ------------------
                                                                  % of               % of                % of
                                                    Amount       Total    Amount    Total     Amount    Total
                                                   ---------  --------  --------  --------  --------  --------
ASSETS:
<S>                                                <C>        <C>       <C>       <C>       <C>       <C>
  Cash and due from banks                          $ 12,981       2.5%   10,797       2.1%   10,069       2.1%
  Interest-bearing deposits in banks                      -         -         -         -         -         -
  Excess funds sold                                       -         -     2,907       0.6       547       0.1
                                                   ---------  --------  --------  --------  --------  --------
    Total cash and cash equivalents                $ 12,981       2.5    13,704       2.7    10,616       2.2

  Taxable securities available for sale            $109,353      20.8   121,784      23.7   122,190      25.2
  Tax-exempt securities available for sale           19,357       3.7    12,508       2.4     9,710       2.0

  Mortgage loans held for sale                       24,822       4.7    34,631       6.7    21,061       4.3

  Loans and leases, net of unearned income          339,946      64.6   311,195      60.6   301,421      62.2
  Less: Allowance for loan losses                     4,564       0.9     4,593       0.9     4,121       0.9
                                                   ---------  --------  --------  --------  --------  --------
    Loans, net                                      335,382      63.7   306,601      59.7   297,300      61.3

  Premises and equipment                           $ 11,502       2.2    10,647       2.1    10,150       2.1
  Goodwill, net of amortization                       2,364       0.4     2,715       0.5     3,136       0.6
  Assets of discontinued operations                   4,768       0.9     4,832       0.9     3,794       0.8
  Other assets                                        6,075       1.1     6,435       1.3     6,674       1.5
                                                   ---------  --------  --------  --------  --------  --------
    TOTAL ASSETS                                   $526,604     100.0%  513,857     100.0%  484,630     100.0%
                                                    ========  ========  ========  ========  ========  =======

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
  Non-interest bearing deposits                    $ 49,662       9.4%   42,805       8.3%   40,585       8.4%
  Interest bearing deposits                         398,584      75.7   388,948      75.7   369,728      76.2
                                                   ---------  --------  --------  --------  --------  --------
    Total deposits                                 $448,246      85.1   431,753      84.0   410,313      84.6
                                                   ---------  --------  --------  --------  --------  --------
  Other borrowings                                   33,154       6.3    36,859       7.2    33,982       7.0
  Other liabilities                                   4,127       0.8     5,611       1.1     4,609       1.0

    TOTAL LIABILITIES                              $485,527      92.2   474,223      92.3   448,904      92.6
                                                   ---------  --------  --------  --------  --------  --------

STOCKHOLDERS' EQUITY:
  Preferred stock                                  $      -         -%      298       0.1%    2,591       0.5%
  Common stock                                        1,177       0.2       721       0.1       693       0.1
  Additional paid-in capital                          7,094       1.3     6,954       1.4     5,100       1.1
  Accumulated other comprehensive (loss) earnings    (1,103)     (0.2)      781       0.2       198       0.0
  Retained earnings                                $ 33,910       6.5    30,880       6.0    27,144       5.7
                                                   ---------  --------  --------  --------  --------  --------

    STOCKHOLDERS' EQUITY                           $ 41,077       7.8    39,634       7.7    35,726       7.4
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                           $526,604     100.0%  513,857     100.0%  484,630     100.0%
                                                    ========  ========  ========  ========  ========  ========
</TABLE>


                                       21
<PAGE>
                                     TABLE 2
             ANALYSIS OF NET INTEREST INCOME - TAX EQUIVALENT BASIS

The  tables  below show information about the Company's average interest earning
assets  and  interest  bearing  liabilities, and  the changes in interest income
(tax equivalent) and interest expense attributable to volume and rate variances.
The  change  in interest income (tax equivalent) due to both volume and rate has
been  allocated  to volume and rate changes in proportion to the relationship of
the  absolute  dollar  amounts  of  the  change  in  each.


<TABLE>
<CAPTION>
                                                          (Dollars in thousands)

                                                             Average Balance                     Average Rate
                                            ---------------------------------------------  --------------------------
INTEREST EARNINGS ASSETS:                         1999              1998          1997       1999     1998     1997
                                            -----------------  --------------  ----------  --------  -------  -------
<S>                                         <C>                <C>             <C>         <C>       <C>      <C>

Taxable securities available for sale       $        109,353         121,784     122,190      6.24%    6.65%    6.81%
Tax-exempt securities available for sale(1)           19,357          12,508       9,710      8.65     8.58     9.78
                                            -----------------  --------------  ----------  --------  -------  -------
Total Securities                                     128,710         134,292     131,900      6.60     6.83     7.03
                                            -----------------  --------------  ----------  --------  -------  -------

Time deposits                                              -               -           -   N/A       N/A        2.39
Excess funds sold                                          -           2,907         547   N/A         2.51     6.03
Mortgage loans held for sale(2)                       24,822          34,631      21,061      7.47     6.91     7.39
Loans, net(1,3)                                      339,946         311,195     301,421      8.48     9.50     9.49
                                            -----------------  --------------  ----------  --------  -------  -------
Total Earning Assets (FTE)                           493,478         483,025     454,929      7.96%    8.53%    8.68%
                                            =================  ==============  ==========  ========  =======  =======

  INTEREST BEARING LIABILITIES:
Interest bearing deposits                   $        398,584         388,948     369,728      4.24%    4.58%    4.69%
Other borrowings                                      33,154          36,859      33,982      5.73     5.87     6.57
                                            -----------------  --------------  ----------  --------  -------  -------
Total Interest Bearing Liabilities          $        431,738         425,807     403,710      4.36%    4.69%    4.85%
                                            ================  ==============  ===========  ========  =======  =======

Interest Rate Spread (FTE)                                                                    3.61%    3.85%    3.88%
Net interest margin (FTE)                                                                     4.15%    4.40%    4.37%
                                                                                           ========  =======  =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                 1999/1998        1998/1997
                                                  Interest  Earned  or  Paid  Change  due  to   Change  due  to
                                                  --------------------------  ---------------   ---------------
                                                      1999    1998    1997    Volume    Rate    Volume   Rate
                                                     ------  ------  -------  -------  -------  -------  -----
INTEREST EARNING ASSETS:
<S>                                                  <C>      <C>     <C>     <C>      <C>      <C>      <C>
Taxable securities available for sale       $         6,825   8,095   8,325    (795)    (475)     (28)    (202)
Tax-exempt securities available for sale1             1,675   1,073     950     593        9      250     (127)
                                                    -------  ------  ------  -------  -------  -------  -------
Total securities                                      8,500   9,168   9,275    (202)    (466)     222     (329)
                                                    -------  ------  ------  -------  -------  -------  -------

Time deposits                               $             -       -       -       -        -        -        -
Excess funds sold                                        92      73      33      10        9       69      (29)
Mortgage loans held for sale(2)                       1,855   2,394   1,557    (721)     182      944     (107)
Net loans(1,3)                                       28,848  29,563  28,615   2,596   (3,311)     929       19
                                                    -------  ------  ------  -------  -------  -------  -------
Total Earnings Asset (FTE)                  $        39,295  41,198  39,480    1,683  (3,586)   2,164     (446)
                                                     ======  ======  =======  =======  =======  =======  =====

  INTEREST BEARING LIABILITIES:
Interest bearing deposits                   $        16,910  17,796  17,354     433   (1,319)     887     (445)
Other borrowings                                      1,899   2,165   2,234    (214)     (52)     180     (249)
                                                    -------  ------  ------  -------  -------  -------  -------
Total Interest Bearing Liabilities          $        18,809  19,961  19,588     219   (1,371)   1,067     (694)
                                                    -------  ------  ------  -------  -------  -------  -------

Net interest income (FTE)                   $        20,486  21,237  19,892    1,464  (2,215)   1,097     (248)
                                                     ======  ======  =======  =======  =======  =======  =====

______________________
1     The interest on tax-exempt investment securities and tax-exempt loans is calculated on a tax equivalent
basis assuming a blended  federal  and  state  tax  rate  of  38.74%.
2     The  yield-related  fees recognized from the origination of mortgage loans held for sale are in addition
to the interest earned  on  the  loans  during  the  period  in  which  they  are  warehoused  for  sale  as
shown  above.
3     The  balances  of  nonaccrual loans are included in average loans outstanding.  Interest on loans includes
yield-related loan  fees.
</TABLE>


                                       22
<PAGE>
                                     TABLE 3
                        MATURITY OF INVESTMENT SECURITIES

The  following  table  sets  forth  the  maturity of the registrant's investment
portfolio:

<TABLE>
<CAPTION>
                                                                          States and        Corporate     Total       Total
                                                       U.S. Government     Political       Obligations  Amortized     Fair
                                     U.S. Treasury         Agencies      Subdivisions(1)    and Other     Cost        Value
                                     ---------------  -----------------  ----------------  -----------  -----------  -------
                                     Amount   Yield    Amount    Yield   Amount    Yield     Amount        Amount    Amount
                                     -------  ------  --------  -------  -------  -------  -----------  -----------  -------
Securities available for sale(2):
<S>                                  <C>      <C>     <C>      <C>      <C>      <C>       <C>          <C>          <C>
1 year or less                      $ 4,008   5.41%     1,000     5.60%   1,247     7.02%            -        6,255   6,242
1 through 5 years                     4,092   5.59%    26,937     5.77%   4,196     6.68%            -       35,225  34,259
5 through 10 years                      774   6.50%    22,947     6.46%   8,857     6.46%            -       32,578  31,308
After 10 years                            -      -      6,859     7.60%   6,050     6.92%            -       12,909  11,893
Mortgage backed securities(3)             -      -     41,569     6.58%       -        -             -      41,569   39,636
                                     -------  ------  --------  -------  -------  -------  -----------  -----------  -------
Total debt securities               $  8,874   5.59%   99,312     6.39%  20,350     6.68%            -      128,536  123,338

Federal Home Loan Bank stock               -      -        -        -        -        -          2,052        2,052    2,052
Other equity securities                    -      -        -        -        -        -            769          769      769
                                     -------  ------  --------  -------  -------  -------  -----------  -----------  -------
Total securities available for sale $  8,874   5.59%   99,312     6.39%  20,350     6.68%        2,821      131,357  126,159
                                     =======  ======  ========  =======  =======  =======  ===========  ===========  =======
____________________________

1     Yields  were  calculated  on  a  tax  equivalent  basis  assuming  a  blended federal and state tax rate of 38.74%.
2     At  December  31,  1999, the Company did not own any investment securities from a single issuer other than the U.S.
Federal  Government,  U.S.  Federal  Government  agencies,  or U.S. Federal Government sponsored agencies that represents
greater  than  10%  of  total  equity  capital.
3     Mortgage-backed  security maturities may differ from contractual maturities because the underlying mortgages may be
called  or  prepaid  without  any penalties.  Therefore, these securities are not included within the maturity categories
above.
</TABLE>


                                       23
<PAGE>
                                     TABLE 4
                 ANALYSIS OF LOAN PORTFOLIO AND LOSS EXPERIENCE

The following table sets forth the registrant's loan portfolio by major category
for  each  of  the  last  five  years.

