UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, DC  20549

                                   FORM 10-K

                    ANNUAL REPORT PURSUANT TO SECTION 13 OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1998

                        Commission File Number: 33-90342

                       BANKILLINOIS FINANCIAL CORPORATION     
             (Exact name of Registrant as specified in its charter)


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


             100 WEST UNIVERSITY, CHAMPAIGN, ILLINOIS    61824-4028
            (Address of principal executive offices)     (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:
                                                           NAME OF EACH EXCHANGE
TITLE OF EXCHANGE CLASS                                     ON WHICH REGISTERED 
           NONE                                                  NONE

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

                                     NONE                
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  

Yes [X]     No   

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


The index to exhibits is located on page 63 of 64 total sequentially numbered
pages.
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As of March 15, 1999, the Registrant had issued and outstanding 5,329,460
shares of the Registrant's Common Stock.  The aggregate market value of the
voting stock held by non-affiliates of the Registrant as of March 15, 1999,
was $61,079,958.*  

*    Based on the last reported price ($23.25) of an actual transaction in
     Registrant's Common Stock on March 3, 1999, and reports of beneficial
     ownership filed by directors and executive officers of Registrant and by
     beneficial owners of more than 5% of the outstanding shares of Common
     Stock of Registrant; however, such determination of shares owned by
     affiliates does not constitute an admission of affiliate status or
     beneficial interest in shares of Registrant's Common Stock.



DOCUMENTS INCORPORATED BY REFERENCE

     None.

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                       BANKILLINOIS FINANCIAL CORPORATION

                            Form 10-K Annual Report

                               Table of Contents

                                     Part I


Item 1.   Description of Business. . . . . . . . . . . . . . . . . . . . . 1
          A.  General
          B.  Business of the Company and Subsidiaries
          C.  Competition
          D.  Monetary Policy and Economic Conditions
          E.  Regulation and Supervision
          F.  Employees
          
Item 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4.   Submission of Matters to a Vote of Security Holders. . . . . . . 8

                                    Part II

Item 5    Market for Registrant's Common Equity and
              Related Stockholder Matters. . . . . . . . . . . . . . . . . 8
Item 6.   Selected Consolidated Financial Data . . . . . . . . . . . . . . 9
Item 7.   Management's Discussion and Analysis of
              Financial Condition and Results of Operations. . . . . . . .10
Item 7a.  Quantitative and Qualitative Disclosures about Market Risk . . .27
Item 8.   Financial Statements and Supplementary Data. . . . . . . . . . .27
Item 9    Changes in and Disagreements on Accounting 
              and Financial Disclosure . . . . . . . . . . . . . . . . . .51

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant . . . . . . .52
Item 11.  Executive Compensation . . . . . . . . . . . . . . . . . . . . .56
Item 12.  Security Ownership of Certain Beneficial Owners 
              and Management . . . . . . . . . . . . . . . . . . . . . . .59
Item 13.  Certain Relationships and Related Transactions . . . . . . . . .60

                                    Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports
              on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . .61

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PART I

ITEM 1.     DESCRIPTION OF BUSINESS

       A.  GENERAL

       BankIllinois Financial Corporation (the "Company"), a Delaware
corporation, is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA").  The Company was incorporated
on December 9, 1994, and on June 30, 1995, acquired all of the outstanding
stock of BankIllinois and The Champaign National Bank following the merger
(the "Merger") of Central Illinois Financial Corporation ("CIF") and
BankIllinois Financial Co. ("BKI").  On October 20, 1995, BankIllinois and
The Champaign National Bank were merged to form BankIllinois ("BankIllinois"
or the "Bank"), an Illinois chartered bank.  On September 14, 1998,
BankIllinois Trust Company, the Company's only non-bank subsidiary, was
merged into BankIllinois.

       B.  BUSINESS OF THE COMPANY AND SUBSIDIARIES

GENERAL

       The Company conducts the business of banking and offers trust services
through BankIllinois, its wholly owned subsidiary.  As of December 31, 1998,
the Company had consolidated total assets of $537.4 million, stockholders'
equity of $60.7 million and trust assets under administration of
approximately $408.9 million.  Substantially all of the income of the Company
is currently derived from dividends received from BankIllinois.  The amount
of these dividends is directly related to the earnings of BankIllinois and is
subject to various regulatory restrictions.  See "Regulation and
Supervision."

       BankIllinois conducts a general banking business embracing most of the
services, both consumer and commercial, which banks may lawfully provide,
including the following principal services:  the acceptance of deposits to
demand, savings and time accounts and the servicing of such accounts;
commercial, consumer and real estate lending, including installment loans and
personal lines of credit; safe deposit operations; and additional services
tailored to the needs of individual customers, such as the sale of traveler's
checks, cashier's checks and other specialized services.  BankIllinois also
offers personalized financial planning services through the PrimeVest
Investment Center at BankIllinois, which services include a broad spectrum of
investment products, including stocks, bonds, mutual funds and tax advantaged
investments.  In addition, the trust & investments division offers a wide
range of services such as acting as trustee, consultant, guardian, executor
and agent.

       Commercial lending at BankIllinois covers such categories as
agriculture, manufacturing, capital, inventory, construction, real estate
development and commercial mortgages.  Commercial lending, particularly loans
to small and medium sized businesses, accounts for a major portion of
BankIllinois' loan portfolio.  BankIllinois' retail banking division makes
direct loans to consumers for various purposes, including home equity and
direct automobile loans.  The consumer mortgage loan department, which is
part of the retail banking division, specializes in real estate loans to
individuals.  BankIllinois also purchases installment obligations from
retailers, primarily without recourse.

       BankIllinois' principal sources of income are interest and fees on
loans and investments and service fees.  Its principal expenses are interest
paid on deposits and general operating expenses.  BankIllinois' primary
service area is Champaign County, Illinois.

LENDING ACTIVITIES

       GENERAL.  BankIllinois' primary source of revenue is interest revenue
from its lending activities.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net
Interest Income."

       LOAN PORTFOLIO COMPOSITION.  BankIllinois' loan portfolio totaled
approximately $292.6 million at December 31, 1998, representing 54% of
BankIllinois' total assets at that date.  At that date, BankIllinois' loan
portfolio included approximately $112.3 million of commercial, financial and
agricultural loans, $132.9 million of real estate loans and $47.4 million of
installment and consumer loans.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Financial
Condition Loans."
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       For a discussion of risks with respect to BankIllinois' loan
portfolio, BankIllinois' strategies for addressing and managing such risks,
BankIllinois' non-performing loans and BankIllinois' allowance for losses on
loans, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS Results of Operations Allowance for Loan Losses and
Loan Quality" and " Financial Condition Loans." 

       INTEREST RATES AND FEES.  Interest rates and fees charged on
BankIllinois' loans are affected primarily by the market demand for loans and
the supply of money available for lending purposes.  These factors are
affected by, among other things, general economic conditions and the policies
of the Federal government, including the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), legislative tax policies and
governmental budgetary matters.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net
Interest Income."

INVESTMENT SECURITIES

       The carrying value of the Company's securities at December 31, 1998
was approximately $191.1 million, representing 36% of the Company's total
assets.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS Financial Condition Investment Securities."

INTEREST RATE SENSITIVITY

       For a discussion of BankIllinois' approach to managing its mix of
interest rate sensitive assets and liabilities, see "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial
Condition Interest Rate Sensitivity."

       C.  COMPETITION

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

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

       D.  MONETARY POLICY AND ECONOMIC CONDITIONS

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

GENERAL
  
       Financial institutions and their holding companies are extensively
regulated under federal and state law.  As a result, the growth and earnings
performance of the Company can be affected not only by management decisions
and general economic conditions, but also by the requirements of applicable
state and federal statutes and regulations and the policies of various
governmental regulatory authorities, including the Federal Reserve, the
Federal Deposit Insurance Corporation (the "FDIC"), the Illinois Commissioner
of Banks and Real Estate (the "Commissioner"), the Internal Revenue Service
and state taxing authorities and the Securities and Exchange Commission (the
"SEC"). The effect of applicable statutes, regulations and regulatory
policies can be significant, and cannot be predicted with a high degree of
certainty.
 
       Federal and state laws and regulations generally applicable to
financial institutions, such as the Company and its subsidiary, regulate,
among other things, the scope of business, investments, reserves against
deposits, capital levels relative to operations, the nature and amount of
collateral for loans, the establishment of branches, mergers, consolidations
and dividends. The system of supervision and regulation applicable to the
Company and its subsidiary establishes a comprehensive framework for their
respective operations and is intended primarily for the protection of the
FDIC's deposit insurance funds and the depositors, rather than the
shareholders, of financial institutions.

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

RECENT REGULATORY DEVELOPMENTS

       PENDING LEGISLATION.  Legislation has been introduced in the Congress
that would allow bank holding companies to engage in a wider range of
nonbanking activities, including greater authority to engage in securities
and insurance activities.  The expanded powers generally would be available
to a bank holding company only if the bank holding company and its bank
subsidiary remain well-capitalized and well-managed.  At this time, the
Company is unable to predict whether the proposed legislation will be enacted
and, therefore, is unable to predict the impact such legislation may have on
the Company and BankIllinois.

THE COMPANY 

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

       INVESTMENTS AND ACTIVITIES.  Under the BHCA, a bank holding company
must obtain Federal Reserve approval before:  (i) acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank
holding company if, after the acquisition, it would own or control more than
5% of the shares of the other bank or bank holding company (unless it already
owns or controls the majority of such shares); (ii) acquiring all or
substantially all of the assets of another bank; or (iii) merging or
consolidating with another bank holding company.  Subject to certain
conditions (including certain deposit concentration limits established by the
BHCA), the Federal Reserve may allow a bank holding company to acquire banks
located in any state of the United States without regard to whether the
acquisition is prohibited by the law of the state in which the target bank is
located.  In approving interstate acquisitions, however, the Federal Reserve
is required to give effect to applicable state law limitations on the
aggregate amount of deposits that may be held by the acquiring bank holding
company and its insured depository institution affiliates in the state in
which the target bank is located (provided that those limits do not
discriminate against out-of-state depository institutions or their
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 holding companies) and state laws which require that the target bank have
been in existence for a minimum period of time (not to exceed five years)
before being acquired by an out-of-state bank holding company. 

       The BHCA also generally prohibits the Company 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.  This general prohibition is subject to a number of
exceptions. The principal exception allows bank holding companies to engage
in, and to own shares of companies engaged in, certain businesses found by
the Federal Reserve to be  so closely related to banking ... as to be a
proper incident thereto.   Under current regulations of the Federal Reserve,
the Company and its subsidiary is permitted to engage in a variety of 
banking-related businesses, including the operation of a thrift, sales and 
consumer finance, equipment leasing, the operation of a computer service 
bureau (including software development), and mortgage banking and
brokerage.  The BHCA generally does not place territorial restrictions on the
domestic activities of non-bank subsidiaries of bank holding companies.

       Federal law also prohibits any person or company from acquiring
 control  of a bank or a bank holding company without prior notice to the
appropriate federal bank regulator.   Control  is defined in certain cases as
the acquisition of 10% of the outstanding shares of a bank or bank holding
company.

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

       The Federal Reserve's capital guidelines establish the following
minimum regulatory capital requirements for bank holding companies:  a risk-
based requirement expressed as a percentage of total risk-weighted assets,
and a leverage requirement expressed as a percentage of total assets.  The
risk-based requirement consists of a minimum ratio of total capital to total
risk-weighted assets of 8%, at least one-half of which must be Tier 1
capital.  The leverage requirement consists of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly rated companies, with a
minimum requirement of 4% for all others.  For purposes of these capital
standards, Tier 1 capital consists primarily of permanent stockholders'
equity less intangible assets (other than certain mortgage servicing rights
and purchased credit card relationships). Total capital consists primarily of
Tier 1 capital plus certain other debt and equity instruments which do not
qualify as Tier 1 capital and a portion of the company's allowance for loan
and lease losses.  
       The risk-based and leverage standards described above are minimum
requirements. Higher capital levels will be required if warranted by the
particular circumstances or risk profiles of individual banking
organizations. For example, the Federal Reserve's capital guidelines
contemplate that additional capital may be required to take adequate account
of, among other things, interest rate risk, or the risks posed by
concentrations of credit, nontraditional activities or securities trading
activities.  Further, any banking organization experiencing or anticipating
significant growth would be expected to maintain capital ratios, including
tangible capital positions (i.e., Tier 1 capital less all intangible assets),
well above the minimum levels.
 
       As of December 31, 1998, the Company had regulatory capital in excess
of the Federal Reserve's minimum requirements, with a risk-based capital
ratio of 19.1% and a leverage ratio of 11.1%.
 
       DIVIDENDS.   The Delaware General Corporation Law (the "DGCL") allows
the Company to pay dividends only out of its surplus (as defined and computed
in accordance with the provisions of the DGCL) or if the Company has no such
surplus, out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.  Additionally, the Federal Reserve
has issued a policy statement with regard to the payment of cash dividends by
bank holding companies.  The policy statement provides that a bank holding
company should not pay cash dividends which exceed its net income or which
can only be funded in ways that weaken the bank holding company's financial
health, such as by borrowing.  The Federal Reserve also possesses enforcement
powers over bank holding companies and their non-bank subsidiaries to prevent
or remedy actions that represent unsafe or unsound practices or violations of
applicable statutes and regulations.  Among these powers is the ability to
proscribe the payment of dividends by banks and bank holding companies. 

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

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BANKILLINOIS

       GENERAL.  BankIllinois is an Illinois-chartered bank, the deposit
accounts of which are insured by the FDIC's Bank Insurance Fund ("BIF").  As
a BIF-insured, Illinois-chartered bank, BankIllinois is subject to the
examination, supervision, reporting and enforcement requirements of the
Commissioner, as the chartering authority for Illinois banks, and the FDIC,
as administrator of the BIF.

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

       During the year ended December 31, 1998, BIF assessments ranged from
0% of deposits to 0.27% of deposits.  For the semi-annual assessment period
beginning January 1, 1999, BIF assessment rates will continue to range from
0% of deposits to 0.27% of deposits.

       The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution (i)
has engaged or is engaging in unsafe or unsound practices, (ii) is in an
unsafe or unsound condition to continue operations or (iii) has violated any
applicable law, regulation, order, or any condition imposed in writing by, or
written agreement with, the FDIC.  The FDIC may also suspend deposit
insurance temporarily during the hearing process for a permanent termination
of insurance if the institution has no tangible capital.  Management of the
Company is not aware of any activity or condition that could result in
termination of the deposit insurance of BankIllinois.

       FICO ASSESSMENTS.  Since 1987, a portion of the deposit insurance
assessments paid by members of the FDIC's Savings Association Insurance Fund
("SAIF") has been used to cover interest payments due on the outstanding
obligations of the Financing Corporation ("FICO").  FICO was created in 1987
to finance the recapitalization of the Federal Savings and Loan Insurance
Corporation, the SAIF's predecessor insurance fund.  As a result of federal
legislation enacted in 1996, beginning as of January 1, 1997, both SAIF
members and BIF members became subject to assessments to cover the interest
payments on outstanding FICO obligations.  These FICO assessments are in
addition to amounts assessed by the FDIC for deposit insurance.  Until
January 1, 2000, the FICO assessments made against BIF members may not exceed
20% of the amount of the FICO assessments made against SAIF members.  Between
January 1, 2000 and the final maturity of the outstanding FICO obligations in
2019, BIF members and SAIF members will share the cost of the interest on the
FICO bonds on a pro rata basis.  During the year ended December 31, 1998, the
FICO assessment rate for SAIF members ranged between approximately 0.061% of
deposits and approximately 0.063% of deposits, while the FICO assessment rate
for BIF members ranged between approximately 0.012% of deposits and
approximately 0.013% of deposits.  During the year ended December 31, 1998,
BankIllinois paid FICO assessments totaling $49,000.

