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, 2000           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  $0.33  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 March 12, 2001, based upon average market price at that date:
The  registrant's  Common  Stock  is infrequently traded.  The most recent known
trading  price  is  $10.75  per share.  Based on this price the aggregate market
value  of voting shares held by non-affiliates of the registrant is $40,464,000.

The  registrant had 4,411,079 shares of Common Stock outstanding as of March 12,
2001.

The  following  documents  are  incorporated  by  reference  in  this  report:
1.     Portions  of the registrant's Proxy Statement for the 2001 Annual Meeting
       of Stockholders are incorporated by reference to Part III hereof.


                                        1
<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., First National Bank in DeKalb, and Castle Bank Harvard,
N.A.  merged on June 26, 2000.  The name of the merged bank is Castle Bank, N.A.
(CB  or  Subsidiary  Bank) and is a wholly owned bank subsidiary of the Company.
The  Subsidiary Bank provides 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  Bank  serves  a  diverse  customer  base  including  individuals,
businesses,  governmental  units,  and  institutional customers.  The Subsidiary
Bank  has  banking  offices  in  DeKalb, Sycamore, Sandwich, Plano, Sugar Grove,
Harvard,  McHenry,  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 continues to wind
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.  The closure of CMI was
accounted  for  as  a  discontinued  operation.

     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.


                                        3
<PAGE>
     Deposits  in  the  Subsidiary Bank are well balanced, with a large customer
base  and no dominant segment of accounts.  The 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.

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  Subsidiary"  below for discussion of regulators of the
Subsidiary  Bank.

     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  the  Subsidiary  Bank  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 2001 to no insurance assessment, and banks classified as
weakest  by  the  FDIC are subject to an insurance assessment rate of 0.27%.  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  2001  debt  service  assessment  was  0.0196%.

     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, 2000,
subject  to  minimum  regulatory  capital guidelines, the Subsidiary Bank could,
without  prior  approval  of  regulatory  authorities,  declare  dividends  of
approximately  $6,134,000.

The  Company's  Banking  Subsidiary
-----------------------------------


                                        4
<PAGE>
     The  Subsidiary  Bank  is a nationally chartered bank and a Federal Reserve
member,  and is therefore subject to regulation and examination by the Office of
the  Comptroller  of  the  Currency,  as well as the Federal Reserve Board.  The
Subsidiary  Bank  is  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
Bank  regulate  among  other things, the scope of its business, its investments,
its 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.

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 7.73% as of
December 31, 2000.  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 11.56% as of
December 31, 2000. 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
10.44%  as  of  December  31,  2000.  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  Bank  cannot  be  predicted.


                                        5
<PAGE>
Financial  Modernization  Legislation
-------------------------------------

     On  November 12, 1999, the President 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 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 also
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.

     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, in May, 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, 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, 2000, the Company and its subsidiaries had a total of
220  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 Subsidiary Bank's
properties  utilized  in  the  Subsidiary Bank's business.  These properties are
suitable  and  adequate  for  the  Subsidiary  Bank's  business  needs.


<TABLE>
<CAPTION>
                                                                   Approximat   Owned/
Description                    Address             City / State    Square Feet  Leased
-------------------  ---------------------------  ---------------  -----------  ------
<S>                  <C>                          <C>              <C>          <C>
Main bank            141 West Lincoln Highway     DeKalb, IL            19,600  Owned
Drive-in facility    141 West Lincoln Highway     DeKalb, IL             1,200  Owned
Branch facility      1007 North First Street      DeKalb, IL             1,800  Owned
Branch facility      511 West State Street        Sycamore, IL           9,400  Owned(1)
Branch facility      1602 East Sycamore Road      DeKalb, IL             2,300  Owned
Commercial building  121 West Lincoln Highway     DeKalb, IL            15,000  Owned(2)
Main bank            100 West Church Street       Sandwich, IL          13,000  Owned
Branch facility      606 Countryside Center       Yorkville, IL         21,100  Owned
Branch facility      36 East Galena Blvd          Sugar Grove, IL        1,150  Owned
Branch facility      505 West Route 34            Plano, IL              2,400  Leased
Main bank            201 West Diggins Street      Harvard, IL           11,700  Owned
Branch facility      1265 South Division Street   Harvard, IL            3,500  Owned
Commercial building  2022 South Route 31, Unit F  McHenry, IL            1,500  Leased

<FN>
----------------------------
(1)  CB owns the  building  and  approximately  60%  of  the underlying land and has a
long-term  lease  with  option  to  buy  the  remaining  land.
(2)  CB owns the  building  and  leases the entire space to the Company.  The facility
houses  all  administrative  and  operational  functions  of  the  Company.
</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,
2000.


                                        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  January  1,  1999:

     2000                                                 High    Low
----------------------------------------------------------------------
Fourth Quarter                                          $12.75   11.00
Third Quarter                                            13.75   12.75
Second Quarter                                           13.25   10.50
First Quarter                                            14.00   10.25

     1999                                                 High    Low
----------------------------------------------------------------------
Fourth Quarter                                          $16.25   12.25
Third Quarter                                            16.375  16.25
Second Quarter                                           16.125  15.00
First Quarter                                            15.00   14.50


     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  March  12,  2001  was  1,039.

     Cash  dividends  on  the  above  referenced  common  stock  are  declared
semi-annually.  Dividends  declared  for  the  years ended December 31, 2000 and
1999  were  as  follows:

                                                       2000  1999
-----------------------------------------------------------------
First semi-annual dividend                           $0.09   0.07
Second semi-annual dividend                           0.12   0.09
                                                      -----  ----
Total                                                 $0.21  0.16
                                                      =====  ====

     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,  2000,  the  Company could declare dividends of
approximately  $402,000  beyond  dividends  already  paid  in  1999  and  2000.


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

     Five  Year  Summary  of  Selected  Consolidated  Financial  Data

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

<TABLE>
<CAPTION>
                                                       2000       1999     1998     1997      1996
====================================================================================================
<S>                                                  <C>        <C>       <C>      <C>      <C>
Interest income                                      $ 40,275    38,250    40,604   39,034   36,307
Interest expense                                       20,520    18,809    19,961   19,589   17,912
---------------------------------------------------  ---------  --------  -------  -------  --------
Net interest income before provision for
  loan losses                                          19,755    19,441    20,643   19,445   18,395
Provision for loan losses                                 420       695       713    1,128    1,113
---------------------------------------------------  ---------  --------  -------  -------  --------
Net interest income after provision for loan losses    19,335    18,746    19,930   18,317   17,282
Other operating income                                  4,854     5,233     5,382    4,228    4,294
Investment securities gains, net                            -       250       154      210       41
Other operating expenses                               17,497    18,373    19,165   18,284   17,773
---------------------------------------------------  ---------  --------  -------  -------  --------
Earnings before income taxes                            6,692     5,856     6,301    4,471    3,844
Income tax expense                                      2,072     1,809     2,142    1,461    1,287
---------------------------------------------------  ---------  --------  -------  -------  --------
Net earnings from continuing operations              $  4,620     4,047     4,159    3,010    2,557
---------------------------------------------------  ---------  --------  -------  -------  --------
Discontinued operations                              $   (837)   (3,786)      576        3     (713)
---------------------------------------------------  ---------  --------  -------  -------  --------
Net earnings                                         $  3,783       261     4,735    3,013    1,844
---------------------------------------------------  ---------  --------  -------  -------  --------
Net earnings applicable to common stock              $  3,783       261     4,712    2,811    1,643
Per common share
  Basic
    Net earnings from continuing operations          $   1.05      0.93      0.96     0.68     0.57
    Discontinued operations                             (0.19)    (0.87)     0.13     0.00    (0.17)
    Net earnings                                         0.86      0.06      1.09     0.68     0.40
  Diluted
    Net earnings from continuing operations              1.04      0.92      0.95     0.67     0.56
    Discontinued operations                             (0.19)    (0.86)     0.13     0.00    (0.17)
    Net earnings                                         0.85      0.06      1.08     0.67     0.39
  Cash dividends                                         0.21      0.16      0.13     0.11     0.10
Financial position - year-end
  Investment securities available for sale           $121,948   126,159   132,060  129,479  133,072
  Mortgage loans held for sale                          3,020    14,892    66,755   44,286   19,959
  Net loans                                           380,086   359,451   322,058  308,540  285,380
  Allowance for losses                                  4,495     4,636     4,750    4,646    3,774
  Noninterest-bearing deposits                         64,108    52,274    50,371   42,589   43,233
  Interest bearing deposits                           423,665   408,143   404,621  382,728  361,695
  Other borrowings                                     17,041    39,486    54,497   49,307   29,738
  Preferred stock                                           -         -         -      300    2,600
  Total stockholders' equity                           43,369    37,408    41,545   36,862   34,962
  Total assets                                        552,260   540,850   558,282  517,183  474,243
====================================================================================================
</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;
-    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 $3,783,000 in 2000, an increase from
$261,000  in  1999.  This  represents  an  increase of $3,522,000.  Net earnings
totaled  $4,735,000  for  1998.  The  increase  in  net  earnings  in  2000  is
attributable  to the impact of discontinued operations in 1999, which produced a
loss  of  $837,000  in  2000  as  compared  to a loss of $3,786,000 in 1999. The
discontinued  operations  relate  to the Company's mortgage banking segment.  In
addition,  a  loss of $514,000 was recorded on the sale of a substantial portion
of  the  CFC loan portfolio in March, 1999.  There was no loss recorded in 2000.


                                       10
<PAGE>
     The  Company's  Annual  Report on Form 10-K for the year ended December 31,
1999 reported that the Company uncovered fraud and other irregularities in CMI's
underwriting  and documentation of certain mortgage loans originated and sold by
CMI.  A  more  detailed  description  of  the  fraud and other irregularities is
included  in that Form 10-K.  These mortgage loans were 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.
Through  December  31,  2000, the Company repurchased and re-sold or indemnified
investors  for  34  loans.

     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  are  included  in  the Form 10-K for the year ended December 31,
1999.

     The  Company's  net  earnings  from  continuing  operations in 2000 totaled
$4,620,000,  a  14.2% increase from 1999 net earnings from continuing operations
of $4,047,000.  Net earnings from continuing operations for 1998 was $4,159,000.
The increase in net earnings from continuing operations was due primarily to the
loss  in  1999 on the sale of a substantial portion of the CFC loan portfolio as
mentioned  earlier.

     Net  earnings  applicable to common stock was $3,783,000 for 2000, $261,000
for  1999,  and  $4,712,000  for  1998.  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 2000 and 1999 as compared to $23,000 in
1998.  The  Company  redeemed  $300,000  of  its  preferred  stock  in  1998.

     Basic  earnings per share from continuing operations increased to $1.05 for
2000 as compared to $0.93 for 1999 and $0.96 for 1998.  Basic earnings per share
increased  to  $0.86  for 2000 as compared to $0.06 for 1999 and $1.09 for 1998.
Basic  earnings  (loss)  per  share  from discontinued operations was ($0.19) in
2000,  ($0.87)  in  1999, and $0.13 in 1998.  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
                                                        1999 to 2000     1998 to 1999
-------------------------------------------------------------------------------------
<S>                                                      <C>             <C>
Prior period basic earnings per share                    $      0.06     $      1.09
Changes due to
  Net interest income                                           0.04           (0.31)
  Provision for loan losses                                     0.06            0.00
-------------------------------------------------------------------------------------
    Net interest income after provision for loan losses         0.10           (0.31)
-------------------------------------------------------------------------------------
  Other operating income
    Investment securities gains, net                           (0.06)           0.02
    Mortgage loan origination income                           (0.06)          (0.18)
    Other operating income items                               (0.03)           0.14
-------------------------------------------------------------------------------------
  Total other operating income                                 (0.15)          (0.02)
-------------------------------------------------------------------------------------
  Other operating expenses
    Salaries and employee benefits                             (0.03)           0.28
    Net occupancy and furniture expenses                        0.03            0.02
    Outside services                                            0.07           (0.01)
    Goodwill amortization                                       0.00            0.02
    Other operating expense items                               0.15           (0.06)
-------------------------------------------------------------------------------------
  Total other operating expenses                                0.22            0.21
  Income tax expenses                                          (0.05)           0.08
  Discontinued operations                                       0.68           (1.00)
  Preferred stock dividends                                     0.00            0.01
-------------------------------------------------------------------------------------
  Current period basic earnings per share                     $ 0.86          $ 0.06
=====================================================================================
</TABLE>

     The  Company's  banking segment posted net earnings of $6,569,000 for 2000,
as  compared  to $6,752,000 for 1999 and $6,214,000 for 1998.  Earnings for 2000
decreased  2.7% from 1999.  The decrease is primarily attributable to a decrease
in  other  operating income of $665,000, partially offset by a $454,000 increase
in  net  interest  income  after  provision  for  loan  losses.