<TABLE>
<CAPTION>
                                                                         (Dollars  in  thousands)

                                                                    December  31,
                                                 -------------------------------------------------
                                                    1999      1998      1997      1996      1995
                                                 ---------  --------  --------  --------  --------

<S>                                              <C>        <C>       <C>       <C>       <C>
Commercial, financial and agricultural           $105,163    85,790    73,908    69,593    63,196
Real estate mortgages                             204,743   213,760   208,500   186,599   159,902
Consumer                                           18,144    29,168    32,606    35,242    33,094
Leases                                                369       478       524       892     1,455
                                                 ---------  --------  --------  --------  --------
  Gross loans                                    $364,419   329,196   315,538   292,326   257,646

Less:
Unearned discount and deferred loan fees         $    332     2,388     2,352     3,172     3,074
Allowance for possible loan losses                  4,636     4,750     4,646     3,774     3,298
                                                 ---------  --------  --------  --------  --------
  Net loans                                      $359,451   322,058   308,540   285,380   251,274
                                                 =========  ========  ========  ========  ========

SUMMARY OF LOAN LOSS EXPERIENCE:
-----------------------------------------------
Allowance for loan and lease losses, beginning   $  4,750     4,646     3,774     3,298     3,475
Amounts charged-off:
  Commercial, financial and agricultural               24        11        60       270       268
  Real estate mortgages                               195       275         -        43       175
  Consumer                                            348       748       677       783       547
                                                 ---------  --------  --------  --------  --------
Total charge-offs                                $    567     1,034       737     1,096       990
                                                 ---------  --------  --------  --------  --------

Recoveries on amounts previously charged-off:
  Commercial, financial and agricultural         $    101       230       274       236       133
  Real estate mortgages                                23        17         -        17         -
  Consumer                                             74       178       174        88       151
                                                 ---------  --------  --------  --------  --------
Total recoveries                                 $    198       425       448       341       284
                                                 ---------  --------  --------  --------  --------
  Net charge-offs                                $    369       609       289       755       706

Provision charged to expense                     $    695       713     1,128     1,113       478
Addition to dealer reserve                              -         -        33       118        51
Allowance for loans sold                             (440)        -         -         -         -
                                                 ---------  --------  --------  --------  --------
  Allowance for loans and lease losses           $  4,636     4,750     4,646     3,774     3,298
                                                 =========  ========  ========  ========  ========

Non-performing loans at year-end:
  Non-accrual                                    $  2,685     2,262     3,968     2,348     2,064
  Restructured                                        120       208       139       314       270
                                                 ---------  --------  --------  --------  --------
Total non-performing loans                       $  2,805     2,470     4,107     2,662     2,334
                                                 =========  ========  ========  ========  ========

Past due 90 days or more, not included above     $    573       347       345        49        15
Other real estate, not included above                 201         -         -        75         -

RATIOS:
-----------------------------------------------
Allowance to year-end loans, net of unearned         1.27%     1.45%     1.48%     1.31%     1.30%
Allowance to non-performing loans                  165.28    192.31    113.12    141.77    141.30
Net charge-offs to average loans (gross)             0.11      0.19      0.10      0.28      0.29
Recoveries to charge-offs                           34.92     41.10     60.79     31.11     28.69
Non-performing loans to loans, net of unearned
  discount and deferred loan fees                    0.77      0.76      1.31      0.92      0.92
</TABLE>


                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                  TABLE 5
                                  ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

The  following  table  shows  the  registrant's  allowance  for  loan  losses  for  the  last  five years.

                                                                                    (Dollars in thousands)


                                         Commercial      Real
                                        Financial &     Estate
                                        Agricultural   Mortgage   Consumer   Leases   Unallocated   Total
                                       --------------  ---------  ---------  -------  -----------  -------
<S>                                    <C>             <C>        <C>        <C>      <C>          <C>

December 31, 1999                      $       1,889      1,185      1,357        5           200   4,636
% of loans in category to total loans          29.09%     65.85%      4.96%    0.10%          N/A  100.00%

December 31, 1998                      $       1,811      1,148      1,586        5           200   4,750
% of loans in category to total loans          26.06%     64.93%      8.86%    0.15%          N/A  100.00%

December 31, 1997                      $       1,779      1,407      1,247       13           200   4,646
% of loans in category to total loans          23.42%     66.08%     10.33%    0.17%          N/A  100.00%

December 31, 1996                      $       1,376      1,129      1,054       15           200   3,774
% of loans in category to total loans          23.85%     63.80%     12.05%    0.30%          N/A  100.00%

December 31, 1995                      $       1,420      1,133        519       26           200   3,298
% of loans in category to total loans          24.77%     61.86%     12.80%    0.56%          N/A  100.00%
</TABLE>

<TABLE>
<CAPTION>
                                                         TABLE 6
                                        MATURITY AND INTEREST SENSITIVITY OF LOANS

The  following  table  shows  the  maturity  of  the  registrant's  loan  portfolio.
                                                                                                   (Dollars in thousands)


                                                              As of December 31, 1999
                                      -------------------------------------------------------------------------
                                                                                                  Loans  Due
                                                   Time Remaining to Maturity                   After One Year
                                      -------------------------------------------------------  ----------------
                                                                                                Fixed   Floating
                                        Due Within        One to Five    After Five            Interest Interest
                                         One Year            Years         Years      Total      Rate     Rate
                                      -----------------  --------------  ----------  --------  --------  ------
Commercial, financial, agricultural,
<S>                                   <C>                <C>             <C>         <C>       <C>       <C>
  and leases                          $          64,853          28,847      11,832   105,532    27,918  12,761
Real estate mortgages                           107,628         111,247      21,868   240,743    62,938  70,177
Consumer                                         10,303           6,954         887    18,144     7,810      31
                                      -----------------  --------------  ----------  --------  --------  ------
Total                                 $         182,784         147,048      34,587   364,419    98,666  82,969
------------------------------------  =================  ==============  ==========  ========  ========  ======
</TABLE>


                                       25
<PAGE>
<TABLE>
<CAPTION>
                                     TABLE 7
                                 AVERAGE DEPOSITS

The  following  table  sets  forth  the  registrant's  average daily deposits and
average  rate  paid  on  the  interest bearing deposits for each of the last five
years:


(Dollars in thousands)
                                              DECEMBER 31,
                        ---------------------------------------------------------
                        Non-Interest   Interest
                           Bearing      Bearing
                           Demand       Demand     Savings     Time       Total
                          Deposits     Deposits   Accounts   Deposits   Deposits
                        -------------  ---------  ---------  ---------  ---------
<S>                     <C>            <C>        <C>        <C>        <C>

1999 Average
  Balance               $      49,662    84,821     93,997    219,776    448,246
  Rate                             --      2.51%      2.81%      5.45%      4.20%
1998 Average
  Balance               $      42,805    78,465     78,725    231,758    431,753
  Rate                             --      2.61%      2.82%      5.75%      4.52%
1997 Average
  Balance               $      40,585    71,527     72,899    225,302    410,313
  Rate                             --      2.83%      3.10%      5.79%      4.76%
1996 Average
  Balance               $      39,292    68,621     76,087    207,248    391,248
  Rate                             --      2.52%      3.14%      5.79%      4.58%
1995 Average
  Balance               $      36,702    66,416     75,884    181,746    360,748
  Rate                             --      2.51%      3.39%      5.67%      4.49%
</TABLE>

The  following  table  sets forth the registrant's maturity distribution for all
time  deposits  of  $100,000  or  more  as  of  December  31,  1999.

         MATURITY DISTRIBUTION FOR ALL TIME DEPOSITS OF $100,000 OR MORE

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                                            December 31, 1999
                                    -----------------------------------------
                                    3 Months   3 - 6  6 - 12  Over 12
                                    or Less   Months  Months  Months   Total
                                    -------  -------  ------  -------  ------
<S>                                <C>       <C>      <C>     <C>      <C>
Time deposits of $100,000 or more  $ 20,773   7,293   14,493  16,134   58,693
</TABLE>


                                       26
<PAGE>
<TABLE>
<CAPTION>
                                     TABLE 8
                                OTHER BORROWINGS

The  following  table  sets forth a summary of the registrant's other borrowings
for  each  of  the  last  three  years.

                                     (Dollars in thousands)


                                         December 31,
                                   ------------------------
                                     1999     1998    1997
                                   --------  ------  ------
<S>                                <C>       <C>     <C>

Repurchase agreements              $    336     313   4,268
Federal funds purchased              24,500  33,900  21,850
Federal Home Loan Bank borrowings     7,700   7,700   8,932
Secured Term Loan                     6,050   8,300   9,250
Other                                   900   4,284   5,007
                                   --------  ------  ------
  Total                            $ 39,486  54,497  49,307
                                   ========  ======  ======
</TABLE>

                                     TABLE 9
                           RETURN ON EQUITY AND ASSETS

The following table sets forth the registrant's return on average assets, return
on  average  equity,  dividend payout ratio, and average equity to average asset
ratio  for  the  last  five  years:

<TABLE>
<CAPTION>
                                                     December 31,
                                       ---------------------------------------------
<S>                                    <C>            <C>     <C>     <C>     <C>
                                               1999    1998    1997    1996    1995
                                       -------------  ------  ------  ------  ------
Return on average assets                       0.05%   0.92%   0.62%   0.40%   0.80%
Return on average equity                       0.64   11.95    8.43    5.36    9.94
Common stock dividend payout ratio           267.43   11.91   15.20   22.45   10.97
Average equity to average asset ratio          7.80    7.71    7.37    7.45    8.03
</TABLE>


                                       27
<PAGE>
Item  7A.  Quantitative  and  Qualitative  Disclosures  About  Market  Risk
---------------------------------------------------------------------------

     See  Item  7  above.

Item  8.  Financial  Statements  and  Supplementary  Data
---------------------------------------------------------

Consolidated  Balance  Sheets

December  31,  1999  and  1998
<TABLE>
<CAPTION>
(Dollars in thousands, except share data)
------------------------------------------------------------------  ---------  -------
<S>                                                                 <C>        <C>
  ASSETS                                                                1999      1998
------------------------------------------------------------------  ---------  -------
Cash and due from banks (note 2)                                    $ 17,501    12,269
------------------------------------------------------------------  ---------  -------
Investment securities available for sale (note 3)                    126,159   132,060
------------------------------------------------------------------  ---------  -------
Mortgage loans held for sale, lower of cost or market                 14,892    66,755
------------------------------------------------------------------  ---------  -------
Loans  (note 4)                                                      364,419   329,196
  Less:
    Allowance for possible loan losses  (note 4)                       4,636     4,750
    Unearned income and deferred loan fees                               332     2,388
------------------------------------------------------------------  ---------  -------
Net loans                                                            359,451   322,058

Premises and equipment  (note 5)                                      11,547    10,936
Goodwill, net of amortization                                          2,210     2,515
Assets of discontinued operations (note 18)                            2,878     5,686
Other assets                                                           6,212     6,003
------------------------------------------------------------------  ---------  -------
                                                                    $540,850   558,282
==================================================================  =========  =======
  LIABILITIES AND STOCKHOLDERS' EQUITY
==================================================================  =========  =======
Liabilities:
  Deposits:
    Noninterest-bearing                                               52,274    50,371
    Interest-bearing  (note 6)                                       408,143   404,621
------------------------------------------------------------------  ---------  -------
Total deposits                                                       460,417   454,992
  Other borrowings  (note 7)                                          39,486    54,497
  Other liabilities                                                    3,539     7,248
------------------------------------------------------------------  ---------  -------
Total liabilities                                                    503,442   516,737
------------------------------------------------------------------  ---------  -------
Stockholders' equity:
  Common stock, $.33 1/3 par value; 25,000,000 shares authorized,
    4,369,663 and 4,343,710 shares issued and outstanding in 1999
    and 1998, respectively                                             1,457     1,448
  Additional paid-in capital                                           6,830     6,439
  Accumulated other comprehensive (loss) earnings  (note 8)           (3,164)      934
  Retained earnings  (notes 11 and 12)                                32,285    32,724
------------------------------------------------------------------  ---------  -------
Total stockholders' equity                                            37,408    41,545
Commitments and contingent liabilities (notes 13 and 14)
------------------------------------------------------------------  ---------  -------
                                                                    $540,850   558,282
==================================================================  =========  =======
See accompanying notes to consolidated financial statements.
</TABLE>


                                       28
<PAGE>
<TABLE>
<CAPTION>
Consolidated  Statements  of  Earnings

Years  Ended  December  31,  1999,  1998,  and  1997
(Dollars  in  thousands,  except  share  data)
----------------------------------------------------