       SUPERVISORY ASSESSMENTS.  All Illinois banks are required to pay
supervisory assessments to the Commissioner to fund the operations of the
Commissioner. The amount of the assessment is calculated based on the bank's
total assets, including consolidated subsidiaries, as reported to the
Commissioner.  During the year ended December 31, 1998, BankIllinois paid
supervisory assessments to the Commissioner totaling $52,000.

       CAPITAL REQUIREMENTS.  The FDIC has established the following minimum
capital standards for state-chartered insured non-member banks, such as
BankIllinois:  a leverage requirement consisting of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly-rated banks with a minimum
requirement of at least 4% for all others, and a risk-based capital
requirement consisting of a minimum ratio of total capital to total risk-
weighted assets of 8%, at least one-half of which must be Tier 1 capital. For
purposes of these capital standards, Tier 1 capital and total capital consist
of substantially the same components as Tier 1 capital and total capital
under the Federal Reserve's capital guidelines for bank holding companies
(see "--the Company--Capital Requirements").

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

       During the year ended December 31, 1998, BankIllinois was not required
by the FDIC to increase its capital to an amount in excess of the minimum
regulatory requirement.  As of December 31, 1998, the Bank exceeded its
minimum regulatory capital requirements with a leverage ratio of 9.8% and a
risk-based capital ratio of 17.2%.

       Federal law provides the federal banking regulators with broad power
to take prompt corrective action to resolve the problems of undercapitalized
institutions.  The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," in each case as defined by regulation.  Depending upon the
capital category to which an institution is assigned, the regulators'
corrective powers include:  requiring the institution to submit a capital
restoration plan; limiting the institution's asset growth and restricting its
activities; requiring the institution to issue additional capital stock
(including additional voting stock) or to be acquired; restricting
transactions between the institution and its affiliates; restricting the
interest rate the institution may pay on deposits; ordering a new election of
directors of the institution; requiring that senior executive officers or
directors be dismissed; prohibiting the institution from accepting deposits
from correspondent banks; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver for the institution.
As of December 31, 1998, BankIllinois was well capitalized, as defined by
FDIC regulations.

       DIVIDENDS.  Under the Illinois Banking Act, Illinois-chartered banks
may not pay, without prior regulatory approval, dividends in excess of their
net profits.

       The payment of dividends by any financial institution or its holding
company is affected by the requirement to maintain adequate capital pursuant
to applicable capital adequacy guidelines and regulations, and a financial
institution generally is prohibited from paying any dividends if, following
payment thereof, the institution would be undercapitalized.  As described
above, BankIllinois exceeded its minimum capital requirements under
applicable guidelines as of December 31, 1998. As of December 31, 1998,
approximately $4.6 million was available to be paid as dividends to the
Company by BankIllinois.  Notwithstanding the availability of funds for
dividends, however, the FDIC may prohibit the payment of any dividends by
BankIllinois if the FDIC determines such payment would constitute an unsafe
or unsound practice.
  
       INSIDER TRANSACTIONS.  BankIllinois is subject to certain restrictions
imposed by federal law on extensions of credit to the Company and its
subsidiary, on investments in the stock or other securities of the Company
and its subsidiary and the acceptance of the stock or other securities of
the Company or its subsidiary as collateral for loans.  Certain limitations
and reporting requirements are also placed on extensions of credit by
BankIllinois to its directors and officers, to directors and officers of the
Company and its subsidiary, to principal stockholders of the Company, and
to "related interests" of such directors, officers and principal
stockholders.  In addition, federal law and regulations may affect the terms
upon which any person becoming a director or officer of the Company or its 
subsidiary or a principal stockholder of the Company may obtain credit
from banks with which BankIllinois maintains a correspondent relationship.

       SAFETY AND SOUNDNESS STANDARDS.  The federal banking agencies have
adopted guidelines which establish operational and managerial standards to
promote the safety and soundness of federally insured depository
institutions.  The guidelines set forth standards for internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation, fees and
benefits, asset quality and earnings.  In addition, in October 1998, the
federal banking regulators issued safety and soundness standards for
achieving Year 2000 compliance, including standards for developing and
managing Year 2000 project plans, testing remediation efforts and planning
for contingencies.

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

       BRANCHING AUTHORITY.  Illinois banks, such as BankIllinois, have the
authority under Illinois law to establish branches anywhere in the State of
Illinois, subject to receipt of all required regulatory approvals.

       Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act"), both state and national banks are allowed to
establish interstate branch networks through acquisitions of other banks,
subject to certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all of its
insured depository institution affiliates.  The establishment of new
interstate branches or the acquisition of individual branches of a bank in
another state (rather than the acquisition of an out-of-state bank in its
entirety) is allowed by the Riegle-Neal Act only if specifically authorized
by state law.  The legislation allowed individual states to "opt-out" of
certain provisions of the Riegle-Neal Act by enacting appropriate legislation
prior to June 1, 1997.  Illinois has enacted legislation permitting
interstate mergers beginning on June 1, 1997, subject to certain conditions,
including a prohibition against interstate mergers involving an Illinois bank
that has been in existence and continuous operation for fewer than five
years.

       STATE BANK ACTIVITIES.  Under federal law and FDIC regulations, FDIC
insured state banks are prohibited, subject to certain exceptions, from
making or retaining equity investments of a type, or in an amount, that are
not permissible for a national bank.  Federal law and FDIC regulations also
prohibit FDIC insured state banks and their subsidiaries, subject to certain
exceptions, from engaging as principal in any activity that is not permitted
for a national bank or its subsidiary, respectively, unless the bank meets,
and continues to meet, its minimum regulatory capital requirements and the
FDIC determines the activity would not pose a significant risk to the deposit
insurance fund of which the bank is a member.  These restrictions have not
had, and are not currently expected to have, a material impact on the
operations of BankIllinois.

       FEDERAL RESERVE SYSTEM.  Federal Reserve regulations, as presently in
effect, require depository institutions to maintain non-interest earning
reserves against their transaction accounts (primarily NOW and regular
checking accounts), as follows:  for transaction accounts aggregating $46.5
million or less, the reserve requirement is 3% of total transaction accounts;
and for transaction accounts aggregating in excess of $46.5 million, the
reserve requirement is $1.395 million plus 10% of the aggregate amount of
total transaction accounts in excess of $46.5 million.  The first $4.9
million of otherwise reservable balances are exempted from the reserve
requirements.  These reserve requirements are subject to annual adjustment by
the Federal Reserve.  BankIllinois is in compliance with the foregoing
requirements. 

       F.  EMPLOYEES

       The Company had a total of 218 employees at December 31, 1998,
consisting of 172 full-time employees and 46 part-time.  The Company places a
high priority on staff development, which involves extensive training,
including customer service training.  New employees are selected on the basis
of both technical skills and customer service capabilities.  None of the
Company's employees are covered by a collective bargaining agreement with the
Company or its subsidiary.  The Company offers a variety of employee
benefits, and management considers its employee relations to be excellent.

ITEM 2.     PROPERTIES

       BankIllinois owns the land and buildings at the Company's principal
executive offices in Champaign, Illinois.  One building is BankIllinois' main
banking office, located at 100 W. University.  The second building, located
adjacent to BankIllinois, is used for bank offices with excess space treated
as rental property.  In addition, BankIllinois owns three separate branch
facilities, one a few blocks away, one approximately two miles away from the
main banking office of BankIllinois and the other approximately five miles
away.  BankIllinois also leases space in two supermarket stores and operates
a branch facility at each store.  One supermarket branch is situated in
Urbana, approximately three miles from BankIllinois' main office.  The second
is located in Mahomet, approximately ten miles from BankIllinois' home
office.  In addition, BankIllinois leases three other branch facility
locations, one approximately two miles southwest of the main office, a second
facility located two miles southeast of the main office, and a third facility
located two miles east of the main office.  BankIllinois also leases
approximately 13,000 square feet in a building located down the street from
the main banking office.  This location had been used for operations and
other support services.  During 1997, some of these functions were relocated
to the Bank's main office and a sublease entered into for a portion of this
space.
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<PAGE>
       BankIllinois also owns one other building and three parking lots which
are located within a mile of its main office.  The building is used for
storage.  Two of the parking lots are partially leased and are also used by
BankIllinois employees.  The third parking lot is for employee use only.

       The Company believes that its facilities are adequate to serve its
present needs.  The main office complex for the Company is owned in fee and
is unencumbered.

ITEM 3.     LEGAL PROCEEDINGS

       In the course of business, the Company and BankIllinois become
involved in various lawsuits and claims that are incidental to their
respective businesses.  As of the date of filing this report, there were no
causes of action which would have a material adverse effect on the business
or financial condition of the Company or BankIllinois.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       There were no items submitted to a vote of security holders in the
fourth quarter of 1998.


PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

       The Company's Common Stock was held by approximately 410 shareholders
of record as of March 15, 1999, and is traded in the over-the-counter market.

       The following table shows, for the periods indicated, the range of
prices per share of the Company's Common Stock in the over-the-counter
market, as reported to the Company by the brokers known to the Company to
regularly follow the market for the Common Stock.  Certain other private
transactions may have occurred during the periods indicated of which the
Company has no knowledge.  The following prices represent inter-dealer prices
without retail markups, markdowns or commissions, and have not been adjusted
to reflect the 5% stock dividends paid by the Company in 1996, 1997 and 1998.

1996   QUARTER ENDING:          PRICE/SHARE
       March 31, 1996           $13.00 - $13.25
       June 30, 1996            $13.25 - $14.00
       September 30, 1996       $13.25 - $13.75
       December 31, 1996        $14.00 - $16.25

1997   QUARTER ENDING:          PRICE/SHARE
       March 31, 1997           $15.25 - $16.50
       June 30, 1997            $15.87 - $17.00
       September 30, 1997       $16.00 - $18.75
       December 31, 1997        $18.00 - $21.75

1998   QUARTER ENDING:          PRICE/SHARE
       March 31, 1998           $18.57 - $20.95
       June 30, 1998            $20.00 - $22.50
       September 30, 1998       $21.75 - $24.00
       December 31, 1998        $21.50 - $23.25

       The Company paid a 5% stock dividend in the second quarters of 1996,
1997 and 1998.  In 1998, the Company also paid $0.08 per share cash dividends
in January, April, July and October.  During the fourth quarter of 1998, the
Company declared an $0.08 per share cash dividend which was paid on January
22, 1999.

       The ability of the Company to pay dividends in the future will be
primarily dependent upon its receipt of dividends from the Bank.  In
determining cash dividends, the Board of Directors considers the earnings,
capital requirements, debt and dividend 
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<PAGE>
servicing requirements, financial ratio guidelines it has established, the
financial condition of the Company and other relevant factors.  The Bank's
ability to pay dividends to the Company and the Company's ability to pay
dividends to its stockholders are also subject to certain regulatory
restrictions.

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA

       The following table presents selected consolidated financial
information for the Company for each of the five years ended December 31,
1998.  The selected consolidated financial data should be read in conjunction
with the Consolidated Financial Statements of the Company, including the
related notes, presented elsewhere herein.  All references to numbers of
shares and per share amounts have been retroactively restated to reflect the
5% stock dividends in 1996, 1997 and 1998.

<TABLE>
                                                                     YEAR ENDED DECEMBER 31,

                                                          1998      1997      1996      1995      1994
                                                          (dollars in thousands, except per share data)
<S>                                                     <C>       <C>       <C>       <C>       <C>
Interest income                                          $38,014   $37,346   $35,088   $35,903   $33,086 
Interest expense                                          18,962    19,410    17,825    17,689    14,487 

Net interest income                                       19,052    17,936    17,263    18,214    18,599 
Provision for loan losses                                    535       465       375     3,097       565 

Net interest income after provision for loan losses       18,517    17,471    16,888    15,117    18,034 
Noninterest income                                         4,935     4,476     4,291     3,951     4,258 
Noninterest expense                                       14,457    13,888    14,495    19,054    17,480 
Income tax expense                                         2,921     2,659     2,183       248     1,466 
Discontinued operations gain on disposal 
   of subsidiary <F1>                                          0         0         0       570     4,634 

Net income                                                $6,074    $5,400    $4,501      $336    $7,980 

Basic earnings per share:
  Income from continuing operations                        $1.13     $1.00     $0.83    ($0.04)    $0.61 
  Discontinued operations gain on disposal of subsidiary    0.00      0.00      0.00      0.10      0.85 

  Net income                                               $1.13     $1.00     $0.83     $0.06     $1.46 

Diluted earnings per share:
  Income from continuing operations                        $1.09     $0.98     $0.81    ($0.04)    $0.61 
  Discontinued operations gain on disposal of subsidiary    0.00      0.00      0.00      0.10      0.85 

  Net income                                               $1.09     $0.98     $0.81     $0.06     $1.46 

Return on average total assets                             1.15%     1.05%     0.92%     0.07%     1.64% 
Return on average stockholders' equity                    10.28%     9.95%     9.00%     0.68%    18.19% 
Cash dividends declared per common share <F2>              $0.32     $0.08     $0.00     $0.20     $0.11 

Total assets                                            $537,373  $539,366  $515,440  $520,586  $495,313 
Investment in debt and equity securities                 191,136   155,386   153,492    97,304   106,034 
Loans held for investment, net                           287,306   309,729   280,281   311,519   326,204 
Deposits                                                 409,898   417,154   404,130   419,157   394,677 
Borrowings                                                59,963    57,857    52,941    45,273    47,504 
Total stockholders' equity                                60,707    57,330    52,096    48,408    46,766 

Total stockholders' equity to total assets                11.30%    10.63%    10.11%     9.30%     9.44% 
Average stockholders' equity to average assets            11.19%    10.57%    10.18%    10.00%     9.00% 

<FN>
<F1> See Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations.
<F2> Prior to the merger of CIF and BKI, only CIF paid cash dividends.
</FN>
</TABLE>

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

       The following discussion and analysis is designed to provide the
reader with a comprehensive review of the consolidated results of operations
for 1998, 1997 and 1996 for the Company, including BankIllinois, and an
analysis of the Company's financial condition at December 31, 1998 compared
to December 31, 1997 and at December 31, 1997 compared to December 31, 1996. 
This discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes which begin at page 29 of
this report.