     The  Company's  mortgage  banking segment posted a net loss of $837,000 and
$3,786,000  for 2000 and 1999, respectively, as compared to earnings of $576,000
for  1998.  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
Bank's  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  Bank.

     The  mortgage  lending  activities  of  the  Subsidiary  Bank represents an
integral,  inseparable  component of the banking segment.  CMI provided mortgage
brokerage  services  to the Subsidiary Bank that are now 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


                                       12
<PAGE>
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 Bank.  These balances relate
to  mortgages  originated  in  the  banking  segment.

     The  loss  from discontinued operations of $837,000 in 2000 included losses
from  operating  activities  of  CMI  and  the  loss  on  disposal  of  the
mortgage-banking  segment.  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  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 remaining
reserve  liability was $1,880,000 at December 31, 2000, and is included in other
liabilities  in  the  Consolidated  Balance  Sheet  as  of December 31, 2000 and
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, and has filed a claim for actual and anticipated losses.
The  outcome  of the claim is pending and uncertain.  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.

     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 $1,949,000 for 2000, compared to
net  losses  of  $2,705,000  and $2,055,000 in 1999 and 1998, respectively.  The
decrease  in  net  losses  for  2000  is  primarily  due  to the losses taken in
association  with  CFC  regarding  a  sale  of a substantial portion of its loan
portfolio  and  other related charges involved in closing that business in 1999.

     The  Company's  return on average equity for 2000 was 9.71%, as compared to
0.64%  in  1999  and 11.95% in 1998.  Return on average assets was 0.70% in 2000
versus  0.05%  in  1999  and 0.92% in 1998.  The change in these ratios for 2000
were primarily due to the loss on discontinued operations at CMI in 1999 and the
losses  at CFC regarding the sale of a substantial portion of its loan portfolio
in  1999  as  described above.  Excluding the loss from discontinued operations,
the  return  on average equity would have been 11.86%, and the return on average
assets  would  have  been  0.86%  for  2000.

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

     Net interest income before provision for loan losses, the Company's primary
source  of  earnings,  totaled $19,755,000 in 2000, a $314,000, or 1.6% increase
over  1999.  This increase can primarily be attributed to an increase in earning
assets  in  2000, offset by a decrease in net interest income no longer realized
from  funding  mortgage  loans  held  for  sale  from  CMI and a decrease in net
interest  income  from  the  CFC  loan  portfolio.  Net  interest  income before
provision  for  loan  losses  decreased  $1,202,000 in 1999 as compared to 1998,
which  represented  a  5.8%  decrease.

     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.


                                       13
<PAGE>
     On  a tax equivalent basis, net interest income increased to $20,735,000 in
2000  from  $20,486,000 in 1999 and decreased from $21,237,000 in 1998.  The tax
equivalent  net interest margin decreased in 2000, to 4.11% as compared to 4.15%
in  1999  and  4.40%  in  1998.

     Total  average  earning  assets  in  2000 were $504,399,000, an increase of
$10,921,000  or 2.2% over 1999.  Average earning assets as a percentage of total
average  assets  increased slightly to 94.0% during 2000 as compared to 93.7% in
1999.  It  was  also  94.0% in 1998.  The net average loan portfolio represented
74.2%  of  total  average earning assets in 2000, an increase from 68.9% in 1999
and  an  increase  from 64.4% in 1998.  Mortgage loans held for sale represented
0.5%  of average earning assets in 2000, a decrease from 5.0% in 1999.  Mortgage
loans  held  for  sale  represented  7.2% of average earning assets in 1998.  In
2000, average total interest-bearing liabilities were $438,664,000, a $6,926,000
or  1.6%  increase  over 1999.  This increase can be attributed to a $14,875,000
increase  in  average  interest-bearing  deposits,  offset  by  a  decrease  of
$7,949,000  in  average  other  borrowings.  The  proportion  of  average
interest-bearing  liabilities  to  average  earning  assets  in  2000  decreased
slightly  to  87.0%  as  compared  to  87.5%  in  1999.

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

     The  adequacy  of  the  Subsidiary  Bank's  allowance  for  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  probable 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 loan losses to non-performing loans and
loans  past due 90 days or more and still accruing was 175.3% at the end of 2000
versus  137.2%  and  168.6%  at  the  end  of 1999 and 1998, respectively.  This
increase  in  coverage was primarily due to a decrease in non-accrual loans from
$2,685,000  at  the  end of 1999 to $2,374,000 at the end of 2000. The allowance
for loan losses as a percentage of total outstanding loans decreased to 1.17% at
December  31,  2000,  as  compared to 1.27% at December 31, 1999.  The allowance
level  was  at  1.45%  of  total  loans  at  December  31,  1998.  The decreased
percentage  is  due  to an increase in loans outstanding.  The reserve liability
for  losses  on loans previously sold by CMI, as discussed above, is included in
other  liabilities  in  the  Consolidated  Balance  Sheet  at  Item  8.

     Gross  charge-offs  increased  $96,000  from 1999 to 2000, primarily due to
commercial  charge-offs,  which  increased  $377,000  offset  by  a  decrease in
consumer  and  real  estate  mortgage  charge-offs  of  $142,000  and  $139,000
respectively.  The  ratio  of net charge-offs to average total loans outstanding
increased during 2000 to 0.15% as compared to 0.11% in 1999.  The net charge-off
ratio  during  1998  was 0.19%.  The increase in this ratio was primarily due to
the  increase  in  commercial  charge-offs as described above, and a decrease in
recoveries  of  $90,000  primarily  due  to  commercial/agricultural  loans.

     The  provision for 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 $420,000 in 2000
as  compared to $695,000 in 1999, a $285,000 decrease.  This decrease was due to
the  closing  of  CFC in 1999 as described above.  The provision for loan losses
decreased $18,000 from 1998 to 1999.  Management's analysis of the allowance for
loan  losses  indicates  that  the  level at December 31, 2000 of 1.17% of total
outstanding  loans  is  adequate  to  cover probable 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 $2,563,000, or 0.46% of total assets, at December 31,
2000.  This  represents  a  decrease from $3,579,000 or 0.66% of total assets at
December 31, 1999. Non-performing assets at December 31, 1998 were $2,817,000 or
0.50%  of  total  assets.


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

     Total  other  operating  income  is  comprised of mortgage loan origination
income  on  loans sold from the Subsidiary Bank, trust services, deposit service
charges,  other  customer  service  charges,  and  other  miscellaneous  income.
Excluding  security  gains and losses, other operating income totaled $4,854,000
for  2000,  a  decrease  from  $5,233,000  and  $5,382,000  in  1999  and  1998,
respectively.  This  change  represents a 7.2% decrease from 1999 to 2000, which
can  be primarily attributed to decreases in mortgage loan origination income of
$278,000  and  other  income of $778,000, partially offset by increases in trust
fees  and  other  service  charges  of $103,000 and $542,000, respectively.  The
decreased  mortgage  loan  activity  at  the Subsidiary Bank 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 12.5% to $929,000 in 2000 as compared to $826,000 in
1999  and  $769,000  in 1998.  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 Subsidiary Bank's trust department was $180.8
million at December 31, 2000 as compared to $154.5 million and $163.9 million at
year-end  1999  and  1998,  respectively.

     There  were  no  net  security gains in 2000 as compared to net gains, on a
pre-tax  basis,  of  $250,000  and $154,000 in 1999 and 1998, respectively.  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  fair  market  value  in  the  accompanying  consolidated 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  fair  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  $17,497,000  in  2000  as  compared to
$18,373,000  and $19,165,000 in 1999 and 1998, respectively.  As a percentage of
average  assets,  total operating expenses decreased to 3.2% in 2000 versus 3.5%
in  1999  and  3.2% for 1998.  The efficiency ratio, which measures the ratio of
non-interest  expense  to  total  net revenues, was 71.1% in 2000 as compared to
74.5%  and  73.6%  in  1999  and  1998,  respectively.

     Salaries  and employee benefits expense represents the largest component of
other  operating  expenses.  This category increased $184,000, or 1.8% from 1999
to  2000.  During  1999,  this  expense  decreased  $1,118,000,  or  10.0%, when
compared  to  1998.  The  Company  has  been  able to reduce salary and benefits
expense  as  it has consolidated certain "back office" functions and closed CFC.
The  Company  employed  220 full-time equivalent (FTE) employees at December 31,
2000 as compared to 361 and 364 at December 31, 1999 and 1998, respectively.  Of
the  361  FTE's  at  December  31, 1999, approximately 123 were employed at CMI,
which  was  closed  in January 2000.  The salaries and employee benefits expense
for  the  CMI  employees  is reported as a component of discontinued operations.

     Occupancy and furniture and fixtures expenses totaled $2,628,000 in 2000, a
decrease  of $106,000, or 3.9%, from 1999.  During 1999, occupancy and furniture
and  fixture  expenses  decreased $70,000 as compared to 1998.  Outside services
and  other  expense  decreased  29.2%  to  $671,000  during  2000 as compared to
$948,000  in  the  prior year, partially due to reduced legal fees.  Advertising
expense  increased  1.8%  in  2000  to  $407,000  compared  to $400,000 in 1999.
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.


<PAAGE>
Financial  Condition
--------------------

     Total assets at December 31, 2000 were $552,260,000, an $11,410,000 or 2.1%
increase  over December 31, 1999 total assets of $540,850,000. This increase can
primarily  be  attributed to an increase in net loans outstanding of $20,635,000
and  an  increase  in  federal  funds sold of $8,250,000 offset by a decrease in
mortgage  loans  held  for  sale  at  the  Subsidiary  Bank of $11,872,000 and a
decrease  in  investment  securities available for sale of $4,411,000.  Cash and
cash  equivalents  are  continually  monitored  and  maintained  at  operational
minimums to minimize the Company's reliance on other borrowings.  Average assets
for 2000 grew by $10,098,000 or 1.9% to $536,702,000 as compared to $526,604,000
for  1999.

     The  Company's  increase  in  year-end  assets  is  also  represented by an
increase  in total deposits of $27,356,000.  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 grow faster than deposits in the future.  Average
deposits  increased  $20,392,000,  or  4.5%,  during  2000,  while average other
borrowings  decreased  $7,949,000, or 24.0%.  There were no brokered deposits at
December  31,  2000.  Brokered  deposits  totaled $297,000 at December 31, 1999,
with  an  interest  rate  of  6.75%  and  matured  in  August,  2000.

Capital
-------

     The  Company  is  committed  to maintaining strong capital positions in the
Subsidiary  Bank 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 2000,
stockholders'  equity increased $5,961,000 over December 31, 1999, primarily due
to  an increase in retained earnings of $2,861,000 and an increase of $2,800,000
in  accumulated  other  comprehensive  earnings,  which represents the change in
unrealized  gains/losses  on  investment  securities  available  for sale, which
decreased  from  a loss of $3,164,000 at December 31, 1999 to a loss of $364,000
at  December  31,  2000.  The  change  of  $2,800,000  in  accumulated  other
comprehensive  earnings  represents  a $4,572,000 gross unrealized gain less the
applicable  tax  effect  of  $1,772,000.  The increase was primarily caused by a
decrease  in  interest rates at the end of the year resulting in a corresponding
increase  in  the  value  of  debt  securities.