                                                                            1999      1998      1997
----------------------------------------------------------------------  ---------  --------  --------
<S>                                                                     <C>        <C>       <C>
Interest income:
  Interest and fees on loans                                            $ 28,452    29,385    28,537
  Interest and dividends on investment securities available for sale:
    Taxable                                                                6,825     8,095     8,325
    Nontaxable                                                             1,025       657       582
  Interest on excess funds sold                                               93        73        33
  Interest on mortgage loans held for sale                                 1,855     2,394     1,557
----------------------------------------------------------------------  ---------  --------  --------
Total interest income                                                     38,250    40,604    39,034
----------------------------------------------------------------------  ---------  --------  --------
Interest expense:
  Interest on deposits                                                    16,910    17,796    17,355
  Interest on other borrowings                                             1,899     2,165     2,234
----------------------------------------------------------------------  ---------  --------  --------
Total interest expense                                                    18,809    19,961    19,589
----------------------------------------------------------------------  ---------  --------  --------
Net interest income before provision for possible loan losses             19,441    20,643    19,445
Provision for possible loan losses  (note 4)                                 695       713     1,128
----------------------------------------------------------------------  ---------  --------  --------
Net interest income after provision for possible loan losses              18,746    19,930    18,317
----------------------------------------------------------------------  ---------  --------  --------
Other operating income:
  Trust fees                                                                 826       769       662
  Deposit service charges                                                    401       358       375
  Other service charges                                                    1,647     1,224     1,178
  Investment securities gains, net  (note 3)                                 250       154       210
  Mortgage loan origination income                                         1,039     1,820     1,113
  Other income                                                             1,320     1,211       900
----------------------------------------------------------------------  ---------  --------  --------
Total other operating income                                               5,483     5,536     4,438
----------------------------------------------------------------------  ---------  --------  --------
Other operating expenses:
  Salaries and employee benefits  (note 9)                                10,084    11,202    10,928
  Net occupancy expense of premises                                        1,294     1,405     1,332
  Furniture and fixtures                                                   1,440     1,399     1,382
  Office supplies                                                            377       412       339
  Outside services                                                           948       911       636
  Advertising expense                                                        400       438       412
  FDIC insurance assessment                                                   52        51        49
  Postage and courier expense                                                377       472       352
  Telephone expense                                                          343       309       431
  Loss on sale of loans                                                      514         -         -
  Amortization expense-goodwill                                              305       388       388
  Other expenses                                                           2,239     2,178     2,035
----------------------------------------------------------------------  ---------  --------  --------
Total other operating expenses                                            18,373    19,165    18,284
----------------------------------------------------------------------  ---------  --------  --------
Earnings before income taxes                                               5,856     6,301     4,471
Income tax expense  (note 8)                                               1,809     2,142     1,461
----------------------------------------------------------------------  ---------  --------  --------
Net earnings from continuing operations                                 $  4,047     4,159     3,010
----------------------------------------------------------------------  ---------  --------  --------
Discontinued operations (note 18)                                       $ (3,786)      576         3
----------------------------------------------------------------------  ---------  --------  --------
Net earnings                                                            $    261     4,735     3,013
----------------------------------------------------------------------  ---------  --------  --------
Net earnings applicable to common stock                                 $    261     4,712     2,811
----------------------------------------------------------------------  ---------  --------  --------
Basic earnings per common share from
  Continuing operations                                                 $   0.93      0.96      0.68
  Discontinued operations                                                  (0.87)     0.13      0.00
  Net earnings                                                              0.06      1.09      0.68
Diluted earnings per common share from
  Continuing operations                                                 $   0.92      0.95      0.67
  Discontinued operations                                                  (0.86)     0.13      0.00
  Net earnings                                                              0.06      1.08      0.67
======================================================================  =========  ========  ========
See accompanying notes to consolidated financial statements.


                                       29
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity

Years Ended December 31, 1999, 1998, and 1997
(Dollars in thousands, except share data)
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Accumulated Other
                                                                                                              Comprehensive
                                                                        Preferred   Common             Retained   (loss)
                                                                          stock     stock    Surplus   earnings  earnings  Total
----------------------------------------------------------------------  ---------  --------  --------  -------  -------  -------
Balance as of January 1, 1997                                           $  2,600     1,382     4,310   26,223      447   34,962
Comprehensive earnings
  Net earnings                                                                 -         -         -    3,013        -    3,013
  Unrealized gain on investment securities                                     -         -         -        -      425      425
  Reclassified adjustments for gains included
     in net earnings                                                           -         -         -        -     (210)    (210)
  Income tax effect                                                            -         -         -        -      (85)     (85)
                                                                                                                         -------
  Total comprehensive earnings                                                 -         -         -        -        -    3,143
Issuance of 27,326 shares of common stock                                      -        10       248        -        -      258
Redemption of preferred stock with issuance of
  132,622 shares of common stock                                          (2,300)       44     1,415        -        -     (841)
Cash dividends on preferred stock                                              -         -         -     (202)       -     (202)
Cash dividends on common stock ($0.11 per share)                               -         -         -     (458)       -     (458)
----------------------------------------------------------------------  ---------  --------  --------  -------  -------  -------
Balance as of December 31, 1997                                         $    300     1,436     5,973   28,576      577   36,862
Comprehensive earnings
  Net earnings                                                                 -         -         -    4,735        -    4,735
  Unrealized gain on investment securities                                     -         -         -        -      727      727
  Reclassified adjustments for gains included
     in net earnings                                                           -         -         -        -     (154)    (154)
  Income tax effect                                                            -         -         -        -     (216)    (216)
                                                                                                                         -------
Issuance of 38,524 shares of common stock                                      -        12       466        -        -      478
Redemption of preferred shares                                              (300)        -         -        -        -     (300)
Cash dividends on preferred stock                                              -         -         -      (23)       -      (23)
Cash dividends on common stock ($0.13 per share)                               -         -         -     (564)       -     (564)
----------------------------------------------------------------------  ---------  --------  --------  -------  -------  -------
Balance as of December 31, 1998                                         $      0     1,448     6,439   32,724      934   41,545
Comprehensive loss
  Net earnings                                                                 -         -         -      261        -      261
  Unrealized loss on investment securities                                     -         -         -        -   (6,431)  (6,431)
  Reclassified adjustments for gains included
     in net earnings                                                           -         -         -        -     (250)    (250)
  Income tax effect                                                            -         -         -        -    2,583    2,583
                                                                                                                         -------
  Total comprehensive loss                                                     -         -         -        -        -   (3,837)
Issuance of 25,953 shares of common stock                                      -         9       391        -        -      400
Cash dividends on common stock ($0.16 per share)                               -         -         -     (700)       -     (700)
----------------------------------------------------------------------  ---------  --------  --------  -------  -------  -------
Balance at December 31, 1999                                            $      0     1,457     6,830   32,285   (3,164)  37,408
======================================================================  =========  ========  ========  =======  =======  =======
See accompanying notes to consolidated financial statements.


                                       30
<PAGE>
Consolidated Statements of Cash Flows

Years Ended December 31, 1999, 1998, and 1997
(Dollars in thousands)                                                      1999      1998      1997
----------------------------------------------------------------------  ---------  --------  --------
Cash flows from continuing operating activities:
  Interest received                                                     $ 36,335    40,231    38,507
  Fees received                                                            4,779     5,488     4,451
  Net decrease (increase) in mortgage loans held for sale                 52,091   (22,600)  (24,411)
  Interest paid                                                          (19,101)  (19,965)  (19,162)
  Cash paid to suppliers and employees                                   (17,806)  (16,712)  (16,136)
  Income taxes paid                                                       (1,002)   (2,695)   (1,784)
----------------------------------------------------------------------  ---------  --------  --------
Net cash provided by (used in) continuing operating activities            55,296   (16,253)  (18,535)
----------------------------------------------------------------------  ---------  --------  --------
Cash flows from investing activities:
  Proceeds from:
    Maturities of investment securities available for sale                16,696    40,639    29,837
    Sales of investment securities available for sale                     26,828    38,406    59,152
  Purchases of investment securities available for sale                  (44,611)  (80,197)  (85,310)
  Net increase in loans                                                  (37,297)  (14,331)  (23,371)
  Premises and equipment expenditures                                     (1,885)   (1,883)   (1,925)
----------------------------------------------------------------------  ---------  --------  --------
Net cash used in investing activities                                    (40,269)  (17,366)  (21,617)
----------------------------------------------------------------------  ---------  --------  --------
Cash flows from financing activities:
  Net increase (decrease) in demand deposits, NOW accounts,
     and savings accounts                                                  7,685    34,885    (1,026)
  Net (decrease) increase in certificates of deposit                      (2,260)   (5,210)   21,415
  Dividends paid on preferred stock                                            -       (23)     (202)
  Dividends paid on common stock                                            (609)     (510)     (208)
  Net proceeds from short-term debt                                      (10,761)    5,141    19,468
  Issuance of long term debt                                                   -     1,000     1,000
  Repayment of long-term debt                                             (4,250)     (950)     (900)
  Redemption of preferred stock                                                -      (300)   (2,300)
  Issuance of common stock                                                   400       478     1,717
----------------------------------------------------------------------  ---------  --------  --------
Net cash (used in) provided by financing activities                       (9,795)   34,511    38,964
----------------------------------------------------------------------  ---------  --------  --------
Net change in cash and due from banks from continuing operations           5,232       892    (1,188)
Cash and due from banks at beginning of year                              12,269    11,377    12,565
----------------------------------------------------------------------  ---------  --------  --------
Cash and due from banks at end of year                                  $ 17,501    12,269    11,377
----------------------------------------------------------------------  ---------  --------  --------
Reconciliation of net earnings to net cash provided
  by (used in) continuing operating activities:
    Net earnings                                                        $    261     4,735     3,013
    Adjustments to reconcile net earnings to net cash provided
       by continuing operating activities:
        Discontinued Operations                                            3,786      (576)       (3)
        Depreciation and amortization                                      1,681     1,796     1,801
        Provision for possible loan losses                                   695       713     1,128
        Gains on sale of investment securities                              (250)     (154)     (210)
      Increase (decrease) in:
        Income taxes payable                                                 807      (553)     (323)
        Interest payable                                                    (292)       (5)      426
        Unearned income                                                   (2,056)       36      (821)
        Other liabilities                                                 (1,114)      833       348
      Decrease (increase) in:
        Interest receivable                                                  208      (358)      363
        Other assets                                                        (454)      105       223
      Decrease (increase) in mortgage loans held for sale                 52,091   (22,600)  (24,411)
      Discount accretion recorded as income                                 (369)     (485)     (380)
      Premium amortization charged against income                            302       260       311
----------------------------------------------------------------------  ---------  --------  --------
Net cash provided by (used in) continuing operating activities          $ 55,296   (16,253)  (18,535)
======================================================================  =========  ========  ========
Net change in cash and due from banks from discontinued operations      $ (2,080)    1,194       813
======================================================================  =========  ========  ========

See accompanying notes to consolidated financial statements.
</TABLE>


                                       31
<PAGE>
Years  Ended  December  31,  1999,  1998,  and  1997
----------------------------------------------------
(1)     SUMMARY  OF SIGNIFICANT ACCOUNTING POLICIES - The consolidated financial
statements  of Castle BancGroup, Inc. and subsidiaries (Company) are prepared in
conformity  with  generally  accepted  accounting  principles  and  prevailing
practices  of  the  financial services industry which require management to make
estimates that affect the reported financial position and results of operations.
Actual results could differ from those estimates.  The following is a summary of
the  significant  accounting  and  reporting  policies  used  in  preparing  the
consolidated  financial  statements.

     (A)     BASIS  OF  CONSOLIDATION.  The  accompanying consolidated financial
statements  include  the  accounts of the Company and the Company's wholly owned
subsidiaries,  Castle  Bank,  N.A.  (CB),  First  National Bank in DeKalb (FNB),
Castle  Finance  Company  (CFC), CasBanc Mortgage, Inc. (CMI), and SBI Illinois,
Inc.,  which  owns  100%  of  Castle  Bank  Harvard,  N.A.  (CBH).  Significant
intercompany  transactions  and  accounts have been eliminated in consolidation.
CMI  is  reported  as  a  discontinued  operation  (see  note  18).

     (B)     INVESTMENT  SECURITIES AVAILABLE FOR SALE.  Investments in debt and
equity  securities  have  been  classified as available-for-sale and reported at
fair  value.  The  amortized valued is adjusted for amortization of premiums and
accretion of discounts using a method that approximates level yield.  Unrealized
gains  and  losses,  net  of  related  deferred  income  taxes,  are reported in
stockholders'  equity.

     Gains  and  losses from the sale of investment securities prior to maturity
are  computed  under  the  specific  identification  method  and are included in
investment  securities  gains,  net,  in the consolidated statement of earnings.

     (C)     MORTGAGE  LOANS  HELD  FOR  SALE.  Mortgage loans held for sale are
valued  at  the  lower  of  cost  or  market  value as determined by outstanding
commitments  from  investors  or  current  investor  yield  requirements  on  an
aggregate basis.  Holding costs are treated as period costs.  The mortgage loans
held  for  sale presented on the Company's Consolidated Balance Sheets represent
mortgages  currently  held  for  sale  by  the Subsidiary Banks.  These balances
relate to both mortgages originated in the banking segment, as well as mortgages
originated by CMI and subsequently sold to the Subsidiary Banks to hold for sale
to  third party investors.  Mortgage loans held for sale by CMI (i.e., those not
sold to the Subsidiary Banks) are presented in assets of discontinued operations
on  the  Consolidated  Balance  Sheets.

     (D)     MORTGAGE  LOAN  ORIGINATION  INCOME.  Gains  or losses on sales and
service  release  premiums of mortgage loans held for sale are recognized at the
time  the  loans  are purchased by the permanent investor and are based upon the
difference  between  the  selling  price  and  the carrying value of the related
mortgage  loan  sold.  All  mortgage  loans are sold servicing released, and the
related  premiums are recognized at the time loans are sold. Points, application
and  other  origination  fees,  net  of  appraisal, credit report and inspection
costs,  are  recognized at closing on mortgage loans held for sale. The mortgage
loan  origination  income  presented on the Company's Consolidated Statements of
Earnings  represents  the income derived from the mortgage lending activities of
the  banking  segment.  The  mortgage loan origination income produced by CMI is
presented  as  a  component  of  discontinued  operations  in  the  Consolidated
Statements  of  Earnings.