OVERVIEW

       The four years ended December 31, 1998 was a period of transition for
the Company involving the fundamental reorganization of the consolidated
organization.  The Company streamlined its subsidiary operations on September
14, 1998, by merging BankIllinois Trust Company into BankIllinois.  During
the first quarter of 1998, the Company also enhanced its corporate identity
by changing its corporate name to BankIllinois Financial Corporation.  Prior
to that date, it operated under the name of Central Illinois Financial Co.,
Inc.
       At June 30, 1995, BankIllinois Financial Co. and Central Illinois
Financial Corporation merged to form the Company.  The merger was accounted
for as a pooling of interest.  Prior period consolidated financial statements
have been restated as though the prior entities had been consolidated for all
periods presented.  On October 20, 1995, the two subsidiary banks,
BankIllinois and Champaign National Bank, were merged into a single resulting
bank known as BankIllinois and the trust operations were transferred to
BankIllinois Trust Company.  Costs incurred during 1995 associated with the
merger were approximately $1,036,000.  The resulting effect of these costs on
both basic and diluted earnings per share was a decrease of approximately
$0.19 for the year ended December 31, 1995.
       In addition to the direct costs associated with the merger, the
Company also incurred non-recurring restructuring costs during 1995 of
approximately $1,786,000.  Included in these restructuring costs were
expenses related to reduction in work force, computer related expenses,
adjustments to carrying value of premises and equipment deemed to be
unnecessary for the ongoing operation of the merged entity and the
consolidation of safe deposit boxes.  Also in 1995, the Company recorded a
gain of $570,000 from discontinued operations as a result of the 1992 sale of
a subsidiary.
       The Company's restructuring continued during 1997 and 1998.  In May
1997, the Company incurred a loss of $131,000 on closing the Champaign Money
Market branch.  In March 1998, a vacant building and parking lot that was
acquired during the merger, was sold at a loss of $250,000.  In addition,
non-recurring organizational changes implemented to improve efficiency,
including the merger of BankIllinois Trust Company into BankIllinois, cost
the Company $480,000.
       Management of the Company continues to spend significant time and
effort maintaining and improving asset quality.  Changes in the loan policy
with an increased focus on credit analysis prior to loan approval and an
emphasis on early detection of problem assets instituted in 1995 contributed
to net loans charged off of $2,478,000 and the provision for loan losses of
$3,097,000 in 1995.  The emphasis on loan quality resulted in net charge-offs
being reduced to $670,000 in 1996, $1,808,000 less than in 1995.  Net charge-
offs declined from $746,000 in 1997 to $562,000 in 1998.  The emphasis on
loan quality also resulted in a decrease in the provision for loan losses in
1996 by $2,722,000 from 1995 resulting in a $375,000 provision in 1996.  The
provision for loan losses was $465,000 in 1997 and $535,000 in 1998.  The 
allowance for loan losses was $5,279,000, or 1.80% of loans, at December 31, 
1998 compared to $5,306,000, or 1.68% of loans, at December 31, 1997.

RESULTS OF OPERATIONS

       The Company had record earnings of $6,074,000 from operations in 1998
compared to $5,400,000 in 1997 and $4,501,000 in 1996.  The Company had net
income of 1.15%, 1.05% and 0.92%, from operations on average assets in 1998,
1997 and 1996, respectively.  The rate of return on operations in 1998
improved relative to 1997 and 1996.  Basic earnings per share from continuing
operations was $1.13, $1.00 and $0.83 in 1998, 1997 and 1996, respectively. 
Diluted earnings per share from operations was $1.09, $0.98 and $0.81 in
1998, 1997 and 1996, respectively.

NET INTEREST INCOME

       Net interest income, the most significant component of the Company's
earnings, is the difference between interest received or accrued on the
Company's earning assets primarily loans and investments and interest paid or
accrued on deposits and short-term borrowings.  In order to compare the
interest generated from different types of earning assets, the interest
income on certain tax-exempt investment securities and loans is increased for
analysis purposes to reflect the income tax savings provided by these tax-
exempt assets.  The adjustment to interest income for tax-exempt investment
securities and loans was calculated based on

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the federal income tax statutory
rate of 34%.  The adjustment to net interest income for the tax effect of
tax-exempt assets is shown in the following schedule.  Net tax equivalent
(TE) interest income of $19,295,000 in 1998 reflected an increase from the
$18,105,000 recorded in 1997, which was an increase from the $17,471,000
recorded in 1996.

<TABLE>
                 NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
                                 (in thousands)

                                              1998      1997      1996
<S>                                            <C>       <C>       <C>
Total interest income                          $38,014   $37,346   $35,088
Total interest expense                          18,962    19,410    17,825

   Net interest income                          19,052    17,936    17,263
Tax equivalent adjustment:
   Tax-exempt investments                          236       156       196
   Tax-exempt loans                                  7        13        12

        Total adjustment                           243       169       208

Net interest income (TE)                       $19,295   $18,105   $17,471
</TABLE>

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

<TABLE>
                                          CONSOLIDATED AVERAGE BALANCE SHEET AND INTEREST RATES
                                                          (dollars in thousands)

                                             1998                       1997                        1996
                                   AVERAGE                    AVERAGE                     AVERAGE     
                                   BALANCE INTEREST RATE      BALANCE INTEREST  RATE      BALANCE INTEREST RATE
<S>                              <C>      <C>       <C>     <C>       <C>      <C>      <C>      <C>       <C>
Assets
Taxable investment
  securities <F1>                $153,732  $9,115   5.93%   $156,101   $9,796  6.28%    $112,359  $6,797   6.05%
Tax-exempt investment
  securities <F1> (TE)             10,008     695   6.94%      6,674      458  6.86%       8,471     576   6.80%
Federal funds sold                 17,900     945   5.28%     13,973      762  5.45%      34,723   1,874   5.40%
Loans <F2><F3> (TE)               306,120  27,502   8.98%    296,170   26,499  8.95%     294,384  26,049   8.85%

  Total interest earning assets
       and interest income (TE)  $487,760 $38,257   7.84%   $472,918  $37,515  7.93%    $449,937 $35,296   7.84%

Cash and due from banks           $17,836                    $17,919                     $20,539                
Premises and equipment              9,984                     10,971                      10,802                
Other assets                       12,386                     11,490                      10,197                

  Total assets                   $527,966                   $513,298                    $491,475                

Liabilities and Stockholders' Equity
Interest bearing demand
  deposits                       $148,492   5,184   3.49%   $139,613   $5,087  3.64%    $118,296  $3,745   3.17%
Savings                            17,073     333   1.95%     17,557      334  1.90%      20,358     379   1.86%
Time deposits                     183,346  10,471   5.71%    192,253   11,122  5.79%     193,486  11,096   5.73%
Short-term borrowings              48,687   2,401   4.93%     42,984    2,275  5.29%      39,598   2,006   5.07%
FHLB advances                       8,962     573   6.39%      8,942      592  6.62%       9,000     599   6.66%

  Total interest bearing
       liabilities and interest
       expense                   $406,560  18,962   4.66%   $401,349  $19,410  4.84%    $380,738 $17,825   4.68%

Noninterest bearing
  demand deposits                 $55,469                    $51,405                     $54,229                
Other liabilities                   6,836                      6,288                       6,489                

  Total liabilities              $468,865                   $459,042                    $441,456                
Stockholders' equity               59,101                     54,256                      50,019                

  Total liabilities and
       stockholders' equity      $527,966                   $513,298                    $491,475                

Interest spread (average
  rate earned minus
  average rate paid) (TE)                           3.18%                      3.09%                       3.16%

Net interest income (TE)                  $19,295                     $18,105                    $17,471        

Net yield on interest
  earning assets (TE)                               3.96%                      3.83%                       3.88%

<FN>
<F1>  Investments in debt securities are included at carrying value.
<F2>  Loans are net of allowance for loan losses.  Nonaccrual loans are
included in the total.
<F3>  Loan fees of approximately $801,000, $533,000 and $473,000 in 1998,
1997 and 1996, respectively, are included in total loan income.
</FN>
</TABLE>

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

                                              ANALYSIS OF VOLUME AND RATE CHANGES
                                                        (in thousands)

                                                   1998                   1997

                                          INCREASE                      INCREASE
                                         (DECREASE)                    (DECREASE)
                                            FROM                          FROM
                                          PREVIOUS  DUE TO   DUE TO     PREVIOUS  DUE TO  DUE TO
                                            YEAR    VOLUME    RATE        YEAR    VOLUME   RATE

<S>                                       <C>      <C>       <C>         <C>      <C>     <C>
Interest Income
  Taxable investment securities            ($681)   ($146)   ($535)      $2,999   $2,733   $266 
  Tax-exempt investment                      237      231        6         (118)    (123)     5 
       securities                                
  Federal funds sold                         183      208      (25)      (1,112)  (1,129)    17 
  Loans                                    1,003      912       91          450      157    293 

       Total interest income                $742   $1,205    ($463)      $2,219   $1,638   $581 

Interest Expense
  Interest bearing demand deposits           $97     $313    ($216)      $1,342     $736   $606 
  Savings                                     (1)     (10)       9          (45)     (53)     8 
  Time deposits                             (651)    (501)    (150)          26      (78)   104 
  Short-term borrowings                      126      288     (162)         269      179     90 
  Federal Home Loan Bank advances            (19)       1      (20)          (7)      (4)    (3)

       Total interest expense              ($448)     $91    ($539)      $1,585     $780   $805 

Net Interest Income (TE)                  $1,190   $1,114      $76         $634     $858  ($224)

</TABLE>

        Total average earning assets increased from $472,918,000 in 1997 to
$487,760,000 in 1998, generating higher levels of interest income in 1998,
while interest expense decreased despite higher average interest bearing
liabilities.  Average loans increased $9,950,000, resulting in an increase of
$1,003,000 in interest income, of which $912,000  was attributable to an
increase in the volume of loans and $91,000 was due to rate changes.  The
Company continues to emphasize credit quality and pricing.  Federal funds
sold increased $3,927,000, resulting in an increase of $183,000 in interest
income, of which $208,000 was attributable to an increase in volume and was
offset by a decrease of $25,000 due to lower interest rates.  Tax-exempt
investment securities increased $3,334,000, resulting in an increase of
$237,000 in interest income of which $231,000 was attributable to an increase
in volume and $6,000 was due to rate changes.  These increases were somewhat
offset by a decrease in taxable investment securities of $2,369,000 which
generated $681,000 less in interest income.  Of this decrease, $146,000 was
attributable to the volume decrease and $535,000 was attributable to lower
interest rates.
        Total average earning assets increased from $449,937,000 in 1996 to
$472,918,000 in 1997, generating higher levels of interest income in 1997,
while interest expense also increased.  Average investments in taxable
investment securities increased $43,742,000 and generated an additional
$2,999,000 in interest income, of which $2,733,000 was attributable to the
volume increase.  Average loans increased $1,786,000, resulting in an
increase of $450,000 in interest income, of which $157,000 was attributable
to an increase in the volume of loans and $293,000 was due to rate changes. 
These increases were somewhat offset by decreases in average federal funds
sold and tax-exempt investment securities.  Average federal funds sold
decreased $20,750,000 and contributed $1,112,000 less to interest income in
1997 as compared to 1996.  Of this $1,112,000 decrease, $1,129,000 was due to
volume, offset by $17,000 due to rate.  Interest income earned on tax-exempt
securities decreased $118,000 in 1997 due to a change in volume.
        The Company establishes interest rates on loans and deposits based
on market rates such as the 91-day Treasury Bill rate and the prime rate and
interest rates offered by other financial institutions in the local
community.  The level of risk and the value of collateral also are evaluated
when determining loan rates.  The average rate earned on loans increased
slightly from 8.95% in 1997 to 8.98% in 1998.  The yield on taxable
investment securities decreased 35 basis points from 6.28% for the year
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ended December 31, 1997 to 5.93% for the year ended December 31, 1998.  The
yield on federal funds sold decreased 17 basis points from the year ended
December 31, 1997.
        Despite the average balance of loans being higher during 1998 than
1997, the actual balances of loans at December 31, 1998 were lower than at
December 31, 1997.  Real estate loans, commercial, financial and agricultural
loans, and installment and consumer loans, decreased $8,172,000, $9,662,000
and $4,616,000, respectively.  The decrease in loans was caused by some large
commercial loans being paid off during 1998, as well as a continued emphasis
on loan quality.  The Company has been unwilling to compromise its loan
underwriting standards in the currently competitive market.
        Interest expense decreased $448,000 in 1998 compared to 1997.  This
was primarily caused by the decrease of $651,000 of interest on time
deposits.  Of this decrease, $501,000 was attributable to a decrease in
volume and $150,000 was attributable to rate, as the average rate paid
decreased from 5.79% in 1997 to 5.71% in 1998.  Somewhat offsetting this
decrease was a $126,000 increase in interest expense on short-term borrowing
in 1998 compared to 1997.   Of this $126,000 increase, $288,000 was due to an
increase in volume, offset by $162,000 due to rate.  Included in the average
balance increase was an increase of $6,027,000 in daily repurchase agreements
and an increase of $118,000 in federal funds purchased.  Somewhat offsetting
this increase was a $442,000 decrease in average term repurchase agreements. 
Average interest bearing demand deposits increased from $139,613,000 in 1997
to $148,492,000 in 1998 and increased interest expense by $97,000 in 1998
compared to 1997.  Of this increase, $313,000 was due to volume, offset by
$216,000 due to rate, as the average rate paid decreased from 3.64% in 1997
to 3.49% in 1998.  A primary cause of this increased volume was the movement
of funds from time deposits to the Prime Investment account because of the
flat yield curve during 1998.  The Prime Investment account pays a higher
rate of interest than a regular money market account on balances of $10,000
and over and provides greater access to funds than a certificate of deposit. 
At December 31, 1998, the Prime Investment product accounted for $75,136,000,
or 47.8%, of all interest bearing demand deposits compared to $60,773,000, or
41.4%, at December 31, 1997.
        Interest expense increased $1,585,000 in 1997 over 1996.  This was
primarily caused by the increase of $1,342,000 of interest on interest
bearing demand deposits.  Of this increase, $736,000 was attributable to an
increase in volume and $606,000 was attributable to rate, as the average rate
paid increased from 3.17% in 1996 to 3.64% in 1997.  A primary cause of this
increase was the success of the Prime Investment account.  At December 1997,
the Prime Investment product accounted for $60,773,000, or 41.4%, of all
interest bearing demand deposits compared to $42,775,000, or 33.6%, at
December 31, 1996.  Interest expense on savings deposits decreased $45,000 in
1997 compared to 1996.  Of this decrease, $53,000 was attributable to a
decrease in volume, offset by $8,000 which was attributable to an increase in
rate.  The average interest rate paid increased from 1.86% in 1996 to 1.90%
in 1997.  Interest expense on time deposits increased $26,000 in 1997
compared to 1996, reflecting the increase in average yield paid from 5.73% in
1996 to 5.79% in 1997, offset somewhat by the decrease in average time
deposits outstanding of $1,233,000.  Interest expense on short-term
borrowings increased $269,000 in 1997 over 1996.  The increase was a result
of average short-term borrowings increasing $3,386,000 in 1997 to $42,984,000
from $39,598,000 in 1996, and the interest rate increasing from 5.07% in 1996
to 5.29% in 1997.  Included in the average balance increase was an increase
of $4,946,000 in daily repurchase agreements.  Somewhat offsetting this
increase was a $1,056,000 decrease in average term repurchase agreements and
a $504,000 decrease in average federal funds purchased in 1997 compared to
1996.

PROVISION FOR LOAN LOSSES

        The quality of the Company's loan portfolio is of prime importance
to Company management and its Board of Directors, as loans are the largest
component of the Company's assets.  BankIllinois maintains an independent
credit administration function which performs reviews of all large loans and
all loans which present indications of additional credit risk.  Approval of
the senior loan committee, which meets weekly, is required prior to funding
of all secured credit relationships over $500,000 and all unsecured
relationships over $100,000.  This committee also reviews nonaccrual loans
and other problem loans.  The Board of Directors meets monthly to review
problem loans, BankIllinois' lending policies and practices, and the results
of credit administration analyses.
        Continued emphasis on loan quality was reflected in net charge-offs
being slightly lower in 1998 than 1997.  Net charge-offs decreased from
$746,000 in 1997 to $562,000 in 1998.  The provision for loan losses
increased $70,000, from $465,000 in 1997 to $535,000 in 1998.  (See the
section on Allowance for Loan Losses and Loan Quality elsewhere in this
report for further discussion relating to the adequacy of the allowance for
loan losses.)  The Company charged off $811,000 in loans during 1998 compared
to $998,000 in 1997.  The largest decrease was in the area of installment and
consumer loans which decreased from $945,000 in 1997 to $677,000 in 1998. 
Recoveries of previously charged off loans were $249,000 in 1998 compared to
$252,000 in 1997.  Net charge-offs increased from $670,000 in 1996 to
$746,000 in 1997.  The provision for loan losses increased $90,000, from
$375,000 in 1996 to $465,000 in 1997.  The Company charged off $998,000 in
loans during 1997 compared to $1,538,000 in 1996.  The largest increase was
in the area of installment and consumer loans which increased from $725,000
in 1996 to $945,000 in 1997.  Included in 1997 charge-offs was $445,000 of
credit card fraud charge-offs.  Recoveries of previously charged off loans
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<PAGE>
were $252,000 in 1997 compared to $868,000 in 1996.  The Company continues to
emphasize credit analysis and early detection of problem loans.