     The Company issued 27,005 shares of stock through its Dividend Reinvestment
and  Stock Purchase Plan and its Stock Benefit Plan during 2000, which generated
$300,000  of  new  shareholders' equity.  The Company's Tier 1 Leverage ratio at
December 31, 2000 was 7.73%, which increased from 7.26% as of December 31, 1999.
This  ratio  exceeds  the minimum regulatory capital requirement.  The Company's
Total  Risk  Weighted  Capital ratio increased to 11.56% as of December 31, 2000
from  11.11%  as  of  December  31, 1999.  The Tier 1 Capital ratio increased to
10.44%  at  December  31,  2000  from  9.91%  at December 31, 1999.  For further
discussion  of  the  regulatory  capital  requirements,  see  note  12  to  the
Consolidated  Financial  Statements  included  in  Item  8.

Liquidity
---------

     The  Company  ensures  that  the  Subsidiary  Bank  maintains  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 Subsidiary 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 Bank through its discretionary access to short-term funding
sources  in  case  of  unanticipated  demand  for  funds.


                                       15
<PAGE>
     As  presented in the Consolidated Statements of Cash Flows included in Item
8,  the  Company  has  experienced  significant  changes  in its cash flows from
operating,  investing, and financing activities during 2000 and 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 Bank
at  year-end,  which  have  allowed  for  decreases  in  other  borrowings.

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  Funds Management Committee 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.


                                       16
<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,  2000:


<TABLE>
<CAPTION>
                                                                                     (Dollars in thousands)

                                                             Balances Subject to Repricing Within
                                                        ---------------------------------------------------
                                                                                         Over 1
                                                        90 Days     180 Days   1 Year     Year      Total
-----------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>        <C>        <C>      <C>
Interest earning cash and due from banks                $       -          -          -         -         -
Federal funds sold                                          8,250          -          -         -     8,250
Investment securities available for sale                    6,834      1,006      3,260   111,474   122,574
Mortgage loans held for sale                                3,020          -          -         -     3,020
Gross loans                                               106,013     31,522     38,043   209,284   384,862
-----------------------------------------------------------------------------------------------------------
  Total earning assets                                    124,117     32,528     41,303   320,758   518,706
===========================================================================================================
Savings and other interest-bearing deposits               197,496          -          -         -   197,496
Time deposits                                              46,839     27,308     46,803   105,219   226,169
Other borrowings                                           11,516          -      5,525         -    17,041
-----------------------------------------------------------------------------------------------------------
  Total interest-bearing liabilities                      255,851     27,308     52,328   105,219   440,706
===========================================================================================================
Net asset (liability) repricing difference               (131,734)     5,220    (11,025)  215,539    78,000
===========================================================================================================
Cumulative asset (liability) repricing difference       $(131,734)  (126,514)  (137,539)   78,000
==================================================================================================
Cumulative earnings assets to cumulative
  interest-bearing liabilities                               0.49       0.55       0.59      1.18
==================================================================================================
Cumulative asset (liability) repricing difference as a
  percent of total earning assets                         (25.43%)   (24.42%)   (26.55%)    15.04%
==================================================================================================
</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,
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, 2000.  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, 2000.
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.


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                                          (Dollars in thousands)

                                                                                                            Fair
                                                                                      After                Value
                                       2001      2002     2003     2004     2005      2005     Total    12/31/00
                                     ---------  -------  -------  -------  -------  --------  --------  --------
<S>                                  <C>        <C>      <C>      <C>      <C>      <C>       <C>       <C>
RATE SENSITIVE ASSETS:

Mortgage loans held for sale         $  3,020        -        -        -        -         -     3,020      3,021
  Average interest rate                  7.57%       -        -        -        -         -      7.57%
Fixed interest rate loans            $ 66,210   31,686   33,718   22,084   19,035    15,389   188,122    186,838
  Average interest rate                  8.41%    8.33%    8.42%    8.02%    8.47%     7.44%     8.28%
Variable interest rate loans         $ 97,753   30,541   33,624   21,889    9,896     2,843   196,740    194,452
  Average interest rate                  9.54%    8.05%    8.08%    7.31%    8.25%     7.50%     8.71%
Fixed interest rate securities       $  5,962   10,756   16,303    5,042   12,843    67,502   118,408    117,782
  Average interest rate                  6.06%    5.87%    5.53%    5.80%    6.09%     5.81%     5.69%
Variable interest rate securities           -        -        -        -        -         -         -
  Average interest rate                     -        -        -        -        -         -         -
Equity securities                    $      -        -        -        -        -     4,166     4,166      4,166
Average interest rate                       -        -        -        -        -     10.33%    10.33%

RATE SENSITIVE LIABILITIES:

Non interest-bearing checking
(with no stated maturity)            $      -        -        -        -        -    64,108    64,108     64,108
  Average interest rate                     -        -        -        -        -         -         -
Savings and interest-bearing
checking  (with no stated maturity)         -        -        -        -        -   192,230   192,230    192,230
  Average interest rate                     -        -        -        -        -      3.41%     3.41%
Time deposits                        $122,042   88,309   16,203    1,984    2,432       465   231,435    230,900
  Average interest rate                  5.84%    6.17%    5.93%    5.11%    6.17%     5.46%     5.97%
Other borrowings                     $  9,041        -        -        -    7,000     1,000    17,041     17,041
  Average interest rate                  7.28%       -        -        -     6.15%     4.95%     6.64%
</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  Funds  Management  Committee  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,  1999.

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

     In  June  1998,  the  FASB  issued SFAS No. 133, "Accounting for Derivative
Instruments  and Hedging Activities."  This statement established accounting and
reporting  standards  for  derivative  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.  In  June 2000, the FASB issued SFAS No. 138,
"Accounting  for  Certain  Derivative  Instruments  and  Certain  Hedging
Activities--an  Amendment  of  Statement  No.  133,"  which  statement addresses
various implementation issues relative to SFAS No. 133. The adoption of SFAS No.
133  on  January  1,  2001,  did  not  have  a  material impact on the Company's
financial  position,  results  of  operations  or  liquidity.


                                       18
<PAGE>
In  September  2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing  of  Financial  Assets  and  Extinguishments  of  Liabilities."  This
statement  replaces  FASB  Statement  No.  125,  "Accounting  for  Transfers and
Servicing  of  Financial Assets and Extinguishments of Liabilities".  It revises
the  standards  for  accounting  for  securitizations  and  other  transfers  of
financial assets and collateral and requires certain disclosures, but it carries
over most of Statement 125's provisions without reconsideration.  This statement
provides  accounting  and  reporting  standards  for  transfers and servicing of
financial  assets  and  extinguishments  of  liabilities.  The  majority  of the
provisions  of  SFAS No. 140 will become effective for transactions entered into
after March 31, 2001; however, certain disclosure requirements are effective for
financial  statements for fiscal years ending after December 15, 2000.  SFAS No.
140  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 22
through  28  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>
<CAPTION>
                                                        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:
                                                                                                (Dollars in thousands)

                                                                December  31,
                                                   ---------------------------------------
                                                          2000                 1999                 1998
                                                   -------------------  ------------------  ------------------
                                                                % of                % of                % of
                                                    Amount     Total     Amount    Total     Amount    Total
                                                   ---------  --------  --------  --------  --------  --------
<S>                                                <C>        <C>       <C>       <C>       <C>       <C>
ASSETS:
  Cash and due from banks                          $ 16,141       3.0%   12,981       2.5%   10,797       2.1%
  Interest-bearing deposits in banks                      -         -         -         -         -         -
  Federal funds sold                                  4,146       0.8         -         -     2,907       0.6
                                                   ---------  --------  --------  --------  --------  --------
    Total cash and cash equivalents                $ 20,287       3.8    12,981       2.5    13,704       2.7

  Taxable securities available for sale            $104,958      19.6   109,353      20.8   121,784      23.7
  Tax-exempt securities available for sale           18,511       3.4    19,357       3.7    12,508       2.4

  Mortgage loans held for sale                        2,339       0.4    24,822       4.7    34,631       6.7

  Loans and leases, net of unearned income          374,445      69.8   339,949      64.6   311,195      60.6
  Less: Allowance for loan losses                     4,732       0.9     4,564       0.9     4,593       0.9
                                                   ---------  --------  --------  --------  --------  --------
    Loans, net                                      369,713      68.9   335,382      63.7   306,601      59.7

  Premises and equipment                           $ 11,471       2.1    11,502       2.2    10,647       2.1
  Goodwill, net of amortization                       2,065       0.4     2,364       0.4     2,715       0.5
  Assets of discontinued operations                   1,237       0.2     4,768       0.9     4,832       0.9
  Other assets                                        6,121       1.2     6,075       1.1     6,435       1.3
                                                   ---------  --------  --------  --------  --------  --------
    TOTAL ASSETS                                   $536,702     100.0%  526,604     100.0%  513,857     100.0%
                                                   =========  ========  ========  ========  ========  ========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
  Non-interest bearing deposits                    $ 55,179     10.3 %   49,662       9.4%   42,805       8.3%
  Interest bearing deposits                         413,459      77.0   398,584      75.7   388,948      75.7
                                                   ---------  --------  --------  --------  --------  --------
    Total deposits                                 $468,638      87.3   448,246      85.1   431,753      84.0
                                                   ---------  --------  --------  --------  --------  --------
  Other borrowings                                   25,205       4.7    33,154       6.3    36,859       7.2
  Other liabilities                                   3,900       0.7     4,127       0.8     5,611       1.1

    TOTAL LIABILITIES                              $497,743      92.7   485,527      92.2   474,223      92.3
                                                   ---------  --------  --------  --------  --------  --------

STOCKHOLDERS' EQUITY:
  Preferred stock                                  $      -         -         -         -       298       0.1%
  Common stock                                        1,462       0.3     1,177       0.2       721       0.1
  Additional paid-in capital                          6,993       1.3     7,094       1.3     6,954       1.4
  Accumulated other comprehensive (loss) earnings    (3,000)     (0.6)   (1,103)     (0.2)      791       0.2
  Retained earnings                                $ 33,504       6.3    33,910       6.5    30,880       6.0
                                                   ---------  --------  --------  --------  --------  --------

    STOCKHOLDERS' EQUITY                           $ 38,959       7.3    41,077       7.8    39,634       7.7
                                                   ---------  --------  --------  --------  --------  --------
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                           $536,702     100.0%  526,604     100.0%  513,857     100.0%
                                                   =========  ========  ========  ========  ========  ========
</TABLE>


                                       21
<PAGE>
<TABLE>
<CAPTION>
                                    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.