     (E)     LOANS.  Loans  are  carried  at  the principal balance outstanding.
Interest  on loans is computed on the principal balance outstanding, except that
interest  on  certain  consumer  loans  is  recognized  using  the
sum-of-the-months-digit  method.  No interest income on non-accrual and impaired
loans  is  recognized  until  the  principal  is collected.  Loans are generally
placed  on  non-accrual  status  when  they  are  past  due 90 days as to either
interest  or  principal.  However,  loans  well  secured  and  in the process of
collection  may  remain  on  accrual  status,  at  the judgment of senior credit
management.  A  non-accrual  loan may be restored to accrual basis when interest
and  principal  payments  are  current  and prospects for future payments are no
longer  in  doubt.

     Loans  are  considered  impaired  when,  based  on  current information and
events,  it is probable that the Company will not be able to collect all amounts
due  according  to  the  contractual  terms of the loan agreement. Impairment is
measured  based  on  the  present  value  of  expected  future  cash  flows,  or
alternatively, the observable market price of the loans or the fair value of the
collateral.  However,  for  those  loans  that are collateral dependent, and for
which  management  has  determined  foreclosure  is  probable,  the  measure  of
impairment  is based on the fair value of the collateral less estimated disposal
costs.


                                       32
<PAGE>
     (F)     LOAN  FEES.  The  Subsidiaries  defer  all  material fees and costs
associated  with  the  origination of loans and leases.  Such fees and costs are
amortized,  using a level yield method, over the period to maturity or sale date
of  the  loans  and  leases.

     (G)     ALLOWANCE FOR POSSIBLE LOAN LOSSES.  An allowance for possible loan
losses  is  maintained  at  a level deemed adequate by management to provide for
known  and inherent losses in the loan portfolio.  The allowance is based upon a
continuing review of specific loans, past loan loss experience, current economic
conditions  that  may  affect  the borrowers' ability to pay, and the underlying
collateral value of the loans.  Loans deemed to be uncollectible are charged off
and  deducted  from  the  allowance.  The provision for possible loan losses and
recoveries  on  loans  previously  charged  off  are  added  to  the  allowance.

     (H)     PREMISES  AND EQUIPMENT.  Premises and equipment are stated at cost
less  accumulated  depreciation.  Depreciation  is  charged  to  expense  on  a
straight-line  or  accelerated  basis  over  the  estimated  useful lives of the
respective  assets,  as follows:  building and improvements, 15 to 40 years; and
furniture,  fixtures,  and  equipment,  3  to  10  years.

     (I)     GOODWILL.  The  total cost of the Company's acquisitions of various
subsidiaries  relating to continuing operations exceeded their fair value of net
assets  acquired  by  approximately $5,892,000.  This amount, net of accumulated
amortization  of  $3,682,000  and  $3,377,000  at  December  31,  1999 and 1998,
respectively,  is  shown  as  goodwill  in the accompanying consolidated balance
sheets.

     The cost of the Company's acquisition of CMI (i.e. discontinued operations)
exceeded  the fair value of the net assets acquired by approximately $1,922,000.
The  remaining  carrying value of CMI's goodwill was written-off at December 31,
1999,  such  that  the  accumulated  amortization was $1,922,000 and $470,000 at
December  31,  1999  and  1998,  respectively.

     The  goodwill  for  continuing  operations is being amortized on a straight
line basis over 15 years.  Goodwill and other valuation intangibles are reviewed
for  impairment when events or future assessments of profitability indicate that
the  carrying  value  may  not  be  recoverable.

     (J)     OTHER  REAL  ESTATE  OWNED.  Other  real  estate  owned  includes
foreclosures  and  property  acquired in forgiveness of debt, and is included in
other  assets in the accompanying consolidated balance sheets.  These properties
are  carried at the lower of cost or fair market value, less the estimated costs
of disposal.  Losses arising from the acquisition of property in full or partial
satisfaction  of  loans  are  treated as loan losses.  Any subsequent losses are
charged  to  other  expenses.

     (K)     INCOME  TAXES.  Deferred  tax assets and liabilities are recognized
for  the  future  tax  consequences  attributable  to  differences  between  the
financial  statement  carrying  amounts  of  existing assets and liabilities and
their  respective  tax  bases  and net operating loss (NOL) and tax credit carry
forwards.  Deferred  tax  assets  and liabilities are measured using enacted tax
rates  expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  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.

     The  Company  and Subsidiaries file a consolidated Federal and State income
tax  returns.

     (L)     EARNINGS PER SHARE.  Basic earnings per share (EPS) is based on the
weighted  average  number of common shares outstanding.  Diluted EPS is based on
the  weighted average number common shares outstanding, increased by the assumed
conversion  of  the  convertible  preferred  stock and exercise of the Company's
stock  options.     All  information  relating to per common share data reflects
the  May  1999  2-for-1  stock  split  in  the  form  of  a 100% stock dividend.

     The  components  of  basic and diluted EPS for the years ended December 31,
1999,  1998,  and  1997  were  as  follows:


                                       33
<PAGE>
     The  components  of  basic and diluted EPS for the years ended December 31,
1999,  1998,  and  1997  were  as  follows:

                                     (Dollars in thousands, except share data)
<TABLE>
<CAPTION>
                                                                               1999        1998       1997
-------------------------------------------------------------------------  -----------  ---------- ----------
<S>                                                                        <C>          <C>         <C>
Basic EPS:
  Net earnings                                                                     261       4,735        3,013
  Less:  preferred stock dividends                                                   -         (23)        (202)
                                                                           -----------  -----------  -----------
    Net earnings available to common stockholders                          $       261       4,712        2,811
                                                                           -----------  -----------  -----------

  Average common shares                                                      4,358,888    4,327,28    4,158,502
                                                                           ===========  ===========  ===========

  Basic EPS                                                                $      0.06        1.09         0.68
                                                                           -----------  -----------  -----------

Diluted EPS
  Net earnings available to common stockholders                            $       261       4,712        2,811
  Assumed conversion of preferred stock (anti-dilutive in 1997)                      -          23          N/A

  Net earnings available to common stockholders after assumed conversion   $       261       4,735        2,811
                                                                           ===========  ===========  ===========

  Average common shares                                                      4,358,888   4,327,288    4,158,502

  Assumed conversion of preferred stock (anti-dilutive in 1997)                      -      21,818          N/A

  Assumed exercise of stock options                                             56,459      37,438       44,376
                                                                           -----------  -----------  -----------

  Average common shares after assumed conversions                            4,415,347   4,386,544    4,202,878
                                                                           ===========  ===========  ===========

Diluted EPS                                                                $      0.06        1.08         0.67
                                                                           ===========  ===========  ===========
</TABLE>

(2)     CASH  AND  DUE  FROM  BANKS - Certain of the Company's subsidiary banks,
which  are  members  of  the  Federal  Reserve  System, are required to maintain
certain  daily  reserve  balances  in  accordance  with  Federal  Reserve  Board
requirements.  The  reserves  required  to  be maintained at the Federal Reserve
Bank  averaged  $3,275,000  and $1,060,000 in 1999 and 1998, respectively.  Cash
and due from banks include cash on hand and in banks with original maturities of
three  months  or  less.

(3)     INVESTMENT SECURITIES - A comparison of amortized cost and fair value of
investment  securities available for sale at December 31, 1999 and 1998 follows:
                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                 December 31, 1999
-----------------------------------------------  ----------------------------------------------------
                                                                     Gross       Gross
                                                 Amortized           Unrealized  Unrealized   Fair
                                                 Cost                Gains       Losses       Value
-----------------------------------------------  ------------------  ----------  -----------  -------
<S>                                              <C>                 <C>         <C>          <C>
U.S. Treasury and agency obligations             $           66,617           3      (2,352)   64,268
Obligations of state and political subdivisions              20,350          14        (930)   19,434
Mortgage-backed securities                                   41,569           6      (1,939)   39,636
-----------------------------------------------  ------------------  ----------  -----------  -------
Total debt securities                            $          128,536          23      (5,221)  123,338
-----------------------------------------------  ------------------  ----------  -----------  -------
Federal Home Loan Bank stock                     $            2,052           -           -     2,052
Other equity securities                                         769           -           -       769
-----------------------------------------------  ------------------  ----------  -----------  -------
Total securities                                 $          131,357          23      (5,221)  126,159
===============================================  ==================  ==========  ===========  =======


                                       34
<PAGE>
                                                                  December 31, 1998
-----------------------------------------------  ----------------------------------------------------
                                                                          Gross        Gross
                                                          Amortized  Unrealized   Unrealized     Fair
                                                               Cost       Gains       Losses    Value
-----------------------------------------------  ------------------  ----------  -----------  -------
U.S. Treasury and agency obligations             $           66,082       1,008         (17)   67,073
Obligations of state and political subdivisions              15,329         277         (36)   15,570
Mortgage-backed securities                                   47,050         381        (130)   47,301
-----------------------------------------------  ------------------  ----------  -----------  -------
Total debt securities                            $          128,461       1,666        (183)  129,944
-----------------------------------------------  ------------------  ----------  -----------  -------
Federal Home Loan Bank stock                     $            1,673           -           -     1,673
Other equity securities                                         433           -           -       443
-----------------------------------------------  ------------------  ----------  -----------  -------
Total securities                                 $          130,577       1,666        (183)  132,060
===============================================  ==================  ==========  ===========  =======
</TABLE>

     The  amortized  cost  and  fair  value  of securities available for sale at
December  31,  1999  by contractual maturity, are shown below. Actual maturities
may  differ  from contractual maturities because borrowers may have the right to
call  or  prepay  obligations  with  or  without  call  or prepayment penalties.

                                                          (Dollars in thousands)

                                            December  31,  1999
                                        ---------------------------
<TABLE>
<CAPTION>
                                        Amortized Cost   Fair Value
                                        ---------------  ----------
<S>                                     <C>              <C>
Due in one year or less                 $         6,255       6,242
Due after one year through five years            35,225      34,259
Due after five years through ten years           32,578      31,308
Due after ten years                              12,909      11,893
--------------------------------------  ---------------  ----------
                                                 86,967      83,702
Mortgage-backed securities                       41,569      39,636
--------------------------------------  ---------------  ----------
Total debt securities                           128,536     123,338
Federal Home Loan Bank stock                      2,052       2,052
Other equity securities                             769         769
--------------------------------------  ---------------  ----------
Total securities                        $       131,357     126,159
======================================  ===============  ==========
</TABLE>

     Gross gains of approximately $312,000, $167,000, and $409,000 occurred from
security  activity  during  1999, 1998, and 1997, respectively.  Gross losses of
approximately  $62,000,  $13,000,  and  $199,000 occurred from security activity
during  1999,  1998, and 1997, respectively.  All security gains and losses were
as  a  result  of  transactions  involving  available-for-sale  securities.

     Investment  securities carried at approximately $82,802,000 and $83,062,000
at December 31, 1999 and 1998, respectively, were pledged to secure deposits and
for  other  purposes  permitted  or  required  by  law.

(4)     LOANS  -  The  composition  of  the  loan portfolio at December 31 is as
follows:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                             1999     1998
                                         --------  -------
<S>                                      <C>       <C>
Commercial, financial, and agricultural  $105,163   85,790
Real estate mortgage                      240,743  213,760
Consumer                                   18,144   29,168
Lease financing receivables                   369      478
---------------------------------------  --------  -------
Total                                    $364,419  329,196
=======================================  ========  =======
</TABLE>


                                       35
<PAGE>
     The  Company  provides  several  types  of  loans  to  customers, including
residential,  construction,  commercial  and  installment  loans.  The  largest
component  of  the  loan portfolio is secured by residential and commercial real
estate,  or  other interests in real property.  Lending activities are conducted
with  customers in a wide variety of industries as well as with individuals with
varying credit requirements.  The Company does not have a concentration of loans
in  any specific industry.  Credit risk, as it relates to the Company's business
activities,  tends to be geographically concentrated in that the majority of the
customer  base  lies within the cities and surrounding communities served by the
Company's  Subsidiaries.

     The  components  of  non-performing  loans  and  leases  are  as follows at
December  31:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                         1999   1998
-------------------------------------  ------  -----
<S>                                    <C>     <C>
Non-accrual loans and leases           $2,685  2,262
Restructured loans                        120    208
-------------------------------------  ------  -----
Total non-performing loans and leases  $2,805  2,470
=====================================  ======  =====
</TABLE>


     Loans past due 90 days or more and still accruing interest are not included
above  and  totaled  $573,000  and  $347,000  at  December  31,  1999  and 1998,
respectively.