NONINTEREST INCOME

        Noninterest income increased $459,000, or 10.3%, from 1997 to 1998. 
Included in this increase was an increase in gains on sales of loans of
$323,000, or 119.2%, from $271,000 in 1997 to $594,000 in 1998.  This
increase reflected a $43,015,000, or 178.2%, increase in mortgage loans held-
for-sale which were closed during 1998 compared to 1997.  The increase in
closed loans was attributable to a decrease in interest rates.  Trust fees
increased $172,000, or 8.5%, from $2,026,000 in 1997 to $2,198,000 in 1998. 
The increase in trust fees was a result of an increase in assets due to new
accounts.  Other noninterest income increased $103,000, or 37.5%, from
$275,000 in 1997 to $378,000 in 1998.  Included in this increase was a gain
of $104,000 booked on the sale of the credit card portfolio to a third party
during the third quarter of 1998.  Also contributing to the increase in
noninterest income was a $22,000, or 57.9%, increase in net security
transactions from $38,000 in 1997 to $60,000 in 1998.  This increase was a
result of the Company amortizing discounts on securities to their maturity
date.  Due to decreasing interest rates, several securities were called
during 1998 prior to their maturity dates which resulted in a gain being
recognized.  Somewhat offsetting this increase was a decrease in service
charges and fees of $161,000, or 8.6%, from $1,866,000 in 1997 to $1,705,000
in 1998.  Included in this decrease, was a $100,000 decrease in mortgage
servicing income as a result of a large number of early payoffs due to the
low interest rate environment and a lower retention of servicing rights when
selling loans during 1998 compared to 1997.  Lower service charges and fees
also affected other income in 1998 compared to 1997.
        Noninterest income increased $185,000, or 4.3%, from 1996 to 1997. 
Included in this increase was an increase in trust fees of $95,000, or 4.9%. 
The bulk of this increase was in the farm management area due to grain market
prices and the timing of sales.  Net security transactions increased $42,000,
or 1,050.0% from ($4,000) in 1996 to $38,000 in 1997.  Due to decreasing
interest rates, some securities were called in 1997.  The unamortized
discount on the called securities was taken into income at the call date. 
Service charges and fees increased $27,000, or 1.5%, from $1,839,000 in 1996
to $1,866,000 in 1997.  Contributing to the increase was the opening of the
Primevest Investment Center in 1996.  Fees collected for brokerage, mutual
funds and annuity transactions were approximately $25,000 higher in 1997 than
in 1996.
        
NONINTEREST EXPENSE

        Total noninterest expense increased $569,000, or 4.1%, to
$14,457,000 in 1998 from $13,888,000 in 1997.  The 1997 expense was a
decrease of $607,000, or 4.2%, from 1996 noninterest expense of $14,495,000. 
During 1998, salaries and employee benefits increased $541,000, or 7.0%, 
from 1997.  Other noninterest expense increased $221,000, or 11.9% from 1997. 
During the same period, occupancy expense decreased $137,000, or 9.0%, office
supplies decreased $37,000, or 7.3%, and equipment expense decreased $21,000,
or 2.3%.  During 1997, advertising and marketing expenses decreased $264,000,
or 32.1% from 1996, other noninterest expense decreased $229,000, or 11.0%,
office supplies decreased $85,000, or 14.4%, salaries and employee benefits
decreased $53,000, or 0.7%, and equipment decreased $47,000, or 4.9%.  During
the same period, federal deposit insurance premiums increased $46,000 to
$48,000.
        Salaries and employee benefits increased $541,000, or 7.0%, from
$7,742,000 in 1997 to $8,283,000 in 1998.  Of this increase, $472,000 was due
to non-recurring organizational changes implemented to improve efficiency,
including the merger of BankIllinois Trust Company into BankIllinois. 
Increases in compensation expense related to the additional revenue generated
by the mortgage origination area also contributed to the increase.  During
1997, salaries and employee benefits decreased $53,000, or 0.7%, from
$7,795,000 to $7,742,000 as continued efficiencies resulted in a reduction of
the number of employees from 1996.
        Other noninterest expense increased $221,000, or 11.9%, from
$1,862,000 in 1997 to $2,083,000 in 1998.  Included in this increase was a
$250,000 loss on disposal of property in 1998 compared to a $131,000 loss on
the closing of  the Champaign Money Market branch in May 1997.  Also
contributing to the increase in other expenses was an increase in legal
expenses associated with organizational changes related to the merger of the
Company's two subsidiaries, BankIllinois and BankIllinois Trust Company. 
Other noninterest expense decreased $229,000, or 11.0%, from 1996 to 1997. 
Included in the 1997 change was a decrease of $127,000 for director fees
which resulted from the adoption during the second quarter of 1997 of a
compensation plan using stock options for directors of the Company and
BankIllinois.
        Occupancy expense decreased $137,000, or 9.0%, from $1,519,000 in
1997 to $1,382,000 in 1997.  The 1998 decrease in occupancy expense was
primarily due to lower maintenance and repair costs as well as lower real
estate taxes, depreciation expense, and utility costs as a result of the sale
of a vacant building and the adjacent parking lot in March 1998.  Occupancy
expense remained stable from 1996 to 1997 with an $8,000 increase.
        Advertising and marketing expense remained stable during 1998 with
a $3,000 decrease compared to 1997.  Advertising and marketing expense
decreased $264,000, or 32.1%, from $822,000 in 1996 to $558,000 in 1997.  
1996 expenses were
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<PAGE>
higher due to additional advertising to establish name recognition after the
merger of BankIllinois and Champaign National Bank in October 1995.
        Federal deposit insurance premiums remained stable from 1997 to
1998.  The premiums increased from $2,000 in 1996 to $48,000 in 1997.  During
1996, the Deposit Insurance Funds Act of 1996 ("DIFA") eliminated the minimum
assessment of $1,000 semiannually that BankIllinois, being a well capitalized
institution with a risk classification of 1A was assessed during 1996.  It
established a Financing Corporation ("FICO") rate that is not tied to the
FDIC risk classification.  The FDIC insurance assessment is a combined rate
of the FICO, BIF and the FDIC risk classification.  BankIllinois, being
classified 1A, incurred no FDIC risk classification expense.  BankIllinois
incurred $49,000 of FDIC insurance assessments during 1998 compared to
$48,000 in 1997.

INCOME TAX EXPENSE

        Income tax expense increased $262,000, or 9.9%, in 1998 compared to
1997, primarily due to higher income in 1998 resulting in more taxable income
for 1998 compared to 1997.  Income tax expense increased $476,000, or 21.8%,
in 1997 compared to 1996, also due to higher income in 1997.  The Company's
effective tax rate remained stable at 32.5%, 33.0% and 32.7% for the years
ended December 31, 1998, 1997 and 1996, respectively.
        The tax effects of temporary differences which gave rise to
significant portions of the deferred tax assets and deferred tax liabilities
at December 31, 1998 and 1997 are shown in note 12 in the Notes to
Consolidated Financial Statements.


FINANCIAL CONDITION

        Total assets remained stable at $537,373,000 at December 31, 1998
compared to $539,366,000 at December 31, 1997.  This decrease in total assets
of less than 1% resulted from a decrease of $22,423,000, or 7%, in loans, net
of allowance for loan losses, a decrease of $13,100,000, or 67%, in federal 
funds sold, a decrease of $11,262,000, or 8%, in securities available-for-
sale, a decrease of $9,878,000, or 34%, in cash and due from banks, and a 
decrease in other assets of $2,859,000, or 35%.  These decreases were 
somewhat offset by an increase of $46,990,000, or 254%, in investment 
securities, an increase of $9,543,000, or 678%, in mortgage loans available-
for-sale, and an increase in premises and equipment of $942,000 or 8%. The 
decrease in year-end assets was partially a result of deposits being 
$7,256,000, or 2%, lower at December 31, 1998 than at December 31, 1997.  
Federal Home Loan Bank advances were $2,000,000, or 25%, higher at December 
31, 1998 than at December 31, 1997.  Average assets were $14,668,000, or 3%, 
higher in 1998 than in 1997.  Included in the increase in average assets was 
an increase of $9,950,000, or 3%, in average net loans including mortgage 
loans held for sale, an increase in federal funds sold of $3,927,000, or 28%.
The increase in average assets was a result of higher average deposits and 
short-term borrowings in 1998.  Total average deposits increased $3,552,000, 
or 1%, in 1998 from 1997.  Included in this increase were some shifts in the
average deposit mix in 1998 versus 1997.  Average interest bearing demand 
deposits increased $8,879,000, or 6%, while average noninterest bearing 
deposits increased $4,064,000, or 8%.  Somewhat offsetting these increases 
were decreases in time deposits of $8,907,000, or 5%, and a decrease of 
$484,000, or 3%, in savings deposits.  Much of the shift in deposits was 
attributable to the Prime Investment account.

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<PAGE>

INVESTMENT SECURITIES

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

<TABLE>
                                            CARRYING VALUE OF SECURITIES
                                                   (in thousands)

December 31,                                      1998       1997        1996
<S>                                             <C>        <C>        <C>
Available-for-sale:
  U.S. Treasury                                  $37,526    $40,530    $42,969
  Federal agencies                                77,012     87,478     78,262
  Mortgage-backed securities                       5,944      6,242      8,226
  Corporate and other obligations                  3,573      1,067        470

            Total available-for-sale            $124,055   $135,317   $129,927


Held-to-maturity:
  U.S. Treasury                                      900      1,897      2,004
  Federal agencies                                31,828      9,615     12,039
  Mortgage-backed securities                      14,167          0        257
  State and municipal                             18,614      7,007      7,570

            Total held-to-maturity               $65,509    $18,519    $21,870


Non-marketable equity securities                   1,572      1,550      1,695

            Total securities                    $191,136   $155,386   $153,492
</TABLE>
        
        The unrealized gain on securities available-for-sale, net of tax
effect, increased $735,000, to a gain of $1,033,000 at December 31, 1998 from
a gain of $298,000 at December 31, 1997.  
        
        The following table shows the maturities and weighted-average
yields of investment securities at December 31, 1998:

<TABLE>
                                       MATURITIES AND WEIGHTED AVERAGE YIELDS OF DEBT SECURITIES
                                                        (dollars in thousands)

                                                           DECEMBER 31, 1998

                                        1 YEAR    1 TO 5    5 TO 10    OVER
                                        OR LESS    YEARS     YEARS   10 YEARS   TOTAL
<S>                                   <C>       <C>       <C>       <C>        <C>
Securities available-for-sale
  U.S. Treasury                       $21,800   $15,726        $0        $0     $37,526
  Federal agencies                     16,169    51,924     8,919         0      77,012
  Mortgage-backed securities                0         0     1,001     4,943       5,944
  Other securities                      3,257       316         0         0       3,573

       Total                          $41,226   $67,966    $9,920    $4,943    $124,055

Average Yield (TE)                      5.57%     5.97%     5.72%     6.08%       5.83%

Securities held-to-maturity
  U.S. Treasury                          $900        $0        $0        $0        $900
  Federal agencies                          0    21,829     9,999         0      31,828
  Mortgage-backed securities                0         0         0    14,167      14,167
  State and municipal                   3,491     3,113    10,215     1,795      18,614

       Total                           $4,391   $24,942   $20,214   $15,962     $65,509

Average Yield (TE)                      4.81%     5.66%     4.96%     5.30%       5.30%
</TABLE>

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<PAGE>
LOANS

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

<TABLE>
                                                       AMOUNT OF LOANS OUTSTANDING
                                                         (dollars in thousands)

                                              1998      1997      1996      1995      1994
<S>                                        <C>       <C>       <C>       <C>       <C>
Commercial, financial and agricultural     $112,265  $121,927  $110,059  $121,180  $113,325
Real estate                                 132,919   141,091   127,724   127,893   136,098
Installment and consumer, net
   of unearned discount                      47,401    52,017    48,085    68,328    82,044

  Total loans                              $292,585  $315,035  $285,868  $317,401  $331,467
</TABLE>

<TABLE>
                                                       PERCENTAGE OF LOANS OUTSTANDING

                                              1998      1997      1996      1995      1994
<S>                                         <C>       <C>       <C>       <C>       <C>
Commercial, financial and agricultural       38.37%    38.70%    38.50%    38.18%    34.19%
Real estate                                  45.43%    44.79%    44.68%    40.29%    41.06%
Installment and consumer, net 
   of unearned discount                      16.20%    16.51%    16.82%    21.53%    24.75%

  Total                                     100.00%   100.00%   100.00%   100.00%   100.00%
</TABLE>

        Total loans decreased by $22,450,000, or 7.1%, from December 31,
1997 to December 31, 1998, with decreases in commercial, financial and
agricultural loans, real estate loans and installment and consumer loans of
$9,662,000, $8,172,000 and $4,616,000 respectively.  $5,706,000 of the
commercial, financial and agricultural loan decrease was attributable to a
decrease in dealer floor plan loans.  The decrease in real estate loans was
mainly attributable to a decrease of $8,399,000 in residential real estate,
offset by a slight increase in commercial real estate.  The emphasis on loan
quality and pricing, coupled with the competitive nature of the market, was
responsible for the decrease in loans.    
        Total loans increased by $29,167,000 from December 31, 1996 to
December 31, 1997, with increases in commercial, financial and agricultural
loans, real estate loans and installment and consumer loans of $11,868,000,
$13,367,000 and $3,932,000, respectively.  $4,487,000 of the commercial,
financial, and agricultural loan increase was attributable to an increase in
dealer floor plan loans.  The increase in real estate loans was attributable
to an increase of $17,066,000 in commercial real estate, offset by a decrease
of $3,699,000 in residential real estate.  Strong loan demand was responsible
for the overall increase in loans.
        The balance of loans outstanding as of December 31, 1998 by
maturities is shown in the following table:

<TABLE>
                                                 MATURITY OF LOANS OUTSTANDING
                                                    (dollars in thousands)

                                                       DECEMBER 31, 1998

                                             1 YEAR      1-5     OVER 5       
                                             OR LESS    YEARS     YEARS     TOTAL
<S>                                         <C>      <C>        <C>      <C>
Commercial, financial and agricultural      $54,788   $38,620   $18,857  $112,265
Real estate                                  10,991    43,251    78,677   132,919
Installment and consumer                     13,867    31,787     1,747    47,401

  Total                                     $79,646  $113,658   $99,281  $292,585

Percentage of total loans outstanding        27.22%    38.85%    33.93%   100.00%
</TABLE>

        As of December 31, 1998, commercial, financial and agricultural
loans with maturities of greater than one year were comprised of $10,916,000
in fixed-rate loans and $46,561,000 in floating-rate loans.  Real estate
loans with maturities greater than one year at December 31, 1998 included
$32,505,000 in fixed-rate loans and $89,423,000 in floating-rate loans.