                                                                           (Dollars in thousands)

                                                    Average Balance              Average Rate
                                            -----------------------------  ----------------------
  INTEREST EARNINGS ASSETS:                     2000      1999      1998      2000   1999   1998
                                            ---------  --------  --------  --------  -----  -----
<S>                                         <C>        <C>       <C>       <C>       <C>    <C>
Taxable securities available for sale       $104,958   109,353   121,784      6.50%  6.24%  6.65%
Tax-exempt securities available for sale1     18,511    19,357    12,508      7.86   8.65   8.58
                                            ---------  --------  --------  --------  -----  -----
Total Securities                             123,469   128,710   134,292      6.70   6.60   6.83
                                            ---------  --------  --------  --------  -----  -----

Federal funds sold                             4,146         -     2,907      6.22   N/A    2.51
Mortgage loans held for sale2                  2,339    24,822    34,631      8.42   7.47   6.91
Loans, net1,3                                374,445   339,946   311,195      8.69   8.48   9.50
                                            ---------  --------  --------  --------  -----  -----
Total Earning Assets (FTE)                   504,399   493,478   483,025      8.18%  7.96%  8.53%
                                            =========  ========  ========  ========  =====  =====

  INTEREST BEARING LIABILITIES:
Interest bearing deposits                   $413,459   398,584   388,948      4.57   4.24%  4.58%
Other borrowings                              25,205    33,154    36,859      6.46   5.73   5.87
                                            ---------  --------  --------  --------  -----  -----
Total Interest Bearing Liabilities          $438,664   431,738   425,807      4.68%  4.36%  4.69%
                                            =========  ========  ========  ========  =====  =====

Interest Rate Spread (FTE)                                                    3.50%  3.61%  3.85%
Net interest margin (FTE)                                                     4.11%  4.15%  4.40%
                                                                           ========  =====  =====
</TABLE>


<TABLE>
<CAPTION>
                                                                                 2000/1999        1999/1998
                                                  Interest Income or Expense   Change due to    Change due to
                                                  --------------------------  ---------------  ----------------
                                                      2000    1999    1998    Volume    Rate   Volume    Rate
                                                     ------  ------  -------  -------  ------  -------  -------
<S>                                                  <C>      <C>     <C>     <C>      <C>      <C>     <C>
  INTEREST EARNING ASSETS:
Taxable securities available for sale               $ 6,823   6,825   8,095    (280)     278     (795)    (475)
Tax-exempt securities available for sale1             1,454   1,675   1,073     (71)    (150)     593        9
                                                    -------  ------  ------  -------  -------  -------  -------
Total securities                                      8,277   8,500   9,168    (351)     128     (202)    (466)
                                                    -------  ------  ------  -------  -------  -------  -------

Federal funds sold                                      258      92      73     166       10        9
Mortgage loans held for sale2                           197   1,855   2,394  (1,867)     209     (721)     182
Net loans1,3                                         32,523  28,848  29,563   2,984      691    2,596   (3,311)
                                                    -------  ------  ------  -------  -------  -------  -------
Total Earnings Asset (FTE)                          $41,255  39,295  41,198     932    1,028    1,683   (3,586)
                                                    =======  ======  ======  =======  =======  =======  =======

  INTEREST BEARING LIABILITIES:
Interest bearing deposits                           $18,891  16,910  17,796     647    1,334      433   (1,319)
Other borrowings                                      1,629   1,899   2,165    (493)     223     (214)     (52)
                                                    -------  ------  ------  -------  -------  -------  -------
Total Interest Bearing Liabilities                  $20,520  18,809  19,961     154    1,557      219   (1,371)
                                                    -------  ------  ------  -------  -------  -------  -------

Net interest income (FTE)                           $20,735  20,486  21,237     778     (529)   1,464   (2,215)
                                                    =======  ======  ======  =======  =======  =======  =======
<FN>

______________________

     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>
<CAPTION>
                                                          TABLE 3
                                             MATURITY OF INVESTMENT SECURITIES

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

                                                                                                            (Dollars in thousands)

                                                                        As  of  December  31,  2000
                                     ---------------------------------------------------------------------------------------------

                                                                                                    Corporate    Total
                                                          U.S. Government    States and Political  Obligations  Amortized  Total
                                       U.S.  Treasury        Agencies           Subdivisions(1)     and Other    Cost    Fair Value
                                     -----------------  --------------------  --------------------  ---------  --------  ---------
                                      Amount    Yield     Amount    Yield       Amount    Yield       Amount    Amount     Amount
                                     --------  -------  ---------  ---------  ---------  ---------  ---------  --------  ---------
<S>                                  <C>       <C>      <C>        <C>        <C>        <C>        <C>        <C>       <C>

Securities available for sale2:
1 year or less                        $ 5,041    5.63%         -          -      1,921       4.14%         -      6,962      6,961
1 through 5 years                           -       -     41,892       5.98%     2,853       4.72%         -     44,745     44,650
5 through 10 years                          -       -      8,987       6.58%     8,417       4.43%         -     17,404     17,334
After 10 years                              -       -      7,175       7.29%     5,400       4.97%         -     12,575     12,367
Mortgage backed securities3                 -       -     36,520       6.39%         -          -          -     36,520     36,173
                                     --------  -------  ---------  ---------  ---------  ---------  ---------  --------  ---------
Total debt securities                 $ 5,041    5.63%    94,574       6.29%    18,591       4.60%         -    118,206    117,485

Federal Home Loan Bank stock                -       -          -          -          -          -      2,052      2,052      2,052
Other equity securities                     -       -          -          -          -          -      2,316      2,316      2,411
                                     --------  -------  ---------  ---------  ---------  ---------  ---------  --------  ---------
Total securities available for sale   $ 5,041    5.63%    94,574       6.29%    18,591       4.60%     4,368    122,574    121,948
                                     ========  =======  =========  =========  =========  =========  =========  ========  =========



____________________________
<FN>

1     Yields  were  calculated  on  a  tax  equivalent  basis  assuming  a  blended  federal  and state tax rate of 38.74%.
2     At  December  31,  2000,  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>
<CAPTION>
                                                  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.

                                                                                    (Dollars in thousands)
                                                                           December 31,
                                                         -------------------------------------------------
                                                           2000       1999      1998      1997      1996
                                                         ---------  --------  --------  --------  --------
<S>                                                      <C>        <C>       <C>       <C>       <C>
Commercial, financial and agricultural                   $107,928   105,163    85,790    73,908    69,593
Real estate mortgages                                     257,111   204,743   213,760   208,500   186,599
Consumer                                                   19,468    18,144    29,168    32,606    35,242
Leases                                                        355       369       478       524       892
                                                         ---------  --------  --------  --------  --------
  Gross loans                                            $384,862   364,419   329,196   315,538   292,326

Less:
Unearned discount and deferred loan fees                 $    281       332     2,388     2,352     3,172
Allowance for loan losses                                   4,495     4,636     4,750     4,646     3,774
                                                         ---------  --------  --------  --------  --------
  Net loans                                              $380,086   359,451   322,058   308,540   285,380
                                                         =========  ========  ========  ========  ========

SUMMARY OF LOAN LOSS EXPERIENCE:
--------------------------------
Allowance for loan and lease losses, beginning of year   $  4,636     4,750     4,646     3,774     3,298
Amounts charged-off:
  Commercial, financial and agricultural                      401        24        11        60       270
  Real estate mortgages                                        56       195       275         -        43
  Consumer                                                    206       348       748       677       783
                                                         ---------  --------  --------  --------  --------
Total charge-offs                                        $    663       567     1,034       737     1,096
                                                         ---------  --------  --------  --------  --------

Recoveries on amounts previously charged-off:
  Commercial, financial and agricultural                 $     13       101       230       274       236
  Real estate mortgages                                        17        23        17         -        17
  Consumer                                                     72        74       178       174        88
                                                         ---------  --------  --------  --------  --------
Total recoveries                                         $    102       198       425       448       341
                                                         ---------  --------  --------  --------  --------
  Net charge-offs                                        $    561       369       609       289       755

Provision charged to expense                             $    420       695       713     1,128     1,113
Addition to dealer reserve                                      -         -         -        33       118
Allowance for loans sold                                        -      (440)        -         -         -
                                                         ---------  --------  --------  --------  --------
  Allowance for loans and lease losses, end of year      $  4,495     4,636     4,750     4,646     3,774
                                                         =========  ========  ========  ========  ========

Non-performing loans at year-end:
  Non-accrual                                            $  2,374     2,685     2,262     3,968     2,348
  Restructured                                                 99       120       208       139       314
                                                         ---------  --------  --------  --------  --------
Total non-performing loans                               $  2,473     2,805     2,470     4,107     2,662
                                                         =========  ========  ========  ========  ========

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

RATIOS:
-------
Allowance to year-end loans, net of unearned                 1.17%     1.27%     1.45%     1.48%     1.31%
Allowance to non-performing loans                          181.76    165.28    192.31    113.12    141.77
Net charge-offs to average loans (gross)                     0.15      0.11      0.19      0.10      0.28
Recoveries to charge-offs                                   15.38     34.92     41.10     60.79     31.11
Non-performing loans to loans, net of unearned
  discount and deferred loan fees                            0.64      0.77      0.76      1.31      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, 2000                      $       1,500      1,305      1,485        5           200  $ 4,495
% of loans in category to total loans          28.04%     66.81%      5.06%    0.09%          N/A   100.00%

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%
</TABLE>


                                       25
<PAGE>
<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,  2000
                                      -----------------------------------------------------------------
                                                                                          Loans  Due
                                           Time  Remaining  to  Maturity                After One Year
                                           -----------------------------               ----------------
                                                                                       Fixe    Floating
                                       Due Within   One to Five  After Five          Interest  Interest
                                         One Year       Years       Years     Total     Rate     Rate
                                      -----------  -----------  ----------  --------  --------  -------
<S>                                   <C>          <C>          <C>         <C>       <C>       <C>
Commercial, financial, agricultural,
  and leases                          $    67,713       25,191      15,379   108,283    20,322   20,248
Real estate mortgages                      95,134      141,147      20,830   257,111    63,977   90,000
Consumer                                   10,618        7,680       1,170    19,468     7,624    1,226
                                      -----------  -----------  ----------  --------  --------  -------
Total                                 $   173,465      174,018      37,379   384,862    91,923  119,474
                                      ===========  ===========  ==========  ========  ========  =======
</TABLE>


                                       26
<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>
2000 Average
  Balance           $  55,179     94,028     91,432   222,998    468,638
  Rate                     --       3.05%      3.39%     5.72%      4.57%
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%
</TABLE>


The  following  table  sets forth the registrant's maturity distribution for all
time  deposits  of  $100,000  or  more  as  of  December  31,  2000.


<TABLE>
<CAPTION>
               MATURITY DISTRIBUTION FOR ALL TIME DEPOSITS OF $100,000 OR MORE

                                                            (Dollars in thousands)

                                                 December  31,  2000
                                   -------------------------------------------
                                   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  $ 28,907   7,385   15,758   16,516   68,566
</TABLE>


                                       27
<PAGE>
                                     TABLE 8
                                OTHER BORROWINGS

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

<TABLE>
<CAPTION>
                                                    (Dollars in thousands)
                                                         December  31,
                                                   -----------------------
                                                    2000     1999    1998
                                                   -------  ------  ------
<S>                                                <C>      <C>     <C>
Repurchase agreements                              $     -     336     313
Federal funds purchased                                  -  24,500  33,900
Federal Home Loan Bank borrowings                   10,500   7,700   7,700
Secured Term Loan                                    5,525   6,050   8,300
Other                                                1,016     900   4,284
                                                   -------  ------  ------
     Total                                         $17,041  39,486  54,497
                                                   =======  ======  ======
</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,
                                       ---------------------------------------
                                        2000    1999     1998    1997    1996
                                       ------  -------  ------  ------  ------
<S>                                    <C>     <C>      <C>     <C>     <C>

Return on average assets                0.70%    0.05%   0.92%   0.62%   0.40%
Return on average equity                9.71     0.64   11.95    8.43    5.36
Common stock dividend payout ratio     24.37   267.43   11.91   15.20   22.45
Average equity to average asset ratio   7.26     7.80    7.71    7.37    7.45
</TABLE>


                                       28
<PAGE>
Item  7A.  Quantitative  and  Qualitative  Disclosures  About  Market  Risk
---------------------------------------------------------------------------

     See  Item  7  above.