     Non-accrual  and  restructured loans and leases had the following effect on
interest  income  for  the  years  ended  December  31:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                                           <C>    <C>   <C>
                                                               1999  1998  1997
                                                              -----  ----  ----
Income recognized                                             $ 101    65    27
Income which would have been recognized under original terms    168   175   344
                                                              =====  ====  ====
</TABLE>

     Impaired  loan  information  at  December  31,  1999,  1998, and 1997 is as
follows:
                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                                               <C>     <C>   <C>
                                                                    1999  1998   1997
----------------------------------------------------------------  ------  ----  -----
Impaired loans for which a related allowance has been allocated   $  883    54    821
Impaired loans for which no allowance has been allocated             907   864  1,841
----------------------------------------------------------------  ------  ----  -----
Total loans determined to be impaired                             $1,790   918  2,662
----------------------------------------------------------------  ------  ----  -----
Allowance allocated to impaired loans, included in the allowance
  for possible loan losses                                        $  182    10    210
================================================================  ======  ====  =====
</TABLE>

     Impaired  loans  averaged  $1,354,000,  $1,790,000,  and $2,152,000 for the
years  ended December 31, 1999, 1998, and 1997, respectively.  Of the $1,790,000
of  impaired  loans  at  December  31,  1999,  $473,000  represented loans still
accruing interest and $1,317,000 represented non-accrual loans.  Of the $918,000
of  impaired  loans  at  December  31,  1998,  $232,000  represented loans still
accruing  interest  and  $686,000  represented  non-accrual  loans.

     At various times throughout the year, certain officers and directors of the
Company and its affiliates have borrowed money from the subsidiary banks.  These
loans  were  made  in  the ordinary course of business on substantially the same
terms,  including interest rates and collateral, as those prevailing at the time
for  comparable  transactions  with  other  bank  customers.


                                       36
<PAGE>
     The  following  summarizes  activity  on loans, including renewals, made to
related  parties  during  1999  and  1998:

                                       (Dollars in thousands)
<TABLE>
<CAPTION>

<S>                                   <C>       <C>
                                         1999     1998
------------------------------------  --------  -------
Loans outstanding, beginning of year  $ 5,666    3,829
New loans, renewals, and advances         295    3,367
Loan payments                          (3,871)  (1,530)
------------------------------------  --------  -------
Loans outstanding, end of year        $ 2,090    5,666
====================================  ========  =======
</TABLE>

     The  following  is a summary of activity in the allowance for possible loan
losses:
                                                 (Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                         <C>     <C>    <C>
                                              1999   1998   1997
                                            ------  -----  -----
Balance, beginning of year                  $4,750  4,646  3,774
Provision charged to expense                   695    713  1,128
Additions to dealer reserves                     -      -     33
Recoveries on loans previously charged off     198    425    448
------------------------------------------  ------  -----  -----
                                             5,643  5,784  5,383
Less loans charged off                         567  1,034    737
Less allowance for loans sold                  440      -      -
------------------------------------------  ------  -----  -----
Balance, end of year                        $4,636  4,750  4,646
==========================================  ======  =====  =====
</TABLE>

(5)     PREMISES  AND  EQUIPMENT  -  The components of premises and equipment at
December  31  were  as  follows:

                                         (Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                 <C>      <C>
                                       1999    1998
                                    -------  ------
Land and land improvements          $ 2,057   1,574
Building and improvements            11,659  11,228
Furniture, fixtures, and equipment    7,380   7,363
----------------------------------  -------  ------
                                     21,096  20,165
Less accumulated depreciation         9,549   9,229
----------------------------------  -------  ------
Total                               $11,547  10,936
==================================  =======  ======
</TABLE>

(6)     DEPOSITS  -  The  aggregate  amount  of large time deposits, each with a
minimum  denomination  of  $100,000, was $58,693,000 and $56,612,000 at December
31,  1999  and  1998,  respectively.  Included in these totals were $297,000 and
$693,000  of brokered deposits at December 31, 1999 and 1998, respectively, with
an  interest  rate  of  6.75%  in 1999 and interest rates from 6.20% to 6.75% in
1998.


                                       37
<PAGE>
(7)     OTHER BORROWINGS - The components of other borrowings at December 31 are
as  follows:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                                                       <C>      <C>
                                                                             1999    1998
                                                                          -------  ------
Repurchase agreements                                                     $   336     313
Federal funds purchased                                                    24,500  33,900
Federal Home Loan Bank borrowings                                           7,700   7,700
Secured term loan dated July 10, 1990, as amended, with interest at the
  60 day LIBOR rate plus 1.625% (7.135% at December 31, 1999), principal
  payable in 2 semi-annual payments remaining from June 30, 1999 through
  December 31, 2000                                                         6,050   8,300
Other                                                                         900   4,284
                                                                          -------  ------
Total                                                                     $39,486  54,497
                                                                          =======  ======
</TABLE>

     The  secured term loan with a balance outstanding of $6,050,000 at December
31,  1999,  is  secured  by  the  stock of the subsidiaries and contains certain
restrictive  covenants,  including  restrictions  on  dividends to stockholders,
maintenance  of  various  capital  adequacy levels, maintenance of allowance for
loan  losses,  restrictions  on  non-performing  assets, attainment of a minimum
return  on  average  assets,  and  certain  restrictions  with  regard  to other
indebtedness.  The Company is in compliance with all restrictive covenants as of
December  31,  1999.  The  restriction on dividends to stockholders is described
further  in  note  11.

     Federal  Home  Loan Bank borrowings are collateralized by Federal Home Loan
Bank  stock  and first mortgage real estate loans.  As of December 31, 1999, the
notes  mature  from  2000  through 2008 and have variable interest rates with an
average  of 5.67%.  Certain Federal Home Loan Bank borrowings with call features
have  been  classified as short-term borrowings by the Company.  CB and FNB have
collateral  pledge  agreements  whereby  they have agreed to keep on hand at all
times, free of all other pledges, loans, and encumbrances, whole first mortgages
on  improved  residential property with unpaid principal balances aggregating no
less  than  167%  of  the  outstanding advances from the Federal Home Loan Bank.

     Included  in  other  borrowings is a line of credit agreement of $7,500,000
with  an outstanding balance at December 31, 1999 and 1998 of $0 and $3,825,000,
respectively.  The  rate  applicable  to the outstanding balance at December 31,
1998  was  6.63%.  The  line  of  credit  is secured by outstanding stock of the
Subsidiaries, which are 100% owned by the Company.  The Company also had another
line  of  credit of $3,000,000 at December 31, 1998 with no outstanding balance,
which  was  canceled  during  1999.

     Scheduled  payments  on  other  borrowings,  through  maturity,  are:

                                                          (Dollars in thousands)

                                           Year ended December 31  Amount
                                           ----------------------  -------

                                           2000                    $38,486
                                           2001                    $ 1,000
                                           ======================  =======


                                       38
<PAGE>
(8)     INCOME  TAXES  -  The components of Federal income tax expense (benefit)
for  1999,  1998,  and  1997  were  as  follows:


                                                      (Dollars in thousands)
                                                       1999    1998    1997
                                                     -------  ------  ------
                                           Current   $2,037   2,270   2,081
                                           Deferred    (228)   (128)   (620)
                                           --------  -------  ------  ------
                                           Total     $1,809   2,142   1,461
                                           ========  =======  ======  ======

     The  reasons  for  the difference between income taxes in the statements of
earnings  and  the  amount computed by applying the statutory Federal income tax
rate  of  34%  in  1999,  1998  and  1997  are  as  follows:

                                                          (Dollars in thousands)

                                                    1999    1998    1997
                                                  -------  ------  ------
Tax expense at statutory rate                     $1,991   2,142   1,520
Tax-exempt interest, net of premium amortization    (462)   (253)   (211)
Nondeductible amortization                           154     158     156
Other, net                                           126      95      (4)
------------------------------------------------  -------  ------  ------
Total income tax expense                          $1,809   2,142   1,461
================================================  =======  ======  ======

     The  tax  effects  of  temporary  differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1999  and  1998  are  as  follows:

<TABLE>
<CAPTION>
                                         (Dollars in thousands)
                                                 1999     1998
                                               -------  -------
<S>                                            <C>      <C>
Deferred tax assets:
  Deferred loan fees                           $    -       40
  Allowance for loan losses                     1,324    1,266
  Unrealized losses on investment securities    1,968        -
  Other                                           110       13
  Deferred compensation                           195      281
---------------------------------------------  -------  -------
Total gross deferred tax assets                 3,597    1,600
---------------------------------------------  -------  -------
Deferred tax liabilities:
  Purchase accounting adjustments                (407)    (464)
  Accretion on investments                        (10)     (45)
  Depreciation                                   (265)    (257)
  Unrealized gains on investment securities         -     (504)
  Net lease adjustment                             (9)     (52)
  Other, net                                      (25)     (97)
---------------------------------------------  -------  -------
Total gross deferred tax liabilities             (716)  (1,419)
---------------------------------------------  -------  -------
Net deferred tax assets (liabilities)           2,881      181
=============================================  =======  =======
</TABLE>

     In assessing the realizability of deferred tax assets, management considers
whether  it is more likely than not that some portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon  the  generation  of future taxable income during the periods in
which  those  temporary differences become deductible.  Management considers the
capacity  to carry back net operating losses, scheduled reversal of deferred tax
liabilities,  projected  future  taxable  income, and tax planning strategies in
making  this  assessment.  Based  on  the level of historical taxable income and
projections  for  future taxable income over the periods, which the deferred tax
assets  are  deductible,  management  believes  it  is  more likely than not the
Company  will  realize  the  benefits  of  these  deductible  differences.


                                       39
<PAGE>
(9)     EMPLOYEE  BENEFIT  PLANS  - The Company maintains a profit-sharing plan,
which  was  amended and restated as of January 1, 1999.  The amended plan covers
substantially  all  officers  and employees of the Company.  Under provisions of
the  plan,  the Company may elect to provide discretionary contributions.  Prior
to the amendment as of January 1, 1999, the Company was required to make minimum
annual  contributions  of  7.5%  of  net  operating  profits,  as defined in the
previous  plan.  Contributions  by  the  Company  to  the plan totaled $449,000,
$908,000,  and  $672,000  in  1999,  1998,  and  1997,  respectively.

     In  1995,  the  Company  instituted  a  non-qualified supplemental employee
profit  sharing  plan.  The  supplemental  plan  covers  certain  officers  and
employees  of the Company whose contributions under the qualified profit sharing
plan  were  limited by the Internal Revenue Code of 1986 (the Code), as amended.
Under  the non-qualified plan, the Company is required to accrue a liability for
the  contribution  that  was  limited  by  the  Code.  Contributions paid by the
Company to the plan totaled approximately $18,000, $14,000, and $15,000 in 1999,
1998,  and  1997,  respectively.

     In  1992,  the  Company instituted an Employee Stock Purchase Plan covering
substantially all officers and employees of the Company.  In 1999, that plan was
replaced  by  a  newly  instituted Dividend Reinvestment and Stock Purchase Plan
(Plan).  The Company incurs no costs associated with the Plan except for nominal
administration  expenses.  Under  the  stock  purchase  portion  of  the  Plan,
employees  may  purchase  original  issue Company stock at market prices up to a
maximum  limit  established  within  the  Plan.  Under the dividend reinvestment
portion  of the Plan, shareholders of the Company may elect to purchase original
issue  Company  stock  at  market prices in lieu of receiving the cash dividend.