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<PAGE>
ALLOWANCE FOR LOAN LOSSES AND LOAN QUALITY

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

<TABLE>
                                                      ALLOWANCE FOR LOAN LOSSES
                                                       (dollars in thousands)

                                            1998      1997      1996      1995      1994
<S>                                        <C>       <C>      <C>       <C>        <C>
Allowance for loan losses at
  beginning of year                        $5,306    $5,587    $5,882    $5,263    $4,686 

Charge-offs during period:
  Commercial, financial and agricultural    ($134)     ($53)    ($610)  ($1,827)    ($159)
  Real estate                                   0         0      (203)     (186)      (40)
  Installment and consumer                   (677)     (945)     (725)     (661)     (434)

       Total                                ($811)    ($998)  ($1,538)  ($2,674)    ($633)

Recoveries of loans previously charged off:
  Commercial, financial and agricultural      $16       $69      $647       $54      $350 
  Real estate                                  13        15        37        24       159 
  Installment and consumer                    220       168       184       118       136 

       Total                                 $249      $252      $868      $196      $645 

            Net (charge-offs) recoveries    ($562)    ($746)    ($670)  ($2,478)      $12 
Provision for loan losses                     535       465       375     3,097       565 

Allowance for loan losses at end of year   $5,279    $5,306    $5,587    $5,882    $5,263 

Ratio of net charge-offs to
  average net loans                         0.18%     0.25%     0.23%     0.74%     0.00% 
</TABLE>

        Management reviews criteria such as the customer's historic loan
payment performance, financial statements, financial ratios, cash flow, net
worth, collateral and guaranties, as well as local and national economic
factors, in determining whether loans should be written off as uncollectible. 
The Company records a loss if it is probable that a loss will occur and the
amount can be reasonably estimated.
        The Company's risk of loan loss is dependent on many factors:
economic conditions, the extent and values of underlying collateral,
significant concentrations of loans within the portfolio, the ability and
willingness of borrowers to perform according to loan terms and management's
competence and judgement in overseeing lending, collecting and loan-
monitoring activities.  The risk of loss from commercial, financial and
agricultural loans is significantly impacted by economic factors and how
these factors affect the particular industries involved.  The local economy
has remained stable for the past several years.
        An analysis of the allowance for loan loss adequacy is performed on
a quarterly basis by the Company's credit administration department.  This
analysis is reported to executive management and discussed at a quarterly
meeting where specific allocations for problem credits, charge-offs and
monthly provisions for loan losses are reviewed and revised, as necessary. 
The results are reported to the Board of Directors.  The analysis includes
assessment of the allowance for loan loss adequacy based on historic loan
losses and current quality grades of specific credits reviewed, credit
concentrations, current delinquent and nonperforming loans, current economic
conditions, peer group information and results of recent audits or regulatory
examinations.  A significant portion of the increased charge-offs during 1995
were a result of the emphasis placed on the early detection of problem
credits.
        The following table shows the allocation of the allowance for loan
losses allocated to each category.

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<PAGE>
<TABLE>
                                            ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

                                              1998    1997     1996     1995     1994
<S>                                          <C>     <C>      <C>      <C>      <C>
Allocated:
  Commercial, financial and agricultural     $3,070  $3,661   $3,799   $4,235   $2,210
  Real estate <F1>                              180     424      503      470      895
  Installment and consumer                      452     478      559      706      684

       Total allocated allowance             $3,702  $4,563   $4,861   $5,411   $3,789
Unallocated allowances                        1,577     743      726      471    1,474

Total                                        $5,279  $5,306   $5,587   $5,882   $5,263

<FN>
<F1>  Residential real estate only for 1998, 1997, 1996, and 1995.
</FN>
</TABLE>

        The portion of the allowance for loan losses which was unallocated
increased to $1,577,000 at December 31, 1998 from $743,000 a year earlier. 
The decreases in the dollars allocated to commercial, financial and
agricultural, residential real estate and installment and consumer loans from
December 31, 1997 to December 31, 1998 were due primarily to adjustments made
in the corresponding factors applied to each of the loan segment balances. 
The revisions were made in order to more accurately reflect actual loss
history since the merger in 1995.  Beginning in 1995, allocations have been
based on loan portfolio balances (commercial, financial and agricultural,
including commercial real estate; residential real estate; and installment
and consumer loans) applied to corresponding factors.  The increase in the
dollar allocation to commercial, financial and agricultural loans since
December 31, 1994 and reduction in the dollar allocation to real estate was
due primarily to the inclusion of commercial real estate in the commercial
category for 1995, 1996, 1997, and 1998.
        The unallocated portion of the allowance for loan losses,
$1,577,000 at December 31, 1998, represented additional reserves available to
cover losses in any of the three categories listed in the table which may
exceed the allocated amount.
        Management believes that nonperforming and potential problem loans
are appropriately identified and monitored based on the extensive loan
analyses performed by the credit administration department, the internal loan
committees and the Board of Directors.  Historically, there has not been a
significant amount of loans charged off which had not been previously
identified as problem loans by the credit administration department or the
loan committees.
        The following table presents the aggregate amount of loans
considered to be nonperforming for the periods indicated.  Nonperforming
loans include loans accounted for on a nonaccrual basis, accruing loans
contractually past due 90 days or more as to interest or principal payments
and loans which are troubled debt restructurings as defined in Statement of
Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors
for Troubled Debt Restructurings."

<TABLE>
                                                NONPERFORMING LOANS (IN THOUSANDS)

                                      1998         1997        1996         1995        1994
<S>                                  <C>         <C>          <C>         <C>          <C>
Nonaccrual loans                <F1> $1,126 <F1> $2,208  <F1> $2,135 <F1> $2,270       $2,327

Loans past due 90 days or more         $415        $747         $384        $846         $144

Renegotiated loans                     $121        $140         $162        $179         $198

<FN>
<F1>  Includes $406,000 at December 31, 1998, $415,000 at December 31, 1997,
      $448,000 at December 31, 1996, and $109,000 at December 31, 1995 of
      real estate and consumer loans which management does not consider
      impaired as defined by the Statement of Financial Accounting Standards
      No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114).
</FN>
</TABLE>

        There were no other interest earning assets which would be required
to be disclosed as being nonperforming if such other assets were loans.
        At December 31, 1998, BankIllinois had approximately $3,798,000 in
potential problem loans, excluding nonperforming loans.  Potential problem
loans are those loans identified by management as being worthy of special
attention, and although currently performing, may have some underlying
weaknesses.  None of these potential problem loans were considered impaired
as defined in SFAS 114.  Approximately $720,000 of the non-performing loans
were considered impaired as of December 31, 1998.  The $3,798,000 of
potential problem loans have either had timely payments or were adequately
secured and loss of principal or interest is determined to be unlikely.
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<PAGE>
        Loans over 90 days past due which are not well secured and in the
process of collection are placed on nonaccrual status.  The total of
$1,126,000 nonaccrual loans at December 31, 1998 was significantly lower than
the December 31, 1997 amount of $2,208,000.  Loans past due 90 days or more
but still accruing were reduced by $332,000 in 1998 to a balance of $415,000
at December 31, 1998.  These loans are well secured and in the process of
collection. 
        The following table categorizes nonaccrual loans as of December 31,
1998 based on levels of performance and also details the allocation of
interest collected during the period in 1998 in which the loans were on
nonaccrual.  Substantial performance, yet contractually past due, includes
borrowers making sizable periodic payments relative to the required periodic
payments due.  A borrower that is not making substantial payments but is
making some periodic payments would be included in the limited performance
category.

<TABLE>
                                                NONACCRUAL AND RELATED INTEREST PAYMENTS
                                                             (in thousands)

                                                                 CASH INTEREST PAYMENTS APPLIED AS:

                                    AT DECEMBER 31, 1998                    RECOVERY OF   REDUCTION
                                      BOOK   CONTRACTUAL        INTEREST   PRIOR PARTIAL     OF
                                     BALANCE   BALANCE           INCOME     CHARGE-OFFS   PRINCIPAL
<S>                                  <C>       <C>                  <C>           <C>        <C>
Contractually past due with:            
  Substantial performance              $251      $319               $9            $0         $18
  Limited performance                     0         0                0             0           0
  No performance                        875       913                0             0           0

Total                                $1,126    $1,232               $9            $0         $18
</TABLE>

        As shown in the table above, the nonaccrual loans with no
performance at December 31, 1998 made up the largest share of the total
(78%).  The difference between the book balance and the contractual balance
represents charge-offs made since the loans were funded.                 
        Management believes that the allowance for loan losses at December
31, 1998 was adequate to absorb credit losses in the total loan portfolio and
that the policies and procedures in place to identify potential problem loans
are being effectively implemented.

PREMISES AND EQUIPMENT

        Total premises and equipment increased $942,000 in 1998 from 1997. 
Included in the increase was the transfer of the BankIllinois Executive
Center ("Executive Center") located adjacent to the Bank's main offices, from
other real estate to premises and equipment at its market value of
$2,500,000.  Somewhat offsetting this increase was the sale of a vacant
building and the adjacent parking lot, with a combined book value of
$1,499,000.

OTHER ASSETS

        Other assets decreased $2,859,000 in 1998 from 1997.  The decrease
was primarily due to a decrease in other real estate.  In December 1998, the
Executive Center, with a market value of $2,500,000 was transferred to
premises and equipment.  Included in this amount was $309,000 of improvements
made during 1998.  Also contributing to the decrease in other assets was the
sale of other repossessed real estate properties with a total book value of
$626,000.  In addition, deferred taxes receivable decreased $330,000 in 1998. 
The decrease in other assets was somewhat offset by a purchase of property
with a book value of $613,000.  This property was acquired as part of the
agreement to sell the building and parking lot included in premises and
equipment.  This property is currently listed for sale.  

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<PAGE>
DEPOSITS

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

<TABLE>
                                          AVERAGE BALANCE AND WEIGHTED AVERAGE RATE OF DEPOSITS
                                                          (dollars in thousands)

                                 1998                 1997                1996

                                   WEIGHTED             WEIGHTED            WEIGHTED
                            AVERAGE AVERAGE     AVERAGE  AVERAGE    AVERAGE  AVERAGE
                            BALANCE  RATE       BALANCE   RATE      BALANCE   RATE
<S>                        <C>       <C>        <C>       <C>      <C>       <C>
Demand
  Noninterest bearing       $55,469  0.00%       $51,405  0.00%     $54,229  0.00%
  Interest bearing          148,492  3.49%       139,613  3.64%     118,296  3.17%
Savings                      17,073  1.95%        17,557  1.90%      20,358  1.86%
Time
  $100,000 and over          37,855  5.75%        36,172  5.74%      30,715  5.41%
  Under $100,000            145,491  5.70%       156,081  5.80      162,771  5.80

  Totals                   $404,380             $400,828           $386,369      
</TABLE>

        In analyzing its deposit activity, management has noted that
average total deposits increased $3,552,000 during 1998.  Included in this
increase were shifts in the average deposit mix in 1998 versus 1997.  Average
interest bearing demand deposits increased $8,879,000, or 6%, while average
noninterest bearing deposits increased 4,064,000, or 8%.  Somewhat offsetting
these increases were decreases in time deposits of $8,907,000, or 5%, and a
decrease of $484,000, or 3%, in savings deposits.  The Prime Investment
account (included in interest bearing demand deposits) accounted for much of
the shift in the deposit mix, increasing from $60,773,000 at December 31,
1997 to $75,136,000 at December 31, 1998.

        The table below sets forth the maturity of deposits greater than
$100,000 at December 31, 1998:

<TABLE>
                 MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
                                 (in thousands)

                                                               TOTAL TIME
                                                               DEPOSITS OF
MATURITY AT DECEMBER 31, 1998             CDS        IRAS   $100,000 OR MORE
<C>                                    <C>          <C>         <C>
3 months or less                       $11,908        $253      $12,161
3 to 6 months                            3,139           0        3,139
6 to 12 months                           7,516         954        8,470
Over 12 months                           9,271       1,541       10,812

  Total                                $31,834      $2,748      $34,582
</TABLE>

SHORT-TERM BORROWINGS

        Short-term borrowings include federal funds purchased, which are
generally overnight transactions, and securities sold under repurchase
agreements, which mature from one day to three years from the date of sale. 
The table in note 9 in the Notes to Consolidated Financial Statements shows
the balances of short-term borrowings at December 31, 1998 and 1997, the
average balance for the years ended December 31, 1998, 1997 and 1996, and the
maximum month-end value during each year.

FAIR VALUES OF FINANCIAL INSTRUMENTS

        The estimated fair values of financial instruments for which no
listed market exists and the fair values of investment securities, which are
based on listed market quotes at December 31, 1998 and 1997, are disclosed in
note 17 in the Notes to Consolidated Financial Statements.
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<PAGE>

CAPITAL

        Total stockholders' equity rose $3,377,000 from $57,330,000 at
December 31, 1997 to $60,707,000 at December 31, 1998.  The increase
represents net income of $6,074,000, a $77,000 increase from stock
appreciation rights and a $735,000 increase in accumulated other
comprehensive income less cash dividends totaling $1,699,000, net Treasury
Stock transactions of $1,806,000 and the purchase of $4,000 in fractional
shares of common stock following the stock dividend.
        Financial institutions are required by regulatory agencies to
maintain minimum levels of capital based on asset size and risk
characteristics.  Currently, the Company and BankIllinois are required by
their primary regulators to maintain adequate capital based on two
measurements: the total assets leverage ratio and the risk-weighted assets
ratio.
        Based on Federal Reserve guidelines, a bank holding company
generally is required to maintain a leverage ratio of 3% plus an additional
cushion of at least 100 to 200 basis points.  The Company's total assets
leverage ratio at December 31, 1998 and 1997 were 11.1% and 10.9%,
respectively.  The leverage ratio for BankIllinois for the same periods were
9.8% and 10.0% well above the regulatory minimum for both the Company and
BankIllinois.
        The minimum risk-weighted assets ratio for bank holding companies
is 8%.  The Company's total risk-weighted assets at December 31, 1998 and
1997 were 19.1% and 17.7% significantly higher than the regulatory minimum. 
BankIllinois' total risk-weighted assets were also significantly higher than
the regulatory minimum 17.2% and 16.4% for the years ended December 31, 1998
and 1997.

INFLATION AND CHANGING PRICES

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

LIQUIDITY AND CASH FLOWS

        The Company requires cash to fund loan growth and deposit
withdrawals.  Cash flows fluctuate with changes in economic conditions,
current interest rate trends and as a result of management strategies and
programs.  The Asset Liability Committee ("ALCO") of BankIllinois, which
includes all executive managers, meets monthly to monitor the demand for cash
and initiates programs and policies as considered necessary to meet funding
gaps.
        The Company was able to adequately fund loan demand and meet
liquidity needs in 1998.  A review of the consolidated statement of cash
flows in the accompanying financial statements shows that the Company's cash
and due from banks and federal funds sold (cash) decreased $22,978,000 from
December 31, 1997 to December 31, 1998.  The decrease resulted from net cash
used by operating, investing and financing activities.  There were
differences in sources and uses of cash during 1998 compared to 1997.  More
cash was used for operating activities in 1998 mainly due to the increase in
loans originated for sale.  In the area of investing activities, less cash
was used in 1998 compared to 1997.  In 1998 there was a decrease in loans
while 1997 experienced rapid loan growth.  Proceeds from maturities and
calls, as well as paydowns on securities, which are reflective of the current
interest rate environment, were higher in 1998.  These were somewhat offset
by more cash used in purchasing investments in debt and equity securities. 
Cash was used in financing activities in 1998 compared to 1997 which provided
cash in this area.  This was mainly due to lower deposits in 1998 as well as
less cash provided by federal funds purchased and securities sold under
repurchase agreements.  Also, cash dividends were paid in 1998 and more cash
was used in purchasing treasury stock.  These were somewhat offset by an
increase in Federal Home Loan Bank advances in 1998.
        The Company's future short-term requirements for cash are not
expected to significantly change and will continue to be provided by
investment maturities, sales of loans and deposits.  Cash required to meet
longer-term liquidity requirements will mostly depend on future goals and
strategies of management, the competitive environment, economic factors and
changes in the needs of customers.  No outside borrowing is anticipated.  The
Company expects to maintain FHLB advances near the current level.  These
funds are matched to seven-year balloon and ten-year fixed-rate residential
mortgage loans booked in previous years.  If current sources of liquidity
cannot provide needed cash in the future, the Company can obtain funds from
several sources.  The Company is able to borrow funds on a temporary basis
from the Federal Reserve Bank, the FHLB and correspondent banks to meet
short-term requirements.  With no parent company debt and sound capital
levels, the Company has several options for longer-term cash needs, such as
for future expansion and acquisitions.
        Management is not aware of any current recommendations by the
Company's primary regulators which if implemented would have a material
effect on the Company's liquidity, capital resources or operations.