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

<TABLE>
<CAPTION>
Consolidated  Balance  Sheets

December  31,  2000  and  1999
(Dollars  in  thousands,  except  share  data)
---------------------------------------------------------------------------------------------
     ASSETS                                                                 2000       1999
---------------------------------------------------------------------------------------------
<S>                                                                       <C>        <C>

Cash and due from banks (note 2)                                          $ 18,938    17,501
---------------------------------------------------------------------------------------------
Federal funds sold                                                           8,250         -
---------------------------------------------------------------------------------------------
Investment securities available for sale (note 3)                          121,948   126,159
---------------------------------------------------------------------------------------------
Mortgage loans held for sale, lower of cost or market                        3,020    14,892
---------------------------------------------------------------------------------------------
Loans  (note 4)                                                            384,862   364,419
     Less:
          Allowance for loan losses  (note 4)                                4,495     4,636
          Unearned income and deferred loan fees                               281       332
---------------------------------------------------------------------------------------------
Net loans                                                                  380,086   359,451

Premises and equipment  (note 5)                                            11,317    11,547
Goodwill, net of amortization                                                1,904     2,210
Assets of discontinued operations (note 18)                                     90     2,878
Other assets                                                                 6,707     6,212
---------------------------------------------------------------------------------------------
                                                                          $552,260   540,850
=============================================================================================
     LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------------------------------
Liabilities:
     Deposits:
          Noninterest-bearing                                             $ 64,108    52,274
          Interest-bearing  (note 6)                                       423,665   408,143
---------------------------------------------------------------------------------------------
Total deposits                                                             487,773   460,417
     Other borrowings  (note 7)                                             17,041    39,486
     Other liabilities                                                       4,077     3,539
---------------------------------------------------------------------------------------------
Total liabilities                                                          508,891   503,442
---------------------------------------------------------------------------------------------
Stockholders' equity:
     Common stock, $.33 1/3 par value; 25,000,000 shares authorized,
          4,396,668 and 4,369,663 shares issued and outstanding in 2000
          and 1999, respectively                                             1,466     1,457
     Additional paid-in capital                                              7,121     6,830
     Accumulated other comprehensive loss  (note 8)                           (364)   (3,164)
     Retained earnings  (notes 11 and 12)                                   35,146    32,285
---------------------------------------------------------------------------------------------
Total stockholders' equity                                                  43,369    37,408
Commitments and contingent liabilities (notes 13 and 14)
---------------------------------------------------------------------------------------------
                                                                          $552,260   540,850
=============================================================================================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       29
<PAGE>
<TABLE>
<CAPTION>
Consolidated  Statements  of  Earnings

Years  Ended  December  31,  2000,  1999,  and  1998
----------------------------------------------------
(Dollars  in  thousands,  except  per  share  data)
----------------------------------------------------------------------------------------------------
                                                                             2000     1999     1998
----------------------------------------------------------------------------------------------------
<S>                                                                        <C>       <C>      <C>
Interest income:
     Interest and fees on loans                                            $32,105   28,452   29,385
     Interest and dividends on investment securities available for sale:
          Taxable                                                            6,823    6,825    8,095
          Nontaxable                                                           891    1,025      657
     Interest on federal funds sold                                            258       93       73
     Interest on mortgage loans held for sale                                  198    1,855    2,394
----------------------------------------------------------------------------------------------------
Total interest income                                                       40,275   38,250   40,604
----------------------------------------------------------------------------------------------------
Interest expense:
     Interest on deposits                                                   18,891   16,910   17,796
     Interest on other borrowings                                            1,629    1,899    2,165
----------------------------------------------------------------------------------------------------
Total interest expense                                                      20,520   18,809   19,961
----------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses                        19,755   19,441   20,643
Provision for loan losses  (note 4)                                            420      695      713
----------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses                         19,335   18,746   19,930
----------------------------------------------------------------------------------------------------
Other operating income:
     Trust fees                                                                929      826      769
     Deposit service charges                                                   433      401      358
     Other service charges                                                   2,189    1,647    1,224
     Investment securities gains, net  (note 3)                                  -      250      154
     Mortgage loan origination income                                          761    1,039    1,820
     Other income                                                              542    1,320    1,211
----------------------------------------------------------------------------------------------------
Total other operating income                                                 4,854    5,483    5,536
----------------------------------------------------------------------------------------------------
Other operating expenses:
     Salaries and employee benefits  (note 9)                               10,268   10,084   11,202
     Net occupancy expense of premises                                       1,192    1,294    1,405
     Furniture and fixtures                                                  1,436    1,440    1,399
     Office supplies                                                           340      377      412
     Outside services                                                          671      948      911
     Advertising expense                                                       407      400      438
     FDIC insurance assessment                                                  94       52       51
     Postage and courier expense                                               347      377      472
     Telephone expense                                                         338      343      309
     Loss on sale of loans                                                       -      514        -
     Amortization expense-goodwill                                             305      305      388
     Other expenses                                                          2,099    2,239    2,178
----------------------------------------------------------------------------------------------------
Total other operating expenses                                              17,497   18,373   19,165
----------------------------------------------------------------------------------------------------
Earnings before income taxes                                                 6,692    5,856    6,301
Income tax expense  (note 8)                                                 2,072    1,809    2,142
----------------------------------------------------------------------------------------------------
Net earnings from continuing operations                                    $ 4,620    4,047    4,159
----------------------------------------------------------------------------------------------------
Discontinued operations (note 18)                                          $  (837)  (3,786)     576
----------------------------------------------------------------------------------------------------
Net earnings                                                               $ 3,783      261    4,735
====================================================================================================
Net earnings applicable to common stock                                    $ 3,783      261    4,712
====================================================================================================
Basic earnings per common share from
     Continuing operations                                                 $  1.05     0.93     0.96
     Discontinued operations                                                 (0.19)   (0.87)    0.13
     Net earnings                                                             0.86     0.06     1.09
Diluted earnings per common share from
     Continuing operations                                                 $  1.04     0.92     0.95
     Discontinued operations                                                 (0.19)   (0.86)    0.13
     Net earnings                                                             0.85     0.06     1.08
====================================================================================================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       30
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity

Years  Ended  December  31,  2000,  1999,  and  1998
(Dollars  in  thousands,  except  share  data)
---------------------------------------------------------------------------------------------------------------
                                                                                            Accumulated
                                                                                               other
                                                Preferred  Common           Retained       comprehensive
                                                    stock   stock  Surplus  earnings   earnings (loss)   Total
---------------------------------------------------------------------------------------------------------------
<S>                                                <C>      <C>    <C>      <C>        <C>              <C>
Balance as of January 1, 1998                      $  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)
                                                                                                        -------
     Total comprehensive earnings                       -       -        -         -                -    5,092
Issuance of 38,524 shares of common stock               -      12      466         -                -      478
Redemption of preferred stock                        (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 as of December 31, 1999                    $    0   1,457    6,830    32,285           (3,164)  37,408

Comprehensive earnings
     Net earnings                                       -       -        -     3,783                -    3,783
     Unrealized gain on investment securities           -       -        -         -            4,572    4,572
     Income tax effect                                  -       -        -         -           (1,772)  (1,772)
                                                                                                        -------
     Total comprehensive earnings                       -       -        -         -                -    6,583
Issuance of 27,005 shares of common stock               -       9      291         -                -      300
Cash dividends on common stock ($0.21 per share)        -       -        -      (922)               -     (922)
---------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                       $    0   1,466    7,121    35,146             (364)  43,369
===============================================================================================================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       31
<PAGE>
<TABLE>
<CAPTION>
Consolidated  Statements  of  Cash  Flows

Years  Ended  December  31,  2000,  1999,  and  1998

(Dollars in thousands)                                                   2000       1999      1998
----------------------------------------------------------------------------------------------------
<S>                                                                    <C>        <C>       <C>
Cash flows from continuing operating activities:
     Interest received                                                 $ 39,519    36,335    40,231
     Fees received                                                        4,853     4,779     5,488
     Net decrease (increase) in mortgage loans held for sale             11,953    52,091   (22,600)
     Interest paid                                                      (20,215)  (19,101)  (19,965)
     Cash paid to suppliers and employees                               (15,810)  (17,806)  (16,712)
     Income taxes paid                                                   (1,400)   (1,002)   (2,695)
----------------------------------------------------------------------------------------------------
Net cash provided by (used in) continuing operating activities           18,900    55,296   (16,253)
----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Proceeds from:
          Maturities of investment securities available for sale         12,721    16,696    40,639
          Sales of investment securities available for sale                  20    26,828    38,406
     Purchases of investment securities available for sale               (4,547)  (44,611)  (80,197)
     Net increase in loans                                              (21,067)  (37,297)  (14,331)
     Premises and equipment expenditures                                   (898)   (1,885)   (1,883)
----------------------------------------------------------------------------------------------------
Net cash used in investing activities                                   (13,771)  (40,269)  (17,366)
----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Net increase in demand deposits, NOW accounts,
          and savings accounts                                           27,489     7,685    34,885
     Net decrease in certificates of deposit                               (132)   (2,260)   (5,210)
     Dividends paid on preferred stock                                        -         -       (23)
     Dividends paid on common stock                                        (787)     (609)     (510)
     Net proceeds from short-term debt                                  (21,787)  (10,761)    5,141
     Issuance of long term debt                                               -         -     1,000
     Repayment of long-term debt                                           (525)   (4,250)     (950)
     Redemption of preferred stock                                            -         -      (300)
     Issuance of common stock                                               300       400       478
----------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities                       4,558    (9,795)   34,511
----------------------------------------------------------------------------------------------------
Net change in cash and due from banks from continuing operations          9,687     5,232       892
Cash and cash equivalents  at beginning of year                          17,501    12,269    11,377
----------------------------------------------------------------------------------------------------
Cash and cash equivalents  at end of year                              $ 27,188    17,501    12,269
====================================================================================================
Reconciliation of net earnings to net cash provided
     by (used in) continuing operating activities:
          Net earnings                                                 $  3,783       261     4,735
          Adjustments to reconcile net earnings to net cash provided
                by continuing operating activities:
                    Discontinued Operations                                 837     3,786      (576)
                    Depreciation and amortization                         1,498     1,681     1,796
                    Provision for loan losses                               420       695       713
                    Gains on sale of investment securities                    -      (250)     (154)
               Increase (decrease) in:
                    Income taxes payable                                    672       807      (553)
                    Interest payable                                        305      (292)       (5)
                    Unearned income                                         (51)   (2,056)       36
                    Other liabilities                                       189    (1,114)      833
               Decrease (increase) in:
                    Interest receivable                                    (494)      208      (358)
                    Other assets                                             (1)     (454)      105
               Decrease (increase) in mortgage loans held for sale       11,953    52,091   (22,600)
               Discount accretion recorded as income                       (414)     (369)     (485)
               Premium amortization charged against income                  203       302       260
----------------------------------------------------------------------------------------------------
Net cash provided by (used in) continuing operating activities         $ 18,900    55,296   (16,253)
====================================================================================================
Net change in cash and cash equivalents from discontinued operations   $   (723)   (2,080)    1,194
====================================================================================================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                       32
<PAGE>
Years  Ended  December  31,  2000,  1999,  and  1998
================================================================================
(1)     SUMMARY  OF SIGNIFICANT ACCOUNTING POLICIES - The consolidated financial
statements  of Castle BancGroup, Inc. and subsidiaries (Company) are prepared in
conformity with accounting principles generally accepted in the United States of
America  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),  Castle  Finance  Company  (CFC), CasBanc
Mortgage,  Inc.  (CMI),  and  SBI  Illinois,  Inc.  Significant  inter-company
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 Bank.  Mortgage loans held
for  sale  by CMI (i.e., those not sold to the Subsidiary Bank) 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.


                                       33
<PAGE>
     (f)     LOAN  FEES.  The  Subsidiaries  defer  all  certain  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  LOAN  LOSSES.  An  allowance  for  loan  losses  is
maintained  at  a  level  deemed  adequate by management to provide for probable
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 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 at the date of acquisition.  This
amount, net of accumulated amortization of $3,988,000 and $3,682,000 at December
31,  2000  and  1999,  respectively,  is  shown  as goodwill in the 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 at December 31,
1999.

     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 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.