     On December 23, 1994, the Company adopted a Stock Benefit Plan covering key
managerial  employees  and  non-employee  directors  of  the  Company  and  its
Subsidiaries.  The  Stock Benefit Plan provides for the grant of incentive stock
options, non-qualified stock options, limited rights, stock appreciation rights,
and  restricted  stock.  The  Company may award options to acquire up to 7.5% of
its  issued  and  outstanding  common stock, with no options being granted after
October 31, 2004.  The exercise price on outstanding non-qualified stock options
ranges from $7.00 to $16.00 per share at December 31, 1999.  Non-qualified stock
options  issued are exercisable at not less than the current common stock market
value  at  the  date  of  grant.  The  outstanding  options  vest ratably over a
four-year  term.  The  following  table presents certain information pursuant to
the  Stock  Benefit  Plan,  at  December  31:
<TABLE>
<CAPTION>
                                                         December 31, 1999  December 31, 1998
                                                       --------------------------------------
                                                                    Average            Average
                                                           Shares    Price    Shares    Price
                                                           ------    -----    ------    -----
<S>                                                       <C>       <C>      <C>       <C>
Options outstanding at beginning of year                  263,600   $  9.05  218,500   $ 7.77
Options granted                                            16,000   $ 16.00   50,000   $14.64
Options exercised                                          (1,600)  $  8.63   (3,150)  $ 7.02
Options forfeited                                          (2,400)  $ 14.42   (1,750)  $12.64
--------------------------------------------------------  --------  -------  --------  ------
Options outstanding at end of year                        275,600   $  9.41  263,600   $ 9.05
--------------------------------------------------------  --------  -------  --------  ------
Options exercisable at end of year                        205,475   $  7.88  146,826   $ 7.35
--------------------------------------------------------  --------  -------  --------  ------
Options available to grant under the plan at end of year   28,825             40,478
========================================================  ========  =======  ========  ======
</TABLE>

     The  Company  applies  APB  opinion  No.  25 and related interpretations in
accounting  for the Stock Benefit Plan.  Had compensation cost for the plan been
determined  consistent  with  FASB Statement No. 123, the Company's net earnings
and  earnings  per  share  would  have  been  reduced  to  the pro forma amounts
indicated  below:


                                       40
<PAGE>
<TABLE>
<CAPTION>
                       (Dollars in thousands, except per share data)
                                                         1999   1998
----------------------------------------  -----------  ------  ------
<S>                                       <C>          <C>     <C>
Net earnings from continuing operations   As reported  $4,047  4,159
                                          Pro forma     4,002  4,029
Net earnings                              As reported  $  261  4,735
                                          Pro forma       216  4,605
Basic earnings per share from continuing  As reported  $ 0.93   0.96
  operations                              Pro forma      0.92   0.93
Basic earnings per share                  As reported  $ 0.06   1.09
                                          Pro forma      0.05   1.06
----------------------------------------  -----------  ------  ------
</TABLE>


     The  fair  value of each option grant is estimated on the date of the grant
using  the  Black-Scholes  option-pricing  model.

(10)     PREFERRED STOCK - In 1993, the Company issued 2,600 shares of Perpetual
Preferred Stock.  On December 31, 1997, the Company redeemed 2,300 shares of its
outstanding  Perpetual  Preferred  Stock.  Of  the 2,300 shares, 841 shares were
redeemed  for  cash,  and 1,459 shares were exchanged into 132,622 shares of the
Company's  common  stock.  On  December  31, 1998, the remaining 300 shares were
redeemed  for  cash.

(11)     DIVIDEND LIMITATIONS - The amendment to the secured term loan agreement
contains  several  restrictive covenants, including restrictions on dividends to
stockholders,  and  other  restrictions  as  described  in  note 7.  Future cash
dividends, in addition to dividends on preferred stock are limited to 50% of the
Company's  net  after-tax  earnings  for  the immediately preceding eight fiscal
quarters of the Company.  As of December 31, 1999, the Company had $1,213,000 of
unrestricted  earnings  available  for  additional  cash  dividends.

     National  banking  regulations restrict the amount of dividends that a bank
may  pay to its stockholders.  Generally, the regulations provide that dividends
are  limited to net earnings for the current and two preceding years, reduced by
dividends  paid  and  transfers  to  permanent  capital.  At  December 31, 1999,
subject  to  minimum  regulatory  capital  guidelines,  FNB,  CBH, and CB could,
without  prior  approval  of  regulatory  authorities,  declare  dividends  of
approximately  $3,927,000,  $299,000,  and  $2,433,000,  respectively.


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

     Quantitative measures established by regulations to ensure capital adequacy
require  the  Company and subsidiaries to maintain minimum amounts and ratios of
total  and  Tier  I  capital  to  risk-weighted assets, and of Tier I capital to
average  assets,  as  defined  in  the  regulations.  Management believes, as of
December  31,  1999 and 1998, that the Company and subsidiaries meet all capital
adequacy  requirements  to  which  they  are  subject.

     As  of  December  31,  1999,  the most recent notification from the federal
banking  agencies  categorized  each  of  the  Company  and subsidiaries as well
capitalized at December 31, 1999 and 1998 under the regulatory capital framework
for  prompt  corrective  action.  There  are  no  conditions  or  events  since
notification that management believes have changed the Company and subsidiaries'
status.   Minimum  capital requirements and actual capital amounts and ratios as
of  December  31,  1999  and  1998  are  as  follows:


                                       41
<PAGE>
<TABLE>
<CAPTION>
                                                                   (Dollars in thousands)

                                                             December  31,  1999
                                                    -------------------------------------
                                                                         Well
                                                    Actual     Actual Capitalized Minimum
                                                    Amount     Ratio     Ratio     Ratio
-------------------------------------------------  -------  ------------  --------  -----
Total  risk-based  capital  to  risk-weighted  assets:
<S>                                                <C>      <C>           <C>       <C>
  Castle BancGroup, Inc.                           $42,999        11.11%    10.00%  8.00%
  First National Bank in DeKalb                     21,801        10.90%    10.00%  8.00%
  Castle Bank N.A.                                  16,871        12.54%    10.00%  8.00%
  Castle Bank Harvard, N.A.                          7,333        14.37%    10.00%  8.00%
-------------------------------------------------  -------  ------------  --------  -----
Tier I capital to risk-weighted assets:
  Castle Bancgroup, Inc.                           $38,362         9.91%     6.00%  4.00%
  First National Bank in DeKalb                     19,736         9.87%     6.00%  4.00%
  Castle Bank N.A.                                  15,194        11.30%     6.00%  4.00%
  Castle Bank Harvard, N.A.                          6,695        13.12%     6.00%  4.00%
-------------------------------------------------  -------  ------------  --------  -----
Tier I capital to average assets:
  Castle BancGroup, Inc.                           $38,362         7.26%     5.00%  4.00%
  First National Bank in DeKalb                     19,736         7.33%     5.00%  4.00%
  Castle Bank N.A.                                  15,194         7.80%     5.00%  4.00%
  Castle Bank Harvard, N.A.                          6,695         9.60%     5.00%  4.00%
=================================================  =======  ============  ========  =====


                                                              December 31, 1998
                                                    -------------------------------------
                                                                Well
                                                    Actual     Actual  Capitalized  Minimum
                                                    Amount     Ratio        Ratio    Ratio
-------------------------------------------------  -------  ------------  --------  -----
Total risk-based capital to risk-weighted assets:
  Castle BancGroup, Inc.                           $41,284        11.08%    10.00%  8.00%
  First National Bank in DeKalb                     20,341        11.22%    10.00%  8.00%
  Castle Bank N.A.                                  15,679        11.59%    10.00%  8.00%
  Castle Bank Harvard, N.A.                          7,020        13.15%    10.00%  8.00%
-------------------------------------------------  -------  ------------  --------  -----
Tier I capital to risk-weighted assets:
  Castle BancGroup, Inc.                           $36,625         9.83%     6.00%  4.00%
  First National Bank in DeKalb                     18,496        10.20%     6.00%  4.00%
  Castle Bank N.A.                                  14,176        10.48%     6.00%  4.00%
  Castle Bank Harvard, N.A.                          6,353        11.90%     6.00%  4.00%
-------------------------------------------------  -------  ------------  --------  -----
Tier I capital to average assets:
  Castle BancGroup, Inc.                           $36,625         6.31%     5.00%  4.00%
  First National Bank in DeKalb                     18,496         6.74%     5.00%  4.00%
  Castle Bank N.A.                                  14,176         7.06%     5.00%  4.00%
  Castle Bank Harvard, N.A.                          6,353         8.58%     5.00%  4.00%
-------------------------------------------------  -------  ------------  --------  -----
</TABLE>



(13)     FINANCIAL  INSTRUMENTS  WITH  OFF-BALANCE  SHEET  RISK - The Company is
party  to financial instruments with off-balance sheet risk in the normal course
of  business  to meeting the financing needs of its customers and to effectively
manage  its  exposure  to  interest  rate  risk.

     Credit  risk  is  the possibility that the Company will incur a loss due to
the  other  party's  failure  to perform under its contractual obligations.  The
Company's  exposure  to credit loss in the event of non-performance by the other
party  with regard to commitments to extend credit and standby letters of credit
is represented by the contractual amount of these instruments.  The Company uses
the same credit policies in making commitments and conditional obligations as it
does  for  actual  extensions  of  credit.


                                       42
<PAGE>
     Financial  instruments  representing  potential credit risk at December 31,
1999  and  1998  are  as  follows:

                           (Dollars in thousands)
                           ----------------------
<TABLE>
<CAPTION>
                                 1999    1998
----------------------------  -------  ------
<S>                           <C>      <C>
Standby letters of credit     $ 3,981   3,695
Commitments to extend credit   94,023  54,869
----------------------------  -------  ------
                              $98,004  58,564
----------------------------  -------  ------
</TABLE>

     Standby letters of credit are conditional commitments issued by the Company
to  guarantee  the  performance  of a customer to a third party.  Commitments to
extend  credit  are  agreements  to  lend  to  a customer as long as there is no
violation  of  any condition established by the contract.  Commitments 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.  The  credit  risk involved for commitments to extend credit
and  in  issuing  standby  letters  of  credit  is  essentially the same as that
involved  in  extending  loans  to  customers.

(14)     COMMITMENTS AND CONTINGENT LIABILITIES - Because of the nature of their
activities,  the  Company and Subsidiaries are subject to pending and threatened
legal  actions  which arise in the normal course of business.  In the opinion of
management,  based  on the advice of legal counsel, the disposition of any known
pending  legal  actions will not have a material adverse effect on the financial
position  or  its  liquidity  and  results  of  operations  of  the  Company.

(15)     FAIR  MARKET  VALUE  OF FINANCIAL INSTRUMENTS - Statement of Accounting
Standards  No  107,  "Disclosures  about  Fair  Value  of Financial Instruments"
(Statement 107), requires that the Company disclose estimated fair value for its
financial  instruments.  Fair  value estimates, methods, and assumptions are set
forth  below  for  the  Company's  financial  instruments.

     (A)     CASH  AND DUE FROM BANKS.  The carrying amount of cash and due from
banks  approximate  fair  value  because  they mature daily and do not represent
unanticipated  credit  risks.

     (B)     INVESTMENT  SECURITIES  AVAILABLE  FOR  SALE.  The  fair  value  of
investment  securities  available  for sale, with the exception of certain state
and  municipal  securities,  is  estimated  based  on  bid  prices  published in
financial  newspapers  or  bid quotations received from securities dealers.  The
fair  value  of  certain state and municipal securities is not readily available
through market sources other than dealer quotations, so fair value estimates are
based  on  quoted market values of similar instruments, adjusted for differences
between  the  quoted  instruments,  and  the  instruments  being  valued.

     (C)     MORTGAGE  LOANS  HELD  FOR SALE.  As of December 31, 1999 and 1998,
the carrying value of the Company's mortgage loans held for sale was $14,892,000
and  $66,755,000,  respectively.  The  estimated  fair  value of these loans was
$14,973,000  and $67,064,000 at December 31, 1999 and 1998, based on commitments
to  purchase  from the end investors. The mortgage loans held for sale presented
on  the Company's Consolidated Balance Sheets represent mortgages currently held
for  sale  by  the  Subsidiary  Banks.  These  balances relate to both mortgages
originated  in  the  banking segment, as well as mortgages originated by CMI and
subsequently  sold  to  the  Subsidiary  Banks  to  hold for sale to third party
investors.  Mortgage  loans  held  for  sale by CMI (i.e., those not sold to the
Subsidiary  Banks)  are  presented  in  assets of discontinued operations on the
Consolidated  Balance  Sheets  (see  note  18).

     (D)     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 real estate, and consumer.  Each
loan  category is further segmented into fixed and variable rate interest terms.

     The  fair  value of loans is calculated by discounting scheduled cash flows
through  the  estimated  maturity  using  estimated  market  discount rates that
reflect  the  credit  and  interest  rate  risk  inherent  in  the  loan.

     (E)     DEPOSIT  LIABILITIES.  Under  Statement  107,  the  fair  value  of
deposits  with  no stated maturity, such as noninterest-bearing demand deposits,
savings  and  NOW  accounts, and money market and checking accounts, is equal to
the  amounts payable on demand as of December 31, 1999 and 1998.  The fair value
of  certificates of deposit is based on the discounted value of contractual cash
flows.  The  discounted  rate is estimated using the rates currently offered for
deposits  of  similar  maturities.


                                       43
<PAGE>
     (F)     OTHER  BORROWINGS.  For  the  short-term  instruments, the carrying
amount  is a reasonable estimate of fair value.  For long-term instrument, rates
currently  available  to  the  Company for debt with similar terms and remaining
maturities  are  used  to  estimate  fair  value  of  existing  borrowings.