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<PAGE>
INTEREST RATE SENSITIVITY

        The concept of interest sensitivity attempts to gauge exposure of
BankIllinois' net interest income to adverse changes in market driven
interest rates by measuring the amount of interest-sensitive assets and
interest-sensitive liabilities maturing or subject to repricing within a
specified time period.  Liquidity represents the ability of BankIllinois to
meet the day-to-day demands of deposit customers balanced by its investments
of these deposits.  BankIllinois must also be prepared to fulfill the needs
of credit customers for loans with various types of maturities and other
financing arrangements.  BankIllinois monitors its interest rate sensitivity
and liquidity through the use of static gap reports which measure the
difference between assets and liabilities maturing or repricing within
specified time periods.  
        The following table shows the Company's interest rate sensitivity
position at various intervals at December 31, 1998:

<TABLE>
                                    RATE SENSITIVITY OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
                                                          (dollars in thousands)

                                          1-30      31-90   91-180    181-365   OVER
                                          DAYS      DAYS     DAYS      DAYS    1 YEAR     TOTAL
<S>                                   <C>          <C>      <C>      <C>      <C>       <C>
Interest earning assets:
  Federal funds sold                     $6,500         $0       $0       $0        $0    $6,500
  Debt and equity securities <F1>         8,995     22,112   19,553   21,703   118,773   191,136
  Loans <F2>                             74,643     18,842   15,929   41,274   152,848   303,536

     Total interest earning assets      $90,138    $40,954  $35,482  $62,977  $271,621  $501,172

Interest bearing liabilities:
  Savings and interest bearing                  
     demand deposits                   $174,800         $0       $0       $0        $0  $174,800
  Time deposits                          16,207     12,658   27,229   39,973    76,029   172,096
  Federal funds purchased and
     securities sold under 
     repurchase agreements               44,763          0        0    5,000       200    49,963
Federal Home Loan Bank advances               0      1,000        0    2,000     7,000    10,000

            Total interest bearing
                 liabilities           $235,770    $13,658  $27,229  $46,973   $83,229  $406,859

Net asset (liability) funding gap     ($145,632)   $27,296   $8,253  $16,004  $188,392   $94,313

Repricing gap                              0.38       3.00     1.30     1.34      3.26      1.23
Cumulative repricing gap                   0.38       0.53     0.60     0.71      1.23      1.23

<FN>
<F1>  Debt and equity securities include available-for-sale securities.
<F2>  Loans include held-for-sale mortgage loans.
</FN>
</TABLE>

        At December 31, 1998, the Company tended to be liability sensitive
due to the levels of savings and interest bearing demand deposits, time
deposits, federal funds purchased and securities sold under repurchase
agreements.  As such, the effect of a decrease in the prime rate of 100 basis
points would increase net interest income by approximately $1,456,000 in 30
days and $1,183,000 in 90 days assuming no management intervention.  A rise
in interest rates would have the opposite effect for the same periods.
        In addition to managing interest sensitivity and liquidity through
the use of gap reports, the Company has provided for emergency liquidity
situations with informal agreements with correspondent banks which permit the
Company to borrow federal funds on an unsecured basis and $7,489,000 from the
Federal Home Loan Bank on a secured basis.
        The Company uses financial forecasting/budgeting/reporting software
packages to perform interest rate sensitivity analysis for all product
categories.  Investments in debt and equity securities are analyzed by
performing duration calculations to determine price volatility for interest
rate shifts of plus or minus 300 basis points.  Call criteria and prepayment
assumptions are taken into consideration.  All other financial instruments
are analyzed by a software database which includes each of the different
product categories which are tied to key rates such as prime or the fed funds
rate.  The relationships of each of the different products to the key rate
that the product is tied to is proportional.  The software reprices the
products based on current offering rates.  The current
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<PAGE> market value of loans is computed by discounting cash flows at market
rates as the discount rate.  Categories of cash, fed funds, demand deposits,
accrued receivables and payables, and other assets and other liabilities are
priced at book value regardless of the interest rate shock.  The software
performs interest rate sensitivity analysis by performing rate shocks of plus
or minus 300 basis points in 100 basis point increments.
        The market value volatility, risk, is a function of term.  The
longer the term, the greater the volatility (risk).  Balances with very short
terms, loans linked to prime or savings, have little market value risk, while
long-term balances e.g., mortgages have much greater market value risk. 
Having short-term deposits and longer term assets results in a negative slope
in the change in market value i.e., decreasing market value as rates rise. 
The steeper this slope, the greater the risk.  Risk can be decreased by
shortening the mismatch between assets and liabilities.
        The following table shows hypothetical results based on these shock
levels:

<TABLE>
                                 (dollars in millions)

                                        MARKET         
                                  VALUE OF PORTFOLIO
CHANGE IN INTEREST RATES                EQUITY      CHANGE   PERCENT CHANGE
<S>                                      <C>        <C>         <C>
300 basis point rise                     $39        ($22)       (36%)
200 basis point rise                      46         (15)       (25%)
100 basis point rise                      54          (7)       (11%)
Base scenario                             61           0          0% 
100 basis point decline                   70           9         15% 
200 basis point decline                   77          16         26% 
300 basis point decline                   86          25         41% 
</TABLE>

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

NEW ACCOUNTING RULES AND REGULATIONS

        In June 1998, the Statement on Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," was
issued, which is required to be adopted in years beginning after June 15,
1999.  The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance.  The Company expects to adopt the Statement
effective January 1, 2000.  The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value.  Derivatives
that are not hedges must be adjusted to fair value through income.  If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings
or recognized in other comprehensive income until the hedged item is
recognized in earnings.  The ineffective portion of a derivative's change in
fair value will be immediately recognized in earnings.  The ineffective
portion of a derivative's change in fair value will be immediately recognized
in earnings.  Management does not anticipate that the adoption of the new
Statement will have a significant effect on the Company's earnings or
financial position.

        In October 1998, the Statement on Financial Accounting Standards
No. 134, "Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," was issued, which is effective for the first fiscal quarter
beginning after December 15, 1998.  The Statement changes the way mortgage
banking firms account for certain securities and other interests they retain
after securitizing mortgage loans which were held for sale.  The Company does
not securitize mortgages; therefore, the Statement will have no effect on its
financial statements.

YEAR 2000

        The federal banking regulators recently issued guidelines
establishing minimum safety and soundness standards for achieving Year 2000
compliance.  The guidelines, which took effect October 15, 1998 and apply to
all FDIC-insured depository
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<PAGE>
institutions, establish standards for developing and managing Year 2000
project plans, testing remediation efforts and planning for contingencies.
The guidelines are based upon guidance previously issued by the agencies
under the auspices of the Federal Financial Institutions Examination Council
(the "FFIEC"), but are not intended to replace or supplant the FFIEC guidance
which will continue to apply to all federally insured depository
institutions.
   
        The guidelines were issued under section 39 of the Federal Deposit
Insurance Act, as amended (the "FDIA"), which requires federal banking
regulators to establish standards for the safe and sound operation of
federally insured depository institutions.  Under section 39 of the FDIA, if
an institution fails to meet any of the standards established in the
guidelines, the institution's primary federal regulator may require the
institution to submit a plan for achieving compliance.  If an institution
fails to submit an acceptable compliance plan, or fails in any material
respect to implement a compliance plan that has been accepted by its primary
federal regulator, the regulator is required to issue an order directing the
institution to cure the deficiency.  Such an order is enforceable in court in
the same manner as a cease and desist order. Until the deficiency cited in
the regulator's order is cured, the regulator may restrict the institution's
rate of growth, require the institution to increase its capital, restrict the
rates the institution pays on deposits or require the institution to take any
action the regulator deems appropriate under the circumstances.  In addition
to the enforcement procedures established in section 39 of the FDIA,
noncompliance with the standards established by the guidelines may also be
grounds for other enforcement action by the federal banking regulators,
including cease and desist orders and civil money penalty assessments.

        The Year 2000 has posed a unique set of challenges to those
industries reliant on information technology.  As a result of methods
employed by earlier programmers, many software applications and operational
programs may be unable to distinguish the Year 2000 from the Year 1900.  If
not effectively addressed, this problem could result in the production of
inaccurate data, or, in the worst cases, the inability of the systems to
continue to function altogether.  Financial institutions are particularly
vulnerable during the industry's dependence on electronic data processing
systems.  

        In December 1996, the Company developed their Year 2000 Project
Plan, following the guidelines established by the FFIEC.  An integral part of
the plan was to establish a Year 2000 Committee comprised of representatives
from key areas throughout the organization.  The Committee's mission is to
identify issues related to the Year 2000 and to initiate remedial measures
designed to eliminate any adverse effects on the Company's operations.  The
Committee has developed a comprehensive, prioritized inventory of all
hardware, software, and material third party providers that may be adversely
affected by the Year 2000 date change, and has contacted vendors requesting
their status as it relates to the Year 2000.  This inventory includes both
information technology ("IT") and non-IT systems, such as alarms, building
access, elevators and heating and cooling systems, which typically contain
embedded technology such as microcontrollers.  This inventory is periodically
reevaluated to ensure that previously assigned priorities remain accurate and
to track the progress each vendor is making in resolving the problems
associated with the issue.  The Company relies on software purchased from
third-party vendors rather than internally-generated software.  The Company
is currently in the process of upgrading systems and testing to validate Year
2000 compliance.  As of March 1999, testing is 80% complete.  Testing is
being done on a test server which emulates the current network and systems of
the Company.  The Company will have all but one of the mission critical
systems renovated and tested prior to March 31, 1999.  The remaining mission
critical system, the item capture system, is scheduled to be upgraded to a
Year 2000 compliant system with imaging capabilities by late summer, a
timeframe determined by vendor availability.  The Company is currently
operating on the Year 2000 compliant releases for core systems supported by
its third party data processor.

        The Year 2000 Committee has also developed a communication plan
that updates the Board of Directors, management, and employees on the
Company's Year 2000 status, and has formed a subcommittee to develop a
customer awareness program.  In addition, the Company has formed a coalition
with other local financial institutions to promote Year 2000 customer
awareness in the community.

        The Committee has developed a separate plan in order to manage the
Year 2000 risks posed by commercial borrowing customers. This plan will 
identify material loan customers, assess their preparedness, evaluate their
credit risk to the Company, and implement appropriate controls to mitigate
the risk.  As a means of creating awareness among these borrowers, the
Company has conducted a corporate customer seminar to provide customers with
information on how the Year 2000 can impact their own business and is
planning a second seminar in the second quarter.  

        In accordance with regulatory guidelines, the Company has developed
a comprehensive contingency plan in the event that Year 2000 related failures
are experienced.  The plan lists the various strategies and resources
available to restore core business processes.  These strategies include
relying on back-up systems that do not utilize computers and, in some cases,
switching vendors.  In the case of utility providers, the Company has not
identified any practical, long-term alternatives to relying on these
companies for basic utility services.  The Company currently utilizes a
generator for emergency power at its main office during short-term power
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<PAGE>
outages.  Although the generator does not supply sufficient power to allow
the main office to remain open during a power outage, the Company is
researching the possibility of the generator supplying sufficient power to
operate a branch office in case of power outages caused by Year 2000 issues.

        Management anticipates that the total additional out-of-pocket
expenditures required for bringing the systems into compliance for the Year
2000 will be approximately $275,000.  Management believes that these required
expenditures will not have a material adverse impact on operations, cash
flow, or financial condition.  This amount, including costs for upgrading
equipment specifically for the purpose of Year 2000 compliance, fees to
outside consulting firms, and certain administrative expenditures, has been
provided for in the Company's Year 2000 budget.  Although management feels
confident that the Company has identified all necessary upgrades, and
budgeted accordingly, no assurance can be made that Year 2000 compliance can
be achieved without additional unanticipated expenditures.  It is not
possible at this time to quantify the estimated future costs due to possible
business disruption caused by vendors, suppliers, customers or even the
possible loss of electric power or phone service; however, such costs could
be substantial.  As a result of the Year 2000 project, the Company has not
had any material delay regarding its information systems projects.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

        This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Reform Act
of 1995, and is including this statement for purposes 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 generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project" or similar expressions.  The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain.  Factors which could have a material
adverse affect on the operations and future prospects of the Company and its
subsidiaries include, but are not limited to, changes in: interest rates,
general economic conditions, legislative/regulatory changes, monetary and
fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles, policies and guidelines.  These risks and
uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements.  Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange
Commission.

ITEM 7A.  QUANTITATIVE AND QUALITITAVE DISCLOSURES ABOUT MARKET RISK

        See pages 24 through 25.
        
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements begin on page 28.
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<PAGE>



                       BANKILLINOIS FINANCIAL CORPORATION
                                 AND SUBSIDIARY

                       Consolidated Financial Statements

                        December 31, 1998, 1997 and 1996

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<PAGE>
                       BANKILLINOIS FINANCIAL CORPORATION
                                 AND SUBSIDIARY

                               TABLE OF CONTENTS





INDEPENDENT AUDITOR'S REPORT                                                  30
                                                                                
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets                                                   31
Consolidated Statements of Income                                             32
Consolidated Statements of Changes in Stockholders' Equity                    33
Consolidated Statements of Cash Flows                                         34
Notes to Consolidated Financial Statements                                 35-50

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<PAGE>




                          INDEPENDENT AUDITOR'S REPORT



The Board of Directors 
BankIllinois Financial Corporation
Champaign, Illinois

We have audited the accompanying consolidated balance sheets of BankIllinois
Financial Corporation (formerly known as Central Illinois Financial Co.,
Inc.) and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders  equity, and cash
flows for each of the three years in the period ended December 31, 1998. 
These consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.  

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of BankIllinois Financial Corporation and subsidiary as of December 31, 1998
and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.