                                       34
<PAGE>
     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,
2000,  1999,  and  1998  were  as  follows:

<TABLE>
<CAPTION>
                                                                      (Dollars in thousands, except share data)

                                                                               2000        1999        1998
---------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>         <C>        <C>
Basic EPS:
     Net earnings                                                            $    3,783        261      4,735
     Less:  preferred stock dividends                                                 -          -        (23)
                                                                             ---------  ----------  ----------
        Net earnings available to common stockholders                        $   3,783         261       4,712
                                                                             ---------  ----------  ----------

     Average common shares outstanding                                        4,384,554  4,358,888  4,327,288
                                                                             ==========  =========  ==========

     Basic EPS                                                               $    0.86        0.06       1.09
                                                                             ---------  ----------  ----------

Diluted EPS
     Net earnings available to common stockholders                           $    3,783        261      4,712
     Assumed conversion of preferred stock                                            -          -         23

     Net earnings available to common stockholders after assumed conversion  $    3,783        261      4,735
                                                                             ==========  =========  ==========

     Average common shares outstanding                                        4,384,554  4,358,888  4,327,288

     Assumed conversion of preferred stock                                            -          -     21,818

     Assumed exercise of stock options                                           47,167     56,459     37,438
                                                                             ---------  ----------  ----------

     Average common shares after assumed conversions                          4,431,721  4,415,347  4,386,544
                                                                             ==========  =========  ==========

Diluted EPS                                                                  $     0.85       0.06       1.08
                                                                             ==========  =========  ==========
=================================================================================================================
</TABLE>


(2)     CASH  AND  DUE  FROM  BANKS  - The Company's Subsidiary Bank, which is a
member  of  the  Federal  Reserve  System, is 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
$10,466,000  and  $3,275,000  in 2000 and 1999, respectively.  Cash and due from
banks include cash on hand and in banks with original maturities of three months
or  less.


                                       35
<PAGE>
(3)     INVESTMENT SECURITIES - A comparison of amortized cost and fair value of
investment  securities available for sale at December 31, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                                       (Dollars in thousands)

                                                             December  31,  2000
---------------------------------------------------------------------------------------------
                                                                  Gross      Gross
                                                 Amortized   Unrealized  Unrealized      Fair
                                                      Cost        Gains      Losses     Value
---------------------------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>          <C>
U.S. Treasury and agency obligations             $   63,094         197        (479)   62,812
Obligations of state and political subdivisions      18,592          46        (138)   18,500
Mortgage-backed securities                           36,520          69        (416)   36,173
---------------------------------------------------------------------------------------------
Total debt securities                               118,206         312      (1,033)  117,485
---------------------------------------------------------------------------------------------
Federal Home Loan Bank stock                          2,052           -           -     2,052
Other equity securities                               2,316          95           -     2,411
---------------------------------------------------------------------------------------------
Total securities                                 $  122,574         407      (1,033)  121,948
=============================================================================================
</TABLE>


<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
=============================================================================================
</TABLE>

     The  amortized  cost  and  fair  value  of securities available for sale at
December  31,  2000  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,  2000
                                                    ---------------------------
                                                    Amortized Cost   Fair Value
--------------------------------------------------------------------------------
Due in one year or less                             $         6,962       6,961
Due after one year through five years                        44,745      44,650
Due after five years through ten years                       17,404      17,334
Due after ten years                                          12,575      12,367
--------------------------------------------------------------------------------
                                                    $        81,686      81,312
Mortgage-backed securities                                   36,520      36,173
--------------------------------------------------------------------------------
Total debt securities                               $       118,206     117,485
Federal Home Loan Bank stock                                  2,052       2,052
Other equity securities                                       2,316       2,411
--------------------------------------------------------------------------------
Total securities                                    $       122,574     121,948
================================================================================


                                       36
<PAGE>
     There  were  no  investment  gains  in  2000  but  there were approximately
$312,000,  and $167,000 in gross gains and approximately $62,000, and $13,000 of
gross  losses  that  occurred  from  security  activity  during  1999  and 1998,
respectively.  All  security  gains  and losses were as a result of transactions
involving  available  for  sale  securities.

     Investment  securities carried at approximately $86,912,000 and $82,802,000
at December 31, 2000 and 1999, 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)
-----------------------------------------------------------------------------
                                                              2000     1999
-----------------------------------------------------------------------------
Commercial, financial, and agricultural                     $107,928  105,163
Real estate mortgage                                         257,111  240,743
Consumer                                                      19,468   18,144
Lease financing receivables                                      355      369
-----------------------------------------------------------------------------
Total                                                       $384,862  364,419
=============================================================================

     The  Company  provides  several  types  of  loans  to  customers, including
residential,  construction,  commercial,  and  consumer  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)
                                                       2000                1999
--------------------------------------------------------------------------------
Non-accrual loans and leases                          $2,374               2,685
Restructured loans                                        99                 120
--------------------------------------------------------------------------------
Total non-performing loans and leases                 $2,473               2,805
================================================================================

     Loans past due 90 days or more and still accruing interest are not included
above  and  totaled  $90,000  and  $573,000  at  December  31,  2000  and  1999,
respectively.

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

                                                          (Dollars in thousands)

                                                              2000   1999  1998
-------------------------------------------------------------------------------
Income recognized                                             $ 198   101    65
Income which would have been recognized under original terms    339   168   175
===============================================================================


                                       37
<PAGE>
<TABLE>
<CAPTION>
     Impaired loan information at December 31, 2000, 1999, and 1998 is as follows:

                                                                (Dollars in thousands)
--------------------------------------------------------------------------------------
                                                                   2000   1999   1998
--------------------------------------------------------------------------------------
<S>                                                               <C>     <C>    <C>

Impaired loans for which a related allowance has been allocated   $1,172    883    54
Impaired loans for which no allowance has been allocated             323    907   864
--------------------------------------------------------------------------------------
Total loans determined to be impaired                             $1,495  1,790   918
--------------------------------------------------------------------------------------
Allowance allocated to impaired loans, included in the allowance
  for  loan losses                                                $  491    182    10
======================================================================================
</TABLE>

     Impaired  loans  averaged  $1,642,000,  $1,354,000,  and $1,790,000 for the
years  ended December 31, 2000, 1999, and 1998, respectively.  All $1,495,000 of
impaired  loans  at  December  31,  2000, represented non-accrual loans.  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.

     At various times throughout the year, certain officers and directors of the
Company  and its affiliates have borrowed money from the Subsidiary Bank.  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.

     The  following  summarizes  activity  on loans, including renewals, made to
related  parties  during  2000  and  1999:

                                                       (Dollars in thousands)

                                                              2000     1999
-----------------------------------------------------------------------------
Loans outstanding, beginning of year                         $2,090    5,666
New loans, renewals, and advances                               232      295
Loan payments                                                  (543)  (3,871)
-----------------------------------------------------------------------------
Loans outstanding, end of year                               $1,779    2,090
=============================================================================

     The  following  is  a summary of activity in the allowance for loan losses:

                                                         (Dollars in thousands)

                                                           2000   1999   1998
------------------------------------------------------------------------------
Balance, beginning of year                                $4,636  4,750  4,646
Provision charged to expense                                 420    695    713
Recoveries on loans previously charged off                   102    198    425
------------------------------------------------------------------------------
                                                           5,158  5,643  5,784
Less loans charged off                                       663    567  1,034
Less allowance for loans sold                                  -    440      -
------------------------------------------------------------------------------
Balance, end of year                                      $4,495  4,636  4,750
==============================================================================


                                       38
<PAGE>
(5)     PREMISES  AND  EQUIPMENT  -  The components of premises and equipment at
December  31  were  as  follows:

                                                      (Dollars in thousands)

                                                          2000     1999
------------------------------------------------------------------------
Land and land improvements                               $ 2,046   2,057
Building and improvements                                 12,452  11,659
Furniture, fixtures, and equipment                         7,438   7,380
------------------------------------------------------------------------
                                                          21,936  21,096
Less accumulated depreciation                             10,619   9,549
------------------------------------------------------------------------
Total                                                    $11,317  11,547


(6)     DEPOSITS  -  The  aggregate  amount  of large time deposits, each with a
minimum  denomination  of  $100,000, was $68,566,000 and $58,693,000 at December
31,  2000 and 1999, respectively.  In these totals there were no broker deposits
at  December  31,  2000 but there were $297,000 of brokered deposits at December
31,  1999,  with  an  interest  rate  of  6.75%.

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

<TABLE>
<CAPTION>
                                                                   (Dollars in thousands)
                                                                           2000     1999
-----------------------------------------------------------------------------------------
<S>                                                                       <C>      <C>

Repurchase agreements                                                     $     -     336
Federal funds purchased                                                         -  24,500
Federal Home Loan Bank borrowings                                          10,500   7,700
Secured revolving loan dated December 31, 2000, with interest at
  Federal Funds Rate plus 1% (7.50% as of December 31, 2000), payable
  December 28, 2001                                                         5,525       -
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
Other                                                                       1,016     900
-----------------------------------------------------------------------------------------
Total                                                                     $17,041  39,486
=========================================================================================
</TABLE>

     The  secured  revolving  loan  with a balance of $5,525,000 at December 31,
2000,  and  the  secured  term  loan with a balance outstanding of $6,050,000 at
December  31, 1999, (repaid in 2000) 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,  2000.  The  restriction  on  dividends to stockholders is
described  further  in  note  11.  The secured revolving loan dated December 31,
2000,  has  a  total  commitment  of  $7,500,000.

     Federal  Home  Loan Bank borrowings are collateralized by Federal Home Loan
Bank  stock  and first mortgage real estate loans.  As of December 31, 2000, the
notes  mature  from  2001  through  2008  and  have fixed interest rates with an
average of  6.19%.  CB has 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.


                                       39
<PAGE>
<TABLE>
<CAPTION>
      Scheduled payments on other borrowings, through maturity, are:

                                                          (Dollars in thousands)

Year ended December 31                                             Amount
--------------------------------------------------------------------------------
<S>                                                        <C>
2001                                                       $              9,041
2002                                                       $                  -
2003                                                       $                  -
2004                                                       $                  -
2005                                                       $              7,000
thereafter                                                 $              1,000
</TABLE>

(8)     INCOME  TAXES  -  The components of Federal income tax expense (benefit)
for  2000,  1999,  and  1998  were  as  follows:

<TABLE>
<CAPTION>
                                                            (Dollars in thousands)

                                                             2000     1999    1998
-----------------------------------------------------------------------------------
<S>                                                         <C>      <C>     <C>
Current                                                     $2,109   2,037   2,270
Deferred                                                       (37)   (228)   (128)
-----------------------------------------------------------------------------------
Total                                                       $2,072   1,809   2,142
===================================================================================
</TABLE>

     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  2000,  1999  and  1998  are  as  follows:

<TABLE>
<CAPTION>
                                                          (Dollars in thousands)
                                                           2000     1999    1998
---------------------------------------------------------------------------------
<S>                                                       <C>      <C>     <C>
Tax expense at statutory rate                             $2,275   1,991   2,142
Tax-exempt interest, net of premium amortization            (478)   (462)   (253)
Nondeductible amortization                                   154     154     158
Other, net                                                   121     126      95
---------------------------------------------------------------------------------
Total income tax expense                                  $2,072   1,809   2,142
=================================================================================
</TABLE>


                                       40
<PAGE>
     The  tax  effects  of  temporary  differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2000  and  1999  are  as  follows:

<TABLE>
<CAPTION>
                                                          (Dollars in thousands)

                                                               2000     1999
--------------------------------------------------------------------------------
<S>                                                           <C>      <C>
Deferred tax assets:
     Allowance for loan losses                                 $1,472     1,324
     Unrealized losses on investment securities                   262     1,968
     Other                                                        109       110
     Deferred compensation                                        187       195
--------------------------------------------------------------------------------
Total gross deferred tax assets                                $2,030     3,597
--------------------------------------------------------------------------------
Deferred tax liabilities:
     Purchase accounting adjustments                             (350)     (407)
     Accretion on investments                                    (170)      (10)
     Depreciation                                                (274)     (265)
     Net lease adjustment                                           -        (9)
     Other, net                                                   (24)      (25)
--------------------------------------------------------------------------------
Total gross deferred tax liabilities                              818      (716)
--------------------------------------------------------------------------------
Net deferred tax assets (liabilities)                          $1,212     2,881
</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.

(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 $522,000,
$449,000,  and  $908,000  in  2000,  1999,  and  1998,  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, as amended (the Code).
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 $5,000, $18,000, and $14,000 in 2000,
1999,  and  1998,  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.