     (G)     LOAN  COMMITMENTS  AND  LETTERS  OF  CREDIT.  The subsidiary banks'
letters  of  credit,  lines  of  credit,  and  loan  commitments  are  financial
instruments  as  defined  by  Statement  107.  The fair value of these financial
instruments  is  based  on  the  present  value  of  the fees received for these
services,  which  are  not  significant  at  December  31,  1999  and  1998.

     The  estimated  fair  values  of  the  Company's  financial  instruments at
December  31  are  as  follows:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                                1999                1998
                                            ------------------  ----------------
                                             Carrying  Fair      Carrying  Fair
                                              Amount   Value     Amount    Value
                                            --------  --------  -------  -------
<S>                                         <C>       <C>       <C>      <C>
Financial Assets:
  Cash and due from banks                   $ 17,501    17,501   12,269   12,269
  Investment securities available for sale   126,159   126,159  132,060  132,060
  Mortgage loans held for sale                14,892    14,973   66,755   67,064
  Loans                                      364,419   360,515  329,196  332,486
Financial Liabilities:
  Non-interest-bearing deposits             $ 52,274    52,274   50,371   50,371
  Interest-bearing deposits                  408,143   408,740  404,621  409,149
  Other borrowings                            39,486    39,486   54,497   54,497
</TABLE>

     LIMITATIONS.  Fair  value  estimates  are made at a specific point in time,
based  on  relevant  market  information  and  information  about  the financial
instrument.  These  estimates  do not reflect any premium or discount that could
result  from  offering  for  sale at one time the Company's entire holdings of a
particular  financial  instrument.  Because  no  market exists for a significant
portion  of  the Company's financial instruments, fair value estimates are based
on  judgments  regarding  future  expected  loss  experience,  current  economic
conditions,  risk  characteristics  of  various financial instruments, and other
factors.  These estimates are subjective in nature and involve uncertainties and
matters  of  significant  judgment  and  therefore  cannot  be  determined  with
precision.  Changes  in  assumptions  could  significantly affect the estimates.

     Fair  value  estimates  are  based  on  existing  on- and off-balance sheet
financial  instruments  without  attempting to estimate the value of anticipated
future  business and the value of assets and liabilities that are not considered
financial  instruments.  For  example,  the  Company  has  a  substantial  trust
department  that  annually  contributes net fee income.  The trust department is
not  considered  a financial instrument, and its value has not been incorporated
into  the  fair  value estimates.  Other significant assets and liabilities that
are  not  considered  financial  assets  or  liabilities  include  deferred  tax
liabilities,  property,  plant,  equipment,  and goodwill.  In addition, the tax
ramifications  related to the realization of the unrealized gains and losses can
have  a  significant effect on fair value estimates and have not been considered
in  many  of  the  estimates.


                                       44
<PAGE>
(16)     OPERATING  SEGMENTS  -  The  Company's  operations  include two primary
segments:  banking  and  mortgage  banking.  Through  its  banking subsidiaries'
network  of  10  retail  banking  facilities  in  Northern Illinois, the Company
provides  traditional  community banking services such as accepting deposits and
making  loans.  Mortgage  banking  activities  conducted  through  the Company's
subsidiary,  CMI (which has been discontinued as discussed in note 18), included
the  origination  and brokerage of primarily residential mortgage loans for sale
to  various  investors.  The  Company's  two  reportable  segments are strategic
business  units that are separately managed as they offer different products and
services and have different marketing strategies.  CMI was legally, financially,
operationally,  and  physically  separate  from  the Subsidiary Banks, and had a
separate  Board  of  Directors,  management  team,  compensation structure, etc.
Smaller  operating  segments  are  combined  and consist of consumer finance and
holding  company  operations.  Assets  and  results  of  operations are based on
generally  accepted  accounting  principles,  with  profit  and losses of equity
method  investees  excluded.  Inter-segment revenues and expenses are eliminated
in  reporting consolidated results of operations.  Operating segment information
is  on  the  following  page:


                                       45
<PAGE>
<TABLE>
<CAPTION>
                                                                                        (Dollars in thousands)
                                                                             Mortgage             Consolidated
                                                                Banking      Banking        Other     Total
                                                               ---------  -------------  --------  --------
<S>                                                            <C>        <C>            <C>       <C>

1999
Interest income                                                $  38,199                      51    38,250
Interest expense                                                  18,683                     126    18,809
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income before provision for possible loan losses     19,516                     (75)   19,441
Provision for possible loan losses                                   308                     387       695
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income after provision for possible loan losses      19,208                    (462)   18,746
Other operating income                                             5,422                      61     5,483
Other operating expenses                                          14,454                   3,919    18,373
-------------------------------------------------------------  ---------  -------------  --------  --------
Earnings before income taxes                                      10,176                  (4,320)    5,856
Income tax expense                                                 3,424                  (1,615)    1,809
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings from continuing operations                        $   6,752                  (2,705)    4,047
-------------------------------------------------------------  ---------  -------------  --------  --------
Discontinued operations                                        $       -        (3,786)        -    (3,786)
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings                                                   $   6,752        (3,786)   (2,705)      261
-------------------------------------------------------------  ---------  -------------  --------  --------
Assets                                                         $ 554,910         2,878   (16,938)  540,850
-------------------------------------------------------------  ---------  -------------  --------  --------

1998
Interest income                                                $  39,206                   1,398    40,604
Interest expense                                                  19,448                     513    19,961
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income before provision for possible loan losses     19,758                     885    20,643
Provision for possible loan losses                                   288                     425       713
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income after provision for possible loan losses      19,470                     460    19,930
Other operating income                                             5,351                     185     5,536
Other operating expenses                                          15,282                   3,883    19,165
-------------------------------------------------------------  ---------  -------------  --------  --------
Earnings before income taxes                                       9,539                  (3,238)    6,301
Income tax expense                                                 3,325                  (1,183)    2,142
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings from continuing operations                        $   6,214                  (2,055)    4,159
-------------------------------------------------------------  ---------  -------------  --------  --------
Discontinued operations                                        $       -           576         -       576
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings                                                   $   6,214           576    (2,055)    4,735
-------------------------------------------------------------  ---------  -------------  --------  --------
Assets                                                         $ 581,431         5,686   (28,835)  558,282
-------------------------------------------------------------  ---------  -------------  --------  --------

1997
Interest income                                                $  37,205                   1,829    39,034
Interest expense                                                  18,604                     985    19,589
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income before provision for possible loan losses     18,601                     844    19,445
Provision for possible loan losses                                   478                     650     1,128
-------------------------------------------------------------  ---------  -------------  --------  --------
Net interest income after provision for possible loan losses      18,123                     194    18,317
Other operating income                                             4,393                      45     4,438
Other operating expenses                                          14,276                   4,008    18,284
-------------------------------------------------------------  ---------  -------------  --------  --------
Earnings before income taxes                                       8,240                  (3,769)    4,471
Income tax expense                                                 2,847                  (1,386)    1,461
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings from continuing operations                        $   5,393                  (2,383)    3,010
-------------------------------------------------------------  ---------  -------------  --------  --------
Discontinued operations                                        $       -             3         -         3
-------------------------------------------------------------  ---------  -------------  --------  --------
Net earnings                                                   $   5,393             3    (2,383)    3,013
-------------------------------------------------------------  ---------  -------------  --------  --------
Assets                                                         $ 511,143         4,451     1,589   517,183
-------------------------------------------------------------  ---------  -------------  --------  --------
</TABLE>


                                       46
<PAGE>
(17)     CONDENSED  FINANCIAL  INFORMATION (PARENT COMPANY ONLY) - The following
is  a  summary  of  condensed financial information for the Parent Company only:

                                                          (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                          December  31,
                                                                       -----------------
CONDENSED  BALANCE  SHEETS                                                1999    1998
---------------------------------------------------------------------  --------  -------
Assets:

<S>                                                                    <C>       <C>
  Investments in subsidiaries                                          $40,421    46,384
  Cash and cash equivalents                                              1,400       287
  Other assets                                                           2,054     7,678
---------------------------------------------------------------------  --------  -------
Total assets                                                            43,875    54,349
---------------------------------------------------------------------  --------  -------
Liabilities and stockholders' equity:
  Liabilities                                                            6,467    12,804
  Stockholders' equity                                                  37,408    41,545
---------------------------------------------------------------------  --------  -------
Total liabilities and stockholders' equity                             $43,875    54,349


                                                                        Years ended December 31
                                                                       --------------------------
CONDENSED STATEMENTS OF EARNINGS                                          1999     1998     1997
---------------------------------------------------------------------  --------  -------  -------
Income - primarily subsidiary dividends                                $ 6,590    6,334    5,405
---------------------------------------------------------------------  --------  -------  -------
Expenses:
  Interest                                                                 589      944    1,081
  Other                                                                  4,878    4,365    4,420
---------------------------------------------------------------------  --------  -------  -------
Total expense                                                            5,467    5,309    5,501
---------------------------------------------------------------------  --------  -------  -------
Earnings (loss) before income tax benefit and equity in undistributed
  earnings of subsidiaries                                               1,123    1,025      (96)
Income tax benefit                                                      (1,235)  (1,135)  (1,248)
---------------------------------------------------------------------  --------  -------  -------
Earnings before equity in undistributed earnings of subsidiaries         2,358    2,160    1,152
Equity in undistributed earnings of subsidiaries                        (2,097)   2,575    1,861
---------------------------------------------------------------------  --------  -------  -------
Net earnings                                                           $   261    4,735    3,013
=====================================================================  ========  =======  =======
Net earnings applicable to common stock                                $   261    4,712    2,811
=====================================================================  ========  =======  =======
</TABLE>


                                       47
<PAGE>
<TABLE>
<CAPTION>
                                                                                                   (Dollars in thousands)

                                                                                                 Years ended December 31
                                                                                               --------------------------
CONDENSED STATEMENTS OF CASH FLOWS                                                               1999      1998     1997
----------------------------------------------------------------------------                   --------  -------  -------
Reconciliation of net earnings to net cash provided by operating activities:
<S>                                                                                            <C>       <C>      <C>
  Net earnings                                                                             $       261    4,735    3,013
  Adjustments to reconcile net earnings to net cash provided by
    operating activities:
    Equity in undistributed earnings of subsidiaries                                             2,097   (2,575)  (1,861)
    Depreciation and amortization                                                                  450      495      514
    Loss  (gain) loss on sale of fixed assets                                                        -        -        1
    Increase (decrease) in:
    Income taxes payable                                                                          (109)    (248)     141
    Other liabilities                                                                             (243)     325      103
    Decrease (increase) in other assets                                                            135      (21)      22
----------------------------------------------------------------------------                   --------  -------  -------
  Net cash provided by operating activities                                                $     2,591    2,711    1,933
----------------------------------------------------------------------------                   --------  -------  -------
  Cash flow from investing activities:
    Capital contribution to subsidiary                                                            (150)       -        -
    Loans to subsidiary                                                                           (200)       -        -
    Other                                                                                        5,156   (1,695)    (340)
----------------------------------------------------------------------------                   --------  -------  -------
  Net cash provided by (used in) investing activities                                            4,806   (1,695)    (340)
----------------------------------------------------------------------------                   --------  -------  -------
  Cash flows from financing activities:
    Net proceeds from short-term debt                                                           (3,825)     575   (1,750)
    Redemption of preferred stock                                                                    -     (300)  (2,300)
    Issuance of common stock                                                                       400      479    1,717
    Repayment of long-term debt                                                                 (2,250)    (950)    (900)
    Dividends paid                                                                                (609)    (533)    (410)
----------------------------------------------------------------------------                   --------  -------  -------
  Net cash used in financing activities                                                         (6,284)    (729)  (3,643)
----------------------------------------------------------------------------                   --------  -------  -------
  Increase (decrease) in cash and cash equivalents                                               1,113      287   (2,050)
  Cash and cash equivalents at beginning of year                                                   287        -    2,050
----------------------------------------------------------------------------                   --------  -------  -------
  Cash and cash equivalents at end of year                                                 $     1,400      287       (0)
  Supplemented disclosure:
    Interest received                                                                      $       132      393      334
    Interest paid                                                                                 (589)    (944)  (1,081)
    Income taxes received from subsidiaries                                                      2,302    3,336    2,794
    Income taxes paid by Parent Company                                                         (1,002)  (2,695)  (1,784)
----------------------------------------------------------------------------                   --------  -------  -------
  Net income taxes received from subsidiaries                                              $     1,300      641    1,010
----------------------------------------------------------------------------                   --------  -------  -------
</TABLE>

(18)     DISCONTINUED OPERATIONS - In January 2000, the Company formally adopted
a plan to liquidate the mortgage banking segment, which is comprised entirely of
the  operations  of  CMI.  The  mortgage  banking  segment  does not include the
Subsidiary  Banks'  mortgage  lending  activities,  which  are  a  component  of
continuing  operations.  As a result of the decision to discontinue the mortgage
banking segment, all related operating activity was reclassified and reported as
discontinued  operations  for  financial  reporting  purposes.