Champaign, Illinois
March 24, 1999

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<PAGE>

BANKILLINOIS FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 1998 and 1997
(in thousands, except share data)

<TABLE>
                                                                     1998         1997  
<S>                                                               <C>          <C>
ASSETS                                                                                  
Cash and due from banks                                            $19,080      $28,958 
Federal funds sold                                                   6,500       19,600 
         Cash and cash equivalents                                  25,580       48,558 
Investments in debt and equity securities:                                              
       Available-for-sale, at fair value                           124,055      135,317 
       Held-to-maturity, at cost (fair value of $65,581                                 
         and $18,635 at December 31, 1998 and 1997, respectively)   65,509       18,519 
       Non-marketable equity securities                              1,572        1,550 
         Total investments in debt and equity securities           191,136      155,386 
Mortgage loans held for sale                                        10,951        1,408 
Loans, net of allowance for loan losses of $5,279 and                                   
         $5,306 at December 31, 1998 and 1997, respectively        287,306      309,729 
Premises and equipment                                              12,195       11,253 
Accrued interest receivable                                          4,865        4,833 
Other assets                                                         5,340        8,199 
         Total assets                                             $537,373     $539,366 
                                                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY                                                    
Deposits:                                                                               
       Demand, non-interest bearing                                $63,002      $59,693 
       Demand, interest bearing                                    157,052      146,776 
       Savings                                                      17,748       16,623 
       Time, $100 and over                                          34,582       41,196 
       Other time                                                  137,514      152,866 
         Total deposits                                            409,898      417,154 
Short-term borrowings                                               49,963       49,857 
Federal Home Loan Bank advances                                     10,000        8,000 
Accrued interest payable                                             1,399        1,736 
Other liabilities                                                    5,406        5,289 
         Total liabilities                                         476,666      482,036 
                                                                                        
Stockholders' equity:                                                                   
       Preferred stock, no par value; 300,000 shares authorized          0            0        Common stock, $0.01 par value;
6,500,000 shares authorized;                      
         5,466,815 and 5,466,996 shares issued at December 31, 1998                     
         and 1997, respectively                                         55           55 
       Paid in capital                                              28,953       28,880 
       Retained earnings                                            33,300       29,006 
       Accumulated other comprehensive income                        1,033          298 
                                                                    63,341       58,239 
       Less:  treasury stock, at cost, 137,976 and 69,053 shares at                     
       December 31, 1998 and 1997, respectively                     (2,634)        (909)
         Total stockholders' equity                                 60,707       57,330 
         Total liabilities and stockholders' equity               $537,373     $539,366 
                                                                                        
See accompanying notes to consolidated financial statements.                            
</TABLE>

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<PAGE>

BANKILLINOIS FINANCIAL CORPORATION
AND SUBSIDIARY
                                                          
Consolidated Statements of Income
                                                      
Years Ended December 31, 1998, 1997 and 1996
(in thousands, except share data)

<TABLE>
                                                                          1998      1997      1996  
<S>                                                                   <C>       <C>       <C>
Interest income:                                                                                    
       Loans and fees on loans                                          $27,495   $26,486   $26,037 
       Investments in debt and equity securities:                                                   
               Taxable                                                    9,115     9,796     6,797 
               Tax-exempt                                                   459       302       380 
       Federal funds sold and interest-bearing deposits                     945       762     1,874 
                          Total interest income                          38,014    37,346    35,088 
                                                                                                    
Interest expense:                                                                                   
       Demand, savings, and other time deposits                          13,810    14,466    13,558 
       Time deposits $100 and over                                        2,178     2,077     1,662 
       Short-term borrowings                                              2,401     2,275     2,006 
       Federal Home Loan Bank advances                                      573       592       599 
                          Total interest expense                         18,962    19,410    17,825 
                          Net interest income                            19,052    17,936    17,263 
Provision for loan losses                                                   535       465       375 
                          Net interest income after provision 
                              for loan losses                            18,517    17,471    16,888 
                                                                                                    
Non-interest income:                                                                                
       Service charges and fees                                           1,705     1,866     1,839 
       Trust fees                                                         2,198     2,026     1,931 
       Security transactions, net                                            60        38        (4)
       Gain on sales of loans, net                                          594       271       266 
       Other                                                                378       275       259 
                          Total non-interest income                       4,935     4,476     4,291 
                                                                                                    
Non-interest expense:                                                                               
       Salaries and employee benefits                                     8,283     7,742     7,795 
       Occupancy                                                          1,382     1,519     1,511 
       Equipment                                                            899       920       967 
       Data processing fees                                                 737       733       716 
       Advertising and marketing                                            555       558       822 
       Office supplies                                                      469       506       591 
       Federal deposit insurance premiums                                    49        48         2 
       Other                                                              2,083     1,862     2,091 
                          Total non-interest expense                     14,457    13,888    14,495 
                                                                                                    
                          Income before income taxes                      8,995     8,059     6,684 
Income taxes                                                              2,921     2,659     2,183 
                                                                                                    
                          Net Income                                     $6,074    $5,400    $4,501 
                                                                                                    
Per share data:                                                                                     
       Basic earnings per share                                           $1.13     $1.00     $0.83 
                                                                                                    
       Weighted average shares of common stock outstanding            5,381,720 5,400,631 5,445,294
                                                                                                    
       Diluted earnings per share                                         $1.09     $0.98     $0.81 
       Weighted average shares of common stock and dilutive                                         
               potential common shares outstanding                    5,556,155 5,524,112 5,536,763
                                                                                                    
See accompanying notes to consolidated financial statements.
</TABLE>

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<PAGE>

<TABLE>
BANKILLINOIS FINANCIAL CORPORATION 
AND SUBSIDIARY
                                                                                                                      
Consolidated Statements of Changes in Stockholders' Equity
                                                                                                                      
Years Ended December 31, 1998, 1997, and 1996
(in thousands, except share data)
                                                                               ACCUMULATED
                                                                                   OTHER          
                                                                                  COMPRE-                              
                                          COMMON STOCK     PAID IN    RETAINED   HENSIVE     TREASURY STOCK 
                                        SHARES    AMOUNT   CAPITAL    EARNINGS    INCOME    SHARES    AMOUNT     TOTAL
<S>                                   <C>           <C>    <C>        <C>        <C>      <C>       <C>        <C>
Balance, January 1, 1996, as                                                                                           
   previously reported                5,207,088     $52    $23,000    $25,244      $112         -        $-    $48,408 
Restated for 5% stock                                                                                       
   dividend-1998                        260,354       3      5,724     (5,727)        -         -         -          - 
Balance, January 1, 1996, as                                                                      
  restated                            5,467,442      55     28,724     19,517       112         -         -     48,408 
Comprehensive Income:                                                                                       
   Net income                                 -       -          -      4,501         -         -         -      4,501 
   Unrealized gain (loss) on                                                                                
     securities available-for-sale                                                                          
     arising this year,                                                                                                
     net of taxes of ($113)                   -       -          -          -      (223)        -         -       (223)
   Reclassification adjustment,                                                                   
     net of tax of $1                         -       -          -          -         2         -         -          2 
   Comprehensive Income                                                                               4,280 
Fractional shares of common                                                                       
   stock purchased following                                                                      
   stock dividend                          (266)      -         (3)         -         -         -         -         (3)
Stock appreciation rights                     -       -         60          -         -         -         -         60 
Treasury stock transactions, net              -       -          -          -         -    51,156      (649)      (649)
Balance, December 31, 1996            5,467,176      55     28,781     24,018      (109)   51,156      (649)    52,096 
Comprehensive Income:                                                                                       
   Net income                                 -       -          -      5,400         -         -         -      5,400 
   Unrealized gain (loss) on                                                                                
     securities available-for-sale                                                                          
     arising this year,                                                                                                
     net of taxes of $215                     -       -          -          -       420         -         -        420 
   Reclassification adjustment,                                                                   
     net of tax of ($7)                       -       -          -          -       (13)        -         -        (13)
   Comprehensive Income                                                                               5,807 
Fractional shares of common                                                                       
   stock purchased following                                                                      
   stock dividend                          (180)      -         (3)         -         -         -         -         (3)
Stock appreciation rights                     -       -        108          -         -         -         -        108 
Cash dividends ($0.08                                                                                                  
   per share)                                 -       -          -       (412)        -         -         -       (412)
Treasury stock transactions, net              -       -         (6)         -         -    17,897      (260)      (266)
Balance, December 31, 1997            5,466,996      55     28,880     29,006       298    69,053      (909)    57,330 
Comprehensive Income:                                                                                       
   Net income                                 -       -          -      6,074         -         -         -      6,074 
   Unrealized gain (loss) on                                                                                
     securities available-for-sale                                                                          
     arising this year,                                                                                                
     net of taxes of $393                     -       -          -          -       765         -         -        765 
   Reclassification adjustment,                                                                   
     net of tax of ($15)                      -       -          -          -       (30)        -         -        (30)
   Comprehensive Income                                                                               6,809 
Fractional shares of common                                                                       
   stock purchased following                                                                      
   stock dividend                          (181)      -         (4)         -         -         -         -         (4)
Stock appreciation rights                     -       -         77          -         -         -         -         77 
Cash dividends ($0.32                                                                                                  
   per share)                                 -       -          -     (1,699)        -         -         -     (1,699)
Treasury stock transactions, net              -       -          -        (81)        -    68,923    (1,725)    (1,806)
Balance, December 31, 1998            5,466,815     $55    $28,953    $33,300    $1,033   137,976   ($2,634)   $60,707 

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

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<PAGE>

BANKILLINOIS FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 1998, 1997, and 1996
(in thousands)

<TABLE>                                                                                  1998      1997      1996  
<S>                                                                                    <C>       <C>       <C>
Cash flows from operating activities:                                                                              
   Net income                                                                           $6,074    $5,400    $4,501 
   Adjustments to reconcile net income to net cash                                                                 
         provided by (used in) operating activities:                                                               
   Depreciation and amortization                                                         1,061     1,144     1,157 
   Amortization of bond premiums, net                                                       77        25       140 
   Provision for loan losses                                                               535       465       375 
   Deferred income taxes                                                                   (49)      (27)      417 
   (Gain) loss on security transactions, net                                               (60)      (38)        4 
   Gain on sales of loans, net                                                            (594)     (271)     (266)
   Increase in accrued interest receivable                                                 (32)     (316)      (74)
   (Decrease) increase in accrued interest payable                                        (337)      160      (388)
   Other, net                                                                              133        44      (203)
   Stock appreciation rights                                                                77       108        60 
   Proceeds from sales of loans originated for sale                                     67,153    24,138    17,726 
   Loans originated for sale                                                           (76,102)  (23,998)  (17,491)
                      Net cash provided by (used in) operating activities               (2,064)    6,834     5,958 
                                                                                                                   
Cash flows from investing activities:                                                                              
   Net decrease (increase) in loans                                                     21,862   (32,236)   38,430 
   Proceeds from maturities and calls of investments in debt securities:                                 
      Held-to-maturity                                                                   9,291    18,346    15,053 
      Available-for-sale                                                                74,620    50,493    34,437 
   Proceeds from sales of investments in debt and equity securities:                                     
      Available-for-sale                                                                     0         0     2,000 
      Non-marketable                                                                        48       145       723 
   Purchases of investments in debt and equity securities:                                                         
      Held-to-maturity                                                                 (56,369)  (15,305)  (16,038)
      Available-for-sale                                                               (72,989)  (59,134)  (94,212)
      Non-marketable                                                                       (70)        0         0 
   Principal paydowns from mortgage-backed securities:                                         
      Held-to-maturity                                                                     100       257       446 
      Available-for-sale                                                                10,716     3,933       926 
   Purchases of premises and equipment                                                    (857)   (1,642)     (854)
   Proceeds from sale of premises and equipment                                          1,380         1        15 
                      Net cash used in investing activities                            (12,268)  (35,142)  (19,074)
                                                                                                                   
Cash flows from financing activities:                                                                              
   Net (decrease) increase in deposits                                                  (7,256)   13,024   (15,027)
   Net increase in short-term borrowings                                                   106     5,916     7,668 
   Net increase (decrease) in Federal Home Loan Bank advances                            2,000    (1,000)        0 
   Cash dividends paid                                                                  (1,686)        0      (378)
   Treasury stock transactions, net                                                     (1,806)     (266)     (649)
   Fractional shares purchased following stock dividend                                     (4)       (3)       (3)
                      Net cash provided by (used in) financing activities               (8,646)   17,671    (8,389)
                           Net decrease in cash and cash equivalents                   (22,978)  (10,637)  (21,505)
Cash and cash equivalents at beginning of year                                          48,558    59,195    80,700 
Cash and cash equivalents at end of year                                               $25,580   $48,558   $59,195 
                                                                                                                   
Supplemental disclosures of cash flow information:                                                                 
   Cash paid during the year for:                                                                                  
     Interest                                                                          $19,299   $19,250   $18,213 
     Income taxes                                                                        2,949     2,060     1,748 
   Transfer of mortgage loans held-for-sale to loans                                         0         0     8,175 
   Disposal of property and equipment subject to valuation allowance                       304         0        71 
   Change in unrealized gain (loss) on securities available-for-sale                    (1,114)     (615)      333 
   Change in deferred taxes attributable to unrealized gain (loss) on securities               
        available-for-sale                                                                 379       208      (112)
   Real estate acquired through or in lieu of foreclosure                                   26     2,323       608 
   Property plant and equipment transferred from other real estate                       2,500         0         0 
   Dividends declared not paid                                                             425       412         0 
                                                                                                                   
See accompanying notes to consolidated financial statements.
</TABLE>

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<PAGE>
                       BANKILLINOIS FINANCIAL CORPORATION
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements



(1) ORGANIZATION
    
        Effective February 27, 1998, the Company changed its corporate name to
           BankIllinois Financial Corporation.  Prior to that date, it
           operated under the name of Central Illinois Financial Co., Inc.

        On September 14, 1998, BankIllinois Trust Company, a former subsidiary
           of BankIllinois Financial Corporation, was merged into
           BankIllinois.

        The Company and its subsidiary provide a full range of banking
           services to individual and corporate customers located within
           Champaign, Illinois, and the surrounding communities. 
           BankIllinois is subject to competition from other financial
           institutions and nonfinancial institutions providing financial
           products.  Additionally, the Company and its subsidiary are
           subject to the regulations of certain regulatory agencies and
           undergo periodic examinations by those regulatory agencies.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

    (a) PRINCIPLES OF CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION

           The consolidated financial statements include the accounts of the
              Company and its wholly owned subsidiary, BankIllinois.  Sig-
              nificant intercompany accounts and transactions have been
              eliminated in consolidation.

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

           Effective January 1, 1998, the Company adopted Statement of
              Financial Accounting Standards No. 130, which was issued in
              June 1997.  Statement No. 130 establishes new rules for the
              reporting and display of comprehensive income and its
              components, but has no effect on the Company's net income or
              total stockholders' equity.  Statement No. 130 requires
              unrealized gains and losses on the Company's available-for-sale
              securities which prior to adoption were reported separately in
              stockholders' equity to be included in comprehensive income. 
              Prior year financial statements have been reclassified to
              conform to the requirements of Statement No. 130.

           Effective January 1, 1998, the Company adopted Statement of
              Financial Accounting Standards No. 131, "Disclosures about
              Segments of an Enterprise and Related Information."  Statement
              No. 131 requires a publicly-held entity to disclose financial
              and other descriptive information about all of its reportable
              operating segments.  The Statement requires disclosure of net
              income or loss, certain specific revenue and expense items, and
              assets for each segment presented and disclosure of a
              reconciliation of this information with the corresponding
              amounts recognized in the financial statements of the entity. 
              This Statement also requires disclosure of other pertinent
              segment information, including the products and services
              provided by its operating segments and the method by which the
              operating segments were determined.

           Based on the Company's approach to decision making, it has decided
              that its business is comprised of a single segment and that
              Statement No. 131 therefore has no impact on its consolidated
              financial statements.

    (b) INVESTMENTS IN DEBT AND EQUITY SECURITIES

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

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

           A decline in the market value of any available-for-sale or held-
              to-maturity security below cost that is deemed other than
              temporary is charged to earnings and results in the establish-
              ment of a new cost basis for the security.