                                       41
<PAGE>
     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 10.0% 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, 2000.  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, 2000  December 31, 1999  December 31, 1998
                                         ------------------  -----------------  -----------------
                                                     Average          Average           Average
                                           Shares    Price    Shares   Price    Shares   Price
                                          -----------------  ----------------  ----------------
<S>                                       <C>       <C>      <C>       <C>     <C>       <C>
Options outstanding at beginning of year  275,600   $  9.41  263,600   $ 9.05  218,500   $ 7.77
Options granted                            26,500   $ 13.25   16,000   $16.00   50,000   $14.64
Options exercised                          (1,150)  $  9.33   (1,600)  $ 8.63   (3,150)  $ 7.02
Options forfeited                          (7,750)  $ 13.74   (2,400)  $14.42   (1,750)  $12.64
-----------------------------------------------------------------------------------------------
Options outstanding at end of year        293,200   $  9.64  275,600   $ 9.41  263,600   $ 9.05
-----------------------------------------------------------------------------------------------
Options exercisable at end of year        228,775   $  8.41  205,475   $ 7.88  146,826   $ 7.35
-----------------------------------------------------------------------------------------------
Options available to grant under the
 plan at end of year                      122,017             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:

<TABLE>
<CAPTION>
                                           (Dollars in thousands, except per share data)

                                                                      2000   1999   1998
------------------------------------------------------------------------------------------
<S>                                       <C>                        <C>     <C>    <C>
Net earnings from continuing operations   As reported                $4,620  4,047  4,159
                                          Pro forma                   4,536  3,980  4,051
Net earnings                              As reported                $3,783    261  4,735
                                          Pro forma                   3,699    194  4,627
Basic earnings per share from continuing  As reported                $ 1.05   0.93   0.96
     operations                           Pro forma                    1.03   0.91   0.94
Basic earnings per share                  As reported                $ 0.86   0.06   1.09
                                          Pro forma                    0.84   0.05   1.07
-----------------------------------------------------------------------------------------
</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, 2000, the Company had $402,000 of
unrestricted  earnings  available  for  additional  cash  dividends.


                                       42
<PAGE>
     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, 2000,
subject  to  minimum  regulatory  capital  guidelines,  CB  could, without prior
approval  of  regulatory  authorities,  declare  dividends  of  approximately
$6,134,000.

(12)     REGULATORY  CAPITAL  REQUIREMENTS - The Company and the Subsidiary Bank
are  subject  to  various  regulatory  capital  requirements administered by the
federal  banking  agencies.  Failure  to  meet  minimum capital requirements can
initiate  certain  mandatory,  and possibly additional discretionary, actions by
regulators  that,  if  undertaken,  could  have  a direct material effect on the
Company's  financial  statements.  Under  capital  adequacy  guidelines  and the
regulatory  framework  for  prompt  corrective  action,  the  Company  and  the
Subsidiary  Bank 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,  2000 and 1999, that the Company and subsidiaries meet all capital
adequacy  requirements  to  which  they  are  subject.

     As  of  December  31,  2000,  the most recent notification from the federal
banking  agencies  categorized  the  Company  and  the  Subsidiary  Bank as well
capitalized at December 31, 2000 and 1999 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,  2000  and  1999  are  as  follows:

<TABLE>
<CAPTION>
                                                                         (Dollars in thousands)

                                                                  December 31, 2000
                                                    --------------------------------------------
                                                                                  Well
                                                    Actual        Actual   Capitalized   Minimum
                                                    Amount         Ratio         Ratio     Ratio
------------------------------------------------------------------------------------------------
<S>                                                <C>      <C>           <C>           <C>

Total risk-based capital to risk-weighted assets:
     Castle BancGroup, Inc.                        $46,322        11.56         10.00      8.00
     Castle Bank, N.A.                              47,772        12.05         10.00      8.00
------------------------------------------------------------------------------------------------
Tier I capital to risk-weighted assets:
     Castle BancGroup, Inc.                        $41,827        10.44          6.00      4.00
     Castle Bank, N.A.                              43,492        10.97          6.00      4.00
------------------------------------------------------------------------------------------------
Tier I capital to average assets:
     Castle BancGroup, Inc.                        $41,827         7.73          5.00      4.00
     Castle Bank, N.A.                              43,492         8.07          5.00      4.00
------------------------------------------------------------------------------------------------


                                       43
<PAGE>
                                                                 December  31, 1999
                                                   ---------------------------------------------
                                                                                  Well
                                                    Actual        Actual   Capitalized   Minimum
                                                    Amount         Ratio         Ratio     Ratio
------------------------------------------------------------------------------------------------
Total risk-based capital to risk-weighted assets:
     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%
================================================================================================
</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.

     Financial  instruments  representing  potential credit risk at December 31,
2000  and  1999  are  as  follows:

<TABLE>
<CAPTION>
                                                          (Dollars in thousands)

                                                               2000      1999
--------------------------------------------------------------------------------
<S>                                                           <C>       <C>

Standby letters of credit                                     $ 2,936     3,981
Commitments to extend credit                                   71,394    94,023
--------------------------------------------------------------------------------
                                                              $74,330    98,004
--------------------------------------------------------------------------------
</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.


                                       44
<PAGE>
(14)     COMMITMENTS AND CONTINGENT LIABILITIES - Because of the nature of their
activities,  the  Company  and  its  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, 2000 and 1999,
the  carrying value of the Company's mortgage loans held for sale was $3,020,000
and  $14,892,000,  respectively.  The  estimated  fair  value of these loans was
$3,021,000  and  $14,973,000 at December 31, 2000 and 1999, 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 Bank.  These balances relate to mortgages originated
in  the  banking  segment.

     (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, 2000 and 1999.  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.

     (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 bank's
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,  2000  and  1999.


                                       45
<PAGE>
<TABLE>
<CAPTION>
     The  estimated  fair  values  of  the  Company's  financial  instruments at
December  31  are  as  follows:

                                                              (Dollars in thousands)

                                                       2000               1999
                                               ------------------  -----------------
                                                Carrying     Fair  Carrying     Fair
                                                  Amount    Value    Amount    Value
                                               ---------  -------  --------  -------
<S>                                            <C>        <C>      <C>       <C>
Financial Assets:
     Cash and due from banks                   $  18,938   18,938    17,501   17,501
     Federal funds sold                            8,250    8,250         -        -
     Investment securities available for sale    121,948  121,948   126,159  126,159
     Mortgage loans held for sale                  3,020    3,021    14,892   14,973
     Loans                                       384,862  381,290   364,419  360,515
Financial Liabilities:
     Non-interest-bearing deposits             $  64,108   64,108    52,274   52,274
     Interest-bearing deposits                   423,665  423,130   408,143  408,740
     Other borrowings                             17,041   17,041    39,486   39,486
</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.

(16)     OPERATING  SEGMENTS  -  The  Company's  operations  include two primary
segments:  banking and mortgage banking.  Through its banking subsidiary network
of  11  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 Bank, 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  two  pages:


                                       46
<PAGE>
<TABLE>
<CAPTION>
                                                                             (Dollars in thousands)

                                                                    Mortgage           Consolidated
Year-ended December 31, 2000                            Banking      Banking      Other       Total
---------------------------------------------------------------------------------------------------
<S>                                                    <C>        <C>            <C>       <C>
Interest income                                        $  40,136             -       139    40,275
Interest expense                                          20,054             -       466    20,520
---------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses      20,082             -      (327)   19,755
Provision for loan losses                                    420             -         -       420
---------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses       19,662             -      (327)   19,335
Other operating income                                     4,757             -        97     4,854
Other operating expenses                                  14,484             -     3,013    17,497
---------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                        9,935             -    (3,243)    6,692
Income tax expense (benefit)                               3,366             -    (1,294)    2,072
---------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations         $   6,569             -    (1,949)    4,620
---------------------------------------------------------------------------------------------------
Discontinued operations                                $       -          (837)        -      (837)
---------------------------------------------------------------------------------------------------
Net earnings (loss)                                    $   6,569          (837)   (1,949)    3,783
---------------------------------------------------------------------------------------------------
Assets as of December 31, 2000                         $ 550,366            90     1,804   552,260
---------------------------------------------------------------------------------------------------


Year-ended December 31, 1999
---------------------------------------------------------------------------------------------------
Interest income                                        $  38,199             -        51    38,250
Interest expense                                          18,683             -       126    18,809
---------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses      19,516             -       (75)   19,441
Provision for loan losses                                    308             -       387       695
---------------------------------------------------------------------------------------------------
Net interest income after provision for 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 (loss) before income taxes                       10,176             -    (4,320)    5,856
Income tax expense (benefit)                               3,424             -    (1,615)    1,809
---------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations         $   6,752             -    (2,705)    4,047
---------------------------------------------------------------------------------------------------
Discontinued operations                                $       -        (3,786)        -    (3,786)
---------------------------------------------------------------------------------------------------
Net earnings (loss)                                    $   6,752        (3,786)   (2,705)      261
---------------------------------------------------------------------------------------------------
Assets as of December 31, 1999                         $ 554,910         2,878   (16,938)  540,850
---------------------------------------------------------------------------------------------------


Year-ended December 31, 1998
---------------------------------------------------------------------------------------------------
Interest income                                        $  39,206             -     1,398    40,604
Interest expense                                          19,448             -       513    19,961
---------------------------------------------------------------------------------------------------
Net interest income before provision for loan losses      19,758             -       885    20,643
Provision for loan losses                                    288             -       425       713
---------------------------------------------------------------------------------------------------
Net interest income after provision for  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 (loss) before income taxes                        9,539             -    (3,238)    6,301
Income tax expense (benefit)                               3,325             -    (1,183)    2,142
---------------------------------------------------------------------------------------------------
Net earnings (loss) from continuing operations         $   6,214             -    (2,055)    4,159
---------------------------------------------------------------------------------------------------
Discontinued operations                                $       -           576         -       576
---------------------------------------------------------------------------------------------------
Net earnings (loss)                                    $   6,214           576    (2,055)    4,735
---------------------------------------------------------------------------------------------------
Assets as of December 31, 1998                         $ 581,431         5,686   (28,835)  558,282
---------------------------------------------------------------------------------------------------
</TABLE>

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


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

                                                                              December  31,
                                                                       --------------------------
CONDENSED BALANCE SHEETS                                                 2000               1999
-------------------------------------------------------------------------------------------------
<S>                                                                    <C>       <C>      <C>
Assets:
     Investments in subsidiaries                                       $43,893            40,421
     Cash and cash equivalents                                           3,156             1,400
     Other assets                                                        2,671             2,054
-------------------------------------------------------------------------------------------------
Total assets                                                            49,720            43,875
=================================================================================================
Liabilities and stockholders' equity:
     Liabilities                                                         6,351             6,467
     Stockholders' equity                                               43,369            37,408
-------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                             $49,720            43,875
=================================================================================================


                                                                         Years ended December 31
                                                                       --------------------------
CONDENSED STATEMENTS OF EARNINGS                                          2000     1999     1998
-------------------------------------------------------------------------------------------------
Income - primarily subsidiary dividends                                $ 6,999    6,590    6,334
-------------------------------------------------------------------------------------------------
Expenses:
     Interest                                                              466      589      944
     Other                                                               4,815    4,878    4,365
-------------------------------------------------------------------------------------------------
Total expense                                                            5,281    5,467    5,309
-------------------------------------------------------------------------------------------------
Earnings (loss) before income tax benefit and equity in undistributed
     earnings of subsidiaries                                            1,718    1,123    1,025
Income tax benefit                                                      (1,312)  (1,235)  (1,135)
-------------------------------------------------------------------------------------------------
Earnings before equity in undistributed earnings of subsidiaries         3,030    2,358    2,160
Equity in undistributed earnings of subsidiaries                           753   (2,097)   2,575
-------------------------------------------------------------------------------------------------
Net earnings                                                           $ 3,783      261    4,735
=================================================================================================
Net earnings applicable to common stock                                $ 3,783      261    4,712
=================================================================================================
</TABLE>


                                       48
<PAGE>
<TABLE>
<CAPTION>
                                                                                (Dollars in thousands)