     The  closure  of  CMI  is  accounted  for  as  a discontinued operation, in
accordance  with  APB  30,  because, among other criteria, it represented both a
separate  major  line  of  business  and a class of customer.  CMI represented a
distinct  segment and served a customer base from a market distinct from that of
the  Subsidiary  Banks.  CMI  was  legally,  financially,  operationally,  and
physically  separate  from  the  Subsidiary  Banks,  and had a separate Board of
Directors,  management  team,  and  compensation  structure.

     The  mortgage  lending  activities  of  the  Subsidiary  Banks represent an
integral,  inseparable  component of the banking segment.  CMI provided mortgage
brokerage  services  to  the  Subsidiary  Banks  that  will  now  be provided by
independent  third  parties.  The banking segment will continue to originate and
sell  mortgage  loans into the secondary market and hold mortgage loans for sale
on  its  balance  sheet.  The  mortgage loan origination income presented on the
Company's Consolidated Statements of Earnings represents the income derived from
the  mortgage  lending  activities  of  the  banking segment.  The mortgage loan
origination  income  produced by CMI is presented as a component of discontinued
operations  in the Consolidated Statements of Earnings.  The mortgage loans held
for  sale  presented  on  the  Company's  Consolidated  Balance Sheets represent
mortgages  currently  held  for  sale  by  the Subsidiary Banks.  These balances
relate to both mortgages originated in the banking segment, as well as mortgages
originated by CMI and subsequently sold to the Subsidiary Banks to hold for sale
to  third party investors.  Mortgage loans held for sale by CMI (i.e., those not
sold to the Subsidiary Banks) are presented in assets of discontinued operations
on  the  Consolidated  Balance  Sheets.


                                       48
<PAGE>
     In  the  Company's  September  30,  1999 Quarterly Report on Form 10-Q, the
Company  reported that it had uncovered irregularities in CMI's underwriting and
documentation  of certain mortgage loans originated for sale by CMI, which could
ultimately  result  in  the  inability  to sell certain loans currently held for
sale,  or  the  purchasers  of  sold  loans  putting  them back to CMI under the
recourse  provisions  of  the  loan  sale agreements.  Since then, the Company's
investigation  has  uncovered  additional  information,  including  discovery of
fraudulent  documents,  underwriting,  and  other lending practices that allowed
certain  mortgage  loans  to be sold into the secondary market, which would have
otherwise  not qualified.  These identified irregularities were limited to three
offices  of  CMI  and were not present at the other offices of CMI, nor were the
irregularities  present in the Subsidiary Banks.  After further investigation of
these  irregularities  and  review  of  the future prospects of CMI, the Company
decided to discontinue the operations of CMI.  All offices of CMI, which had not
been  previously  closed,  were  closed  in  January  2000.  All  new  mortgage
origination  from  CMI  has ceased and current operations are limited to winding
down  remaining  issues.

     The  loss  from  discontinued operations of $3,786,000 in 1999 represents a
loss from operating activities, which includes a pre-tax charge of $2,300,000 to
establish  a reserve liability for possible losses on loans previously sold, and
a  pre-tax  charge  of  $1,341,000  to write-off the remaining carrying value of
intangible  assets  related  to  the  mortgage  banking  segment.  The  reserve
liability  is included in other liabilities in the Consolidated Balance Sheet as
of  December  31,  1999.

     The  loss  from discontinued operations of $3,786,000 in 1999 is net of tax
benefit of $2,458,000.  The earnings from discontinued operations of $576,000 in
1998  and  $3,000  in  1997  are  net  of  tax  expense  of $445,000 and $7,000,
respectively.

     The first quarter 2000 financial statements will include additional charges
for  2000  operating activities and the loss on disposal of the mortgage banking
segment.  The  Company  estimates that the first quarter charge for discontinued
operations will total $837,000, net of tax effect of $582,000.  Included in this
charge  are  accruals for operating losses during the phase-out period, accruals
for  salary  and  severance  payments, write-downs of the value of fixed assets,
accruals  for  lease  liabilities,  and  other  items.

     The  consolidated financial statements of the Company have been restated to
reflect  the  closing  of  CMI  as  a  discontinued operation.  Accordingly, the
revenues  and  expenses,  assets and liabilities, and cash flows of the mortgage
banking  segment  have  been  excluded  from  the  respective  captions  in  the
Consolidated  Balance  Sheets,  Consolidated  Statements  of  Earnings,  and
Consolidated  Statements  of Cash Flows, and have been reported as "Discontinued
Operations,"  and "Assets of discontinued operations."  The assets include fixed
assets,  cash,  mortgage loans held for sale, and other assets.  The liabilities
generated  by  the  discontinued operation are reflected in other liabilities in
the  Consolidated  Balance  Sheets.

(19)     YEAR  2000 -     The cost of the Year 2000 project through 1999 totaled
$338,000,  which  included  $248,000  in  capitalized  costs incurred to replace
non-compliant  hardware and software.  Costs incurred do not include the cost of
internal  staff  time.  Projects  costs  incurred in 1999 totaled $62,000, which
included  $33,000  in  capitalized  costs.  Final project costs of approximately
$15,000  are  expected  to  be  incurred  in  2000.


                                       49
<PAGE>
INDEPENDENT  AUDITORS'  REPORT


Board  of  Directors
Castle  BancGroup,  Inc.:


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Castle
BancGroup, Inc. and subsidiaries (Company) as of December 31, 1999 and 1998, and
the  related  consolidated  statements  of  earnings,  changes  in stockholders'
equity,  and  cash  flows  for  each of the years in the three-year period ended
December  31,  1999.  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  generally  accepted  auditing
standards.  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  financial position of the Company at
December  31,  1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity  with  generally  accepted  accounting  principles.


/s/  KPMG  LLP

April  10,  2000
Chicago,  Illinois


                                       50
<PAGE>
Item  9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting and
--------------------------------------------------------------------------------
          Financial  Disclosure
          ---------------------

     None.

                                    PART III


Item  10.  Directors  and  Executive  Officers  of  the  Registrant
-------------------------------------------------------------------

     Information  regarding  directors  and executive officers of the Company is
included  in  the Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders  to  be  held  May  25,  2000  (Proxy  Statement) under the caption
"Proposal  No.  1  -  Election  of  Directors" which information is incorporated
herein  by  reference.

Item  11.  Executive  Compensation
----------------------------------

     The  information contained under the captions "Directors' Compensation" and
"Executive  Compensation"  in  the  Proxy  Statement  is  incorporated herein by
reference.

Item  12.  Security  Ownership  of  Certain  Beneficial  Owners  and  Management
--------------------------------------------------------------------------------

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

Item  13.  Certain  Relationships  and  Related  Transactions
-------------------------------------------------------------

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


                                       51
<PAGE>
                                     PART IV


Item  14. Exhibits,  Financial  Statement  Schedules,  and  Reports on Form 8-K
-------------------------------------------------------------------------------

     (a)  Financial  Statements:
          ----------------------

          The  following financial statements are submitted herewith in response
          to  Part  II  Item  8:

          Consolidated  Balance  Sheets  as  of  December  31,  1999  and  1998.

          Consolidated  Statements  of Earnings for the years ended December 31,
          1999,  1998  and  1997.

          Consolidated  Statements  of  Changes  in Stockholders' Equity for the
          years  ended  December  31,  1999,  1998  and  1997.

          Consolidated Statements of Cash Flows for the years ended December 31,
          1999,  1998,  and  1997.

     (b)  Reports  on  Form  8-K
          ----------------------

          The  registrant  has not filed any reports on Form 8-K for the quarter
          ended  December  31,  1999.

     (c)  Exhibits:
          --------

          3.1     Certificate  of  Incorporation  of  registrant  as  amended.

          3.2     By-laws  of  the registrant as amended are incorporated herein
                  by  reference  to  Exhibit 3.2 of the registrant's Form 10-K
                  for the fiscal year ended  December  31,  1997.

          10.1    Castle  BancGroup,  Inc.  Stock  Benefit Plan is incorporated
                  herein  by  reference to Exhibit 4.1 of the registrant's Form
                  S-8, Registration Statement,  filed  on  December  22,  1994,
                  Registration  No.  33-87658.

          10.2    Agreement for Services by and between Ronald L. Hovermale and
                  Castle  BancGroup,  Inc., dated as of September 26, 1997, and
                  amendment dated as of March  12, 1999 are incorporated herein
                  by reference to Exhibit 10.2 of the registrant's  Form  10-K
                  for  the  fiscal  year  ended  December  31,  1998.

          10.3    Employment  agreement  by  and  between  Dewey  R. Yaeger and
                  Castle  BancGroup,  Inc.,  dated  as  of  January  1,  1999.

          21.1    Subsidiaries  of  Registrant

          23.1    Consent  of  KPMG  LLP

          27.1    Financial  Data  Schedule


                                       52
<PAGE>
                                   SIGNATURES


Pursuant  to  the requirements of Section 13 or 15(d) 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.

CASTLE  BANCGROUP,  INC.
(registrant)


     /s/  John  W.  Castle
--------------------------
BY:     John  W.  Castle,  Chairman  of  the
        Board,  Chief  Executive  Officer
        and  Director
Date:   April  13,  2000


Pursuant  to  the  requirements of the Securities and Exchange Act of 1934, this
report  has been signed by the following persons on behalf of the registrant and
in  the  capacities  and  on  the  dates  indicated.


   /s/  John  W.  Castle                         /s/  Dewey  R.  Yaeger
-----------------------------------------------  -------------------------------
By:     John  W.  Castle                          By: Dewey  R.  Yaeger
        Chairman  of the Board, Chief Executive       President, Chief Operating
        Officer  (Principal  Executive                Officer  and Director
        Officer) and  Director                  Date: April  13,  2000
Date:   April  13,  2000


   /s/  Micah  R.  Bartlett                      /s/  Bruce  P.  Bickner
-----------------------------------------------  -------------------------------
By:     Micah  R.  Bartlett                      By:  Bruce  P.  Bickner
        Vice  President  and  Controller              Director
        (Principal  Financial  Officer         Date:  April 13, 2000
        and  Principal Accounting  Officer)
Date:   April  13,  2000


   /s/  Peter  H.  Henning                       /s/  Robert  T.  Boey
-----------------------------------------------  -------------------------------
By:     Peter  H.  Henning                       By:  Robert  T.  Boey
        Director                                      Director
Date:   April  13,  2000                       Date:  April  13,  2000


   /s/  Kathleen  L.  Halloran                   /s/  Donald  E.  Kieso
-----------------------------------------------  -------------------------------
By:     Kathleen  L.  Halloran                   By:  Donald  E.  Kieso
        Director                                      Director
Date:   April  13,  2000                       Date:  April  13,  2000


   /s/  Richard  C.  McGinity
-----------------------------------------------
By:     Richard  C.  McGinity
        Director
Date:   April  13,  2000


                                       53
<PAGE>

                                  EXHIBIT INDEX


Exhibit No.  Description
-----------  -----------

     3.1     Certificate  of  Incorporation  of  registrant  as  amended.

     3.2     By-laws  of  the  registrant  as amended are incorporated herein by
             reference to Exhibit 3.2 of the registrant's Form 10-K for the
             fiscal year ended December  31,  1997.

     10.1    Castle  BancGroup, Inc. Stock Benefit Plan is incorporated here by
             reference  to  Exhibit 4.1 of the registrant's Form S-8,
             Registration Statement, filed on December  22, 1994, Registration
             No.  33-87658.

     10.2    Agreement  for  Services  by  and  between Ronald L. Hovermale and
             Castle  BancGroup,  Inc., dated as of September 26, 1997, and
             amendment dated as of  March  12,  1999 are incorporated herein by
             reference to Exhibit 10.2 of the registrant's  Form  10-K  for the
             fiscal  year  ended  December  31,  1998.

     10.3    Employment  agreement  by  and  between Dewey R. Yaeger and Castle
             BancGroup,  Inc.,  dated  as  of  January  1,  1999.

     21.1    Subsidiaries  of  Registrant

     23.1    Consent  of  KPMG  LLP

     27.1    Financial  Data  Schedule


                                       54
<PAGE>