                                                                                Years ended December 31
                                                                              --------------------------
CONDENSED STATEMENTS OF CASH FLOWS                                              2000     1999     1998
--------------------------------------------------------------------------------------------------------
<S>                                                                           <C>       <C>      <C>
Reconciliation of net earnings to net cash provided by operating activities:
     Net earnings                                                             $ 3,783      261    4,735
     Adjustments to reconcile net earnings to net cash provided by
       operating activities:
          Equity in undistributed earnings of subsidiaries                       (753)   2,097   (2,575)
          Depreciation and amortization                                           293      450      495
       Increase (decrease) in:
          Income taxes payable                                                   (125)    (109)    (248)
          Other liabilities                                                       400     (243)     325
       Decrease (increase) in other assets                                       (309)     135      (21)
--------------------------------------------------------------------------------------------------------
     Net cash provided by operating activities                                $ 3,289    2,591    2,711
--------------------------------------------------------------------------------------------------------
     Cash flow from investing activities:
       Capital contribution to subsidiary                                           -     (150)       -
       Loans to subsidiary                                                       (867)    (200)       -
       Repayment of loans from subsidairy                                         305        -        -
       Other                                                                       41    5,156   (1,695)
--------------------------------------------------------------------------------------------------------
     Net cash provided by (used in) investing activities                         (521)   4,806   (1,695)
--------------------------------------------------------------------------------------------------------
     Cash flows from financing activities:
       Net proceeds from of other borrowings                                        -   (3,825)     575
       Redemption of preferred stock                                                -        -     (300)
       Issuance of common stock                                                   300      400      479
       Repayment of or other borrowings                                          (525)  (2,250)    (950)
       Dividends paid                                                            (787)    (609)    (533)
--------------------------------------------------------------------------------------------------------
     Net cash used in financing activities                                     (1,012)  (6,284)    (729)
--------------------------------------------------------------------------------------------------------
     Increase  in cash and cash equivalents                                     1,756    1,113      287
     Cash and cash equivalents at beginning of year                             1,400      287        -
--------------------------------------------------------------------------------------------------------
     Cash and cash equivalents at end of year                                 $ 3,156    1,400      287
========================================================================================================
     Supplemented disclosure:
       Interest received                                                      $   104      132      393
       Interest paid                                                             (406)    (589)    (944)
       Income taxes received from subsidiaries                                  2,587    2,302    3,336
       Income taxes paid by Parent Company                                     (1,400)  (1,002)  (2,695)
--------------------------------------------------------------------------------------------------------
</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  Bank's  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  Bank.  CMI  was  legally,  financially,  operationally,  and
physically  separate  from  the  Subsidiary  Bank,  and  had a separate Board of
Directors,  management  team,  and  compensation  structure.

     The  mortgage  lending  activities  of  the  Subsidiary  Bank  represent an
integral,  inseparable  component of the banking segment.  CMI provided mortgage
brokerage  services to the Subsidiary Bank that  are now 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


                                       49
<PAGE>
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 Bank.  These balances relate
to  both  mortgages  originated  in  the  banking  segment.

     The  Company's  Annual  Report on Form 10-K for the year ended December 31,
1999 reported that the Company uncovered fraud and other irregularities in CMI's
underwriting  and documentation of certain mortgage loans originated and sold by
CMI.  A  more  detailed  description  of  the  fraud and other irregularities is
included  in that Form 10-K.  These mortgage loans were 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.
Through  December  31,  2000, the Company repurchased and re-sold or indemnified
investors  for  34  loans.

     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  are  included  in  the Form 10-K for the year ended December 31,
1999.

     The  loss  from discontinued operations of $837,000 in 2000 included losses
from  operating  activities  of  CMI  and  the  loss  on  disposal  of  the
mortgage-banking  segment.  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  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 remaining
reserve  liability was $1,880,000 at December 31, 2000, and is included in other
liabilities  in  the  Consolidated  Balance  Sheet  as  of  December  31,  2000.

     The consolidated financial statements of the Company have been presented 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 cash
and  other  assets.  The liabilities generated by the discontinued operation are
reflected  in  other  liabilities  in  the  Consolidated  Balance  Sheets.


                                       50
<PAGE>
(19)  SELECTED  QUARTERLY FINANCIAL DATA (UNAUDITED) - A summary of consolidated
operating  results  on  a  quarterly  basis  is  as  follows:

<TABLE>
<CAPTION>
                                                         2000                                  1999
                                          -----------------------------------  -------------------------------------
                                          First     Second   Third    Fourth   First    Second    Third     Fourth
                                          Quarter   Quarter  Quarter  Quarter  Quarter  Quarter   Quarter   Quarter

--------------------------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>      <C>      <C>      <C>      <C>       <C>       <C>
Interest Income                          $  9,778     9,993   10,085   10,419    9,803    9,266     9,446     9,735
Interest Expense                            4,852     5,015    5,185    5,468    4,750    4,557     4,649     4,853
                                         ---------------------------------------------------------------------------
Net interest income before provision
  for loan losses                           4,926     4,978    4,900    4,951    5,053    4,709     4,797     4,882
Provision for loan losses                     105       105      105      105      159      337        64       135
Net interest income after provision
                                         ---------------------------------------------------------------------------
  for loan losses                           4,821     4,873    4,795    4,846    4,894    4,372     4,733     4,747
Other operating income                      1,153     1,167    1,297    1,237    1,424    1,264     1,314     1,231
Investment securities gains                     -         -        -        -      245        4         1         -
Other operating expenses                    4,239     4,352    4,492    4,414    5,332    4,584     4,471     3,986
                                         ---------------------------------------------------------------------------
Earnings before income taxes                1,735     1,688    1,600    1,669    1,231    1,056     1,577     1,992
Income tax expense                            548       552      481      491      376      280       474       679
                                         ---------------------------------------------------------------------------
Net earnings from continuing
  operations                                1,187     1,136    1,119    1,178      855      776     1,103     1,313
Discounted operations                        (837)        -        -        -       58     (105)     (323)   (3,416)
                                         ---------------------------------------------------------------------------
Net earnings                             $    350     1,136    1,119    1,178      913      671       780    (2,103)

Per common share
Basic
Net earnings from continuing
   operations                            $   0.27      0.26     0.25     0.27     0.20     0.17      0.26      0.30
Discontinued operations                     (0.19)     0.00     0.00     0.00     0.01    (0.02)    (0.08)    (0.78)
Net earnings                                 0.08      0.26     0.25     0.27     0.21     0.15      0.18     (0.48)

Diluted
Net earnings from continuing operations      0.27      0.26     0.25     0.26     0.20     0.17      0.26      0.29
Discontinued operations                     (0.19)     0.00     0.00     0.00     0.01    (0.02)    (0.08)    (0.77)
Net earnings                                 0.08      0.26     0.25     0.26     0.21     0.15      0.18     (0.48)
</TABLE>


                                       51
<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, 2000 and 1999, 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,  2000.  These  consolidated  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial position of the Company at
December  31,  2000 and 1999, and the results of their operations and their cash
flows  for each of the years in the three-year period ended December 31, 2000 in
conformity  with  accounting principles generally accepted in the United States.



/s/  KPMG  LLP



January  25,  2001
Chicago,  Illinois


                                       52
<PAGE>
Item  9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting and
--------------------------------------------------------------------------------
Financial  Disclosure
---------------------

     The  Board  of  Directors  has  selected  Crowe,  Chizek  &  Company  LLP,
independent  certified  public accountants, to serve as the independent auditors
of  the Corporation and its subsidiaries for the fiscal year ending December 31,
2001.   The Corporation engaged Crowe, Chizek and Company LLP as its independent
auditors on February 1, 2001.  During the two years ended December 31, 2000, and
the  subsequent interim period from January 1, 2001 through engagement of Crowe,
Chizek  and  Company  LLP as the Corporation's independent auditors, neither the
Corporation nor anyone on its behalf had consulted Crowe, Chizek and Company LLP
with  respect  to  any  accounting  or auditing issue involving the Corporation.

     On  February 1, 2001, the Corporation gave notification of dismissal of the
firm  of  KPMG  LLP  as  independent auditors of the Corporation, effective with
completion of the audit of the Corporation's financial statements for the fiscal
year  ended  December  31,  2000, and the issuance of their report thereon.  The
change  in independent certified accountants was approved by the Audit Committee
and by the Board of Directors.  KPMG LLP served as the Corporation's independent
auditor  since  its  inception  in  1984.

     KPMG  LLP  performed  audits of the financial statements of the Corporation
for  the  two  years  ended December 31, 2000.  Their reports did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to  uncertainty,  audit  scope,  or  accounting principles.  With respect to the
foregoing, (1) there have been no disagreements between the Corporation and KPMG
LLP  on  any  matter  of  accounting principles or practice, financial statement
disclosure, or auditing scope of procedure, which disagreements, if not resolved
to the satisfaction of KPMG LLP, would have caused KPMG LLP to make reference to
the subject matter of such disagreements in connection with its reports; and (2)
KPMG LLP did not advise the Corporation of any of the other matters described in
Item  304(a)  of  Regulation  S-K  under  the  Securities  Act  of  1933 and the
Securities  Exchange  Act  of  1934.

                                    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  April  25,  2001 (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.


                                       53
<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,  2000  and  1999.

          Consolidated  Statements  of Earnings for the years ended December 31,
          2000,  1999  and  1998.

          Consolidated  Statements  of  Changes  in Stockholders' Equity for the
          years  ended  December  31,  2000,  1999  and  1998.

          Consolidated Statements of Cash Flows for the years ended December 31,
          2000,  1999,  and  1998.

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

          The  registrant  has not filed any reports on Form 8-K for the quarter
          ended  December  31,  2000.

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

          3.1  Certificate  of  Incorporation  of  registrant  as  amended  is
               incorporated  herein  by  reference  to  Exhibit  3.1  of  the
               registrant's  Form  10-K  for  the fiscal year ended December 31,
               1999.

          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.

          10.3 Employment  agreement  by  and between Dewey R. Yaeger and Castle
               BancGroup,  Inc.,  dated  as  of  January 1, 1999 is incorporated
               herein by reference to Exhibit 10.3 of the registrant's Form 10-K
               for  the  fiscal  year  ended  December  31,  1999.

          21.1 Subsidiaries  of  Registrant.

          23.1 Consent  of  KPMG  LLP.


                                       54
<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 and Director

Date:     March 12, 2001

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, and Director          President, Chief  Executive
                                                    Officer, and  Director
Date:  March 12, 2001                        Date:  March 12, 2001


     /s/  Micah R. Bartlett                     /s/  Bruce P. Bickner
-------------------------------------------  ----------------------------------
By:    Micah R. Bartlett                     By:    Bruce P. Bickner
       Senior Vice President and Controller         Director
       (Principal Financial Officer and      Date:  March 12, 2001
       Principal Accounting Officer)
Date:  March 12, 2001


     /s/  Peter H. Henning                       /s/  Robert T. Boey
-------------------------------------------  ----------------------------------
By:    Peter H. Henning                      By:    Robert T. Boey
       Director                                     Director
Date:  March 12, 2001                        Date:  March 12, 2001


    /s/  Kathleen L. Halloran                    /s/  Donald E. Kieso
-------------------------------------------  ----------------------------------
By:    Kathleen L. Halloran                  By:    Donald E. Kieso
       Director                                     Director
Date:  March 12, 2001                        Date:  March 12, 2001


    /s/  Richard C. McGinity
-------------------------------------------
By:    Richard C. McGinity
       Director
Date:  March 12, 2001


                                       55
<PAGE>
                                  EXHIBIT INDEX


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

   3.1    Certificate  of Incorporation of registrant as amended is incorporated
          herein  by  reference to Exhibit 3.1 of the registrant's Form 10-K for
          the  fiscal  year  ended  December  31,  1999.

   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.

  10.3    Employment  agreement  by  and  between  Dewey  R.  Yaeger  and Castle
          BancGroup, Inc., dated as of January 1, 1999 is incorporated herein by
          reference to Exhibit 10.3 of the registrant's Form 10-K for the fiscal
          year  ended  December  31,  1999.

  21.1    Subsidiaries  of  Registrant.

  23.1    Consent  of  KPMG  LLP.


                                       56
<PAGE>