           Non-marketable equity securities, including BankIllinois' required
              investment in the capital stock of the Federal Home Loan Bank,
              are carried at cost, as fair values are not readily
              determinable.

    (c) LOANS

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

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

           Loan origination fees and costs are deferred at origination and
              are recognized over the life of the loan as an adjustment to
              yield.

           Mortgage loans held for sale are carried at the lower of aggregate
              cost or estimated market value.  Net unrealized losses are
              recognized in a valuation allowance by charges to income. 
              Gains or losses on sales of loans held for sale are computed
              using the specific-identification method and are reflected in
              income at the time of sale.

    (d) ALLOWANCE FOR LOAN LOSSES

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

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

           Loans are categorized as "impaired" when, based on current
              information or events, it is probable that the Company will be
              unable to collect all amounts due, including principal and
              interest, in accordance with the contractual terms of the loan
              agreement.

           The Company reviews all non-accrual and substantially delinquent
              loans, as well as problem loans identified by management, for
              impairment as defined above.  A specific reserve amount will be
              established for impaired loans in which the present value of
              the expected cash flows to be generated is less than the amount
              of the loan recorded on the Company's books.  As an alternative
              to discounting, the Company may use the "fair value" of any
              collateral supporting a collateral-dependent loan in reviewing
              the necessity for establishing a specific loan loss reserve
              amount.  Specific reserves will be established for accounts
              having a collateral deficiency estimated to be $50,000 or more. 
              The Company's general reserve is maintained at an adequate
              level to cover accounts having a collateral deficiency of less
              than $50,000.  

           Loans restructured prior to December 1994 and loans evaluated as
              groups or homogeneous pools of loans will be excluded from this
              analysis.
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<PAGE>

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

    (e) PREMISES AND EQUIPMENT

           Premises and equipment are stated at cost less accumulated
              depreciation and amortization.  Depreciation and amortization
              applicable to furniture and equipment and buildings and lease-
              hold improvements is charged to occupancy expense using
              straight-line and accelerated methods over the estimated useful
              lives of the assets.  Such lives are estimated to be three to
              seven years for furniture and equipment and five to fifty years
              for buildings and leasehold improvements.  Maintenance and
              repairs are charged to operations as incurred.

    (f) OTHER REAL ESTATE

           Other real estate, included in other assets in the accompanying
              consolidated balance sheets, is initially recorded at fair
              value.  If, subsequent to foreclosure, the fair value is less
              than the carrying amount, the difference is recorded as a
              valuation allowance through a charge to income.  Subsequent
              increases in fair value are recorded through a reversal of the
              valuation allowance, but not below zero.  Expenses incurred in
              maintaining the properties are charged to operations.

    (g) MORTGAGE SERVICING RIGHTS

           The cost of mortgage servicing rights is amortized in proportion
              to, and over the period of, estimated net servicing revenues. 
              Impairment of mortgage servicing rights is assessed based on
              the fair value of those rights.  Fair values are estimated
              using discounted cash flows based on a current market interest
              rate.  For purposes of measuring impairment, the rights are
              stratified primarily based on the contractual maturities of the
              underlying mortgages.  The amount of impairment recognized is
              the amount by which the capitalized mortgage servicing rights
              for a stratum exceed their fair value.

    (h) INCOME TAXES

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

    (i) EARNINGS PER SHARE

           Basic earnings per share is computed by dividing net income by the
              weighted average number of common stock shares outstanding.

           Diluted earnings per share is computed by dividing net income by
              the weighted average number of common stock and dilutive
              potential common shares outstanding.  Options to purchase
              shares of the Company's common stock and stock appreciation
              rights, as discussed in note 14 to the consolidated financial
              statements, are the only dilutive potential common shares.  The
              weighted average number of dilutive potential common shares is
              calculated using the treasury stock method.

    (j) CASH AND CASH EQUIVALENTS

           For purposes of the consolidated statements of cash flows, cash
              and cash equivalents include cash and due from banks and
              federal funds sold.  Generally, federal funds are sold for one-
              day periods.

    (k) STOCK DIVIDEND

           During May 1996, 1997 and 1998, the Company effected 5% stock
              dividends.  All references in the accompanying financial
              statements to number of shares and per share amounts have been
              retroactively restated to reflect the stock dividends.

Page 37
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<PAGE>
    (l) RECLASSIFICATION

           Certain amounts in the 1997 and 1996 consolidated financial
              statements have been reclassified to conform with the 1998
              presentation.  Such reclassifications have no effect on previ-
              ously reported net income.

    (m) EMERGING ACCOUNTING STANDARDS

           In June 1998, the Statement of Financial Accounting Standards No.
              133, "Accounting for Derivative Instruments and Hedging
              Activities," was issued, which is required to be adopted in
              years beginning after June 15, 1999.  The Statement permits
              early adoption as of the beginning of any fiscal quarter after
              its issuance.  The Company expects to adopt the Statement
              effective January 1, 2000.  The Statement will require the
              Company to recognize all derivatives on the balance sheet at
              fair value.  Derivatives that are not hedges must be adjusted
              to fair value through income.  If the derivative is a hedge,
              depending on the nature of the hedge, changes in the fair value
              of derivatives will either be offset against the change in fair
              value of the hedged assets, liabilities, or firm commitments
              through earnings or recognized in other comprehensive income
              until the hedged item is recognized in earnings.  The
              ineffective portion of a derivative's change in fair value will
              be immediately recognized in earnings.

           Management does not anticipate that the adoption of the new
              Statement will have a significant effect on the Company's
              earnings or financial position.

(3) CASH AND DUE FROM BANKS

        The compensating balances held at correspondent banks was $522,000 and
           $1,086,000 at December 31, 1998 and 1997, respectively. 
           BankIllinois maintains such compensating balances with
           correspondent banks to offset charges for services rendered by
           those banks.  In addition, BankIllinois was required by the
           Federal Reserve Bank to maintain reserves in the form of cash on
           hand or balances at the Federal Reserve Bank.  The balance of
           reserves required to be held was $6,975,000 and $5,465,000 at
           December 31, 1998 and 1997, respectively.

(4) INVESTMENTS IN DEBT AND EQUITY SECURITIES

        The amortized cost and fair values of investments in debt and equity
           securities (in thousands) were as follows:

<TABLE>
        AVAILABLE-FOR-SALE
                                                               GROSS        GROSS            
                                               AMORTIZED  UNREALIZED   UNREALIZED        FAIR
                                                    COST       GAINS       LOSSES       VALUE
        <S>                                     <C>           <C>            <C>     <C>
        December 31, 1998                                                                    
           U.S. Treasury and other                                                           
                    government agencies         $113,129      $1,420          $11    $114,538
           Mortgage-backed securities              5,954          13           23       5,944
           Other                                   3,407         281          115       3,573
                                                $122,490      $1,714         $149    $124,055
                                                                                             
        December 31, 1997                                                                    
           U.S. Treasury and other                                                           
                    government agencies         $127,690        $470         $152    $128,008
           Mortgage-backed securities              6,264          15           37       6,242
           Other                                     912         155            0       1,067
                                                $134,866        $640         $189    $135,317
</TABLE>

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<PAGE>

<TABLE>
HELD-TO-MATURITY
                                                               GROSS        GROSS            
                                               AMORTIZED  UNREALIZED   UNREALIZED        FAIR
                                                    COST       GAINS       LOSSES       VALUE
        <S>                                      <C>            <C>          <C>      <C>
        December 31, 1998                                                                    
           U.S. Treasury and other                                                           
                    government agencies          $32,728         $83         $148     $32,663
           Obligations of states and                                                         
                    political subdivisions        18,614         204           54      18,764
           Mortgage-backed securities             14,167           9           22      14,154
                                                 $65,509        $296         $224     $65,581
                                                                                             
        December 31, 1997                                                                    
           U.S. Treasury and other                                                           
                    government agencies          $11,512         $36           $0     $11,548
           Obligations of states and                                                         
                    political subdivisions         7,007          80            0       7,087
                                                 $18,519        $116           $0     $18,635
</TABLE>

        Proceeds from sales of investments in debt and equity securities
           during 1998, 1997 and 1996 were $48,000, $145,000 and $2,723,000,
           respectively.  Proceeds from maturities and calls of investments
           in debt and equity securities during 1998, 1997 and 1996 were
           $83,911,000, $68,839,000 and $49,490,000, respectively.  Realized
           gains and losses (in thousands) on sales, maturities and calls for
           the years ended December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
                                      1998      1997      1996 
        <S>                            <C>       <C>       <C>
        Gross gains                    $61       $38        $0 
        Gross losses                    (1)        0        (4)
        Net gains (losses)             $60       $38       ($4)
</TABLE>

        Investments in debt and equity securities with a carrying value of
           $109,499,000 and $91,474,000 were pledged at December 31, 1998 and
           1997, respectively, to secure public deposits, securities sold
           under agreements to repurchase, and for other purposes as required
           by law.

        The amortized cost and fair value of investments in debt and equity
           securities (in thousands) at December 31, 1998, by contractual
           maturity, are shown below.  Expected maturities will differ from
           contractual maturities because borrowers may have the right to
           call or prepay obligations with or without call or prepayment
           penalties.  
<TABLE>
                                                       AVAILABLE-FOR-SALE          HELD-TO-MATURITY
                                                      AMORTIZED      FAIR       AMORTIZED      FAIR
                                                           COST     VALUE            COST     VALUE
        <S>                                            <C>       <C>              <C>       <C>
        Due in one year or less                         $40,919   $41,226          $4,391    $4,418
        Due after one year through five years            66,719    67,966          24,942    24,990
        Due after five years through ten years            8,898     8,919          20,214    20,171
        Due after ten years                                   0         0           1,795     1,848
                                                        116,536   118,111          51,342    51,427
        Mortgage-backed securities                        5,954     5,944          14,167    14,154
                      Total debt securities            $122,490  $124,055         $65,509   $65,581
</TABLE>

(5) LOANS

        A summary of loans (in thousands), by classification, at December 31,
           1998 and 1997 is as follows:

                                                           1998      1997 
        Commercial, financial, and agricultural        $112,265  $121,927
        Real estate                                     132,919   141,091
        Installment and consumer                         47,401    52,017
                                                        292,585   315,035
        Less:                                                            
           Allowance for loan losses                      5,279     5,306
        
                                                       $287,306  $309,729

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

        During 1998, 1997 and 1996, the Company sold approximately
           $67,153,000, $24,138,000 and $17,726,000, respectively, of
           residential mortgage loans in the secondary market, primarily to
           the NationsBanc and Fannie Mae.  Gross gains of approximately
           $642,000, $275,000 and $315,000, and gross losses of approximately
           $48,000, $4,000 and $49,000, were realized on the sales during
           1998, 1997 and 1996, respectively.

        Mortgage loans serviced for others are not included in the
           accompanying consolidated financial statements.  The unpaid
           balances of these loans consisted of the following (in thousands)
           at December 31, 1998 and 1997:

<TABLE>
                                                          1998      1997 
           <S>                                          <C>      <C>
           Fannie Mae                                   $68,137  $94,104 
           Freddie Mac                                    1,944    3,381 
           Illinois Housing Development Authority         3,146    3,848 
</TABLE>

        In the normal course of business, loans are made to directors,
           executive officers, and principal stockholders of the Company and
           to parties which the Company or its directors, executive officers,
           and stockholders have the ability to significantly influence its
           management or operating policies (related parties).  The terms of
           these loans, including interest rates and collateral, are similar
           to those prevailing for comparable transactions with other custom-
           ers and do not involve more than a normal risk of collectibility. 
           Activity associated with loans  (in thousands) made to related
           parties during 1998 was as follows:

<TABLE>
                                                         1998  
        <S>                                            <C>
        Balance, January 1                             $11,053 
        New loans                                        1,532 
        Repayments                                      (4,222)
        Changes in relationship                         (1,862)
        Balance, December 31                            $6,501 
</TABLE>

        Activity in the allowance for loan losses (in thousands) for 1998,
           1997 and 1996 was as follows:

<TABLE>
                                                          1998      1997      1996 
        <S>                                             <C>       <C>       <C>
        Balance, beginning of year                      $5,306    $5,587    $5,882 
        Provision charged to expense                       535       465       375 
        Loans charged off                                 (811)     (998)   (1,538)
        Recoveries on loans previously charged off         249       252       868 
        Balance, end of year                            $5,279    $5,306    $5,587 
</TABLE>

        The following table presents summary data on nonaccrual and other
           impaired loans (in thousands) at December 31, 1998, 1997 and 1996:

<TABLE>
                                                          1998     1997  
        <S>                                               <C>     <C>
        Impaired loans on nonaccrual                       $720   $1,793 
        Impaired loans continuing to accrue interest          0      172 
        Total impaired loans                               $720   $1,965 
        Other non-accrual loans not classified                           
            as impaired                                     406      415 
        Allowance for loan losses on impaired loans         377      773 
                                                                         
        Impaired loans for which there is no related                     
            allowance for loan losses                         0        0 
        Average recorded investment in impaired                          
            loans                                         2,240    3,129 
        Interest income recognized from impaired                         
            loans                                             5       98 
        
        Cash basis interest income recognized from                       
            impaired loans                                   18        6 
</TABLE>

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<PAGE>

(6) PREMISES AND EQUIPMENT

        A summary of premises and equipment (in thousands) at December 31,
           1998 and 1997 is as follows:

<TABLE>
                                                          1998      1997 
        <S>                                             <C>      <C>
        Land                                             $2,865   $3,279 
        Furniture and equipment                           5,269    5,475 
        Buildings and leasehold improvements             13,762   13,390 
                                                         21,896   22,144 
        Less accumulated depreciation and amortization    9,701   10,891 
                                                        $12,195  $11,253 
</TABLE>

        Depreciation and amortization expense was $1,035,000, $1,105,000 and
           $1,114,000 for 1998, 1997 and 1996, respectively.

        The Company leases various operating facilities and equipment under
           noncancellable operating lease arrangements.  These leases expire
           at various dates through November 2007 and have renewal options to
           extend the lease terms for various dates through November 2017. 
           The rental expense for these operating leases was $222,000,
           $199,000 and $226,000 in 1998, 1997 and 1996, respectively.

        Minimum annual rental payments required under the operating leases (in
           thousands), which have initial or remaining terms in excess of one
           year at December 31, 1998 are as follows:
        
        1999                                               $172
        2000                                                148
        2001                                                148
        2002                                                148
        2003                                                 42
        Thereafter                                          113

        As a result of the merger between BankIllinois Financial Co. and
           Central Illinois Financial Corporation, certain banking facilities
           were deemed to be unnecessary for the ongoing operations of the
           merged entity.  Accordingly, premises and equipment was identified
           to be disposed of and a charge of $375,000 was recorded to other
           non-interest expense in 1995 to reduce the book value of these
           assets.  During 1996, certain data processing equipment was
           disposed of.  During March 1998, the remaining identified property
           was sold and an additional loss of $246,000 was recognized.

(7) OTHER REAL ESTATE OWNED

        On January 24, 1994, the Company entered into an agreement to sell the
           BankIllinois Executive Center.  During 1997, the borrower
           defaulted on the loan and approximately $1,834,000 was transferred
           to other real estate.  Additionally, approximately $822,000 of
           improvements were completed on this office building.  During
           December 1998, the building was written down to market value and
           transferred to premises and equipment.

(8) DEPOSITS

        As of December 31, 1998, the scheduled maturities of time deposits (in
           thousands) were as follows:

        1999                                            $96,067
        2000                                             31,484
        2001                                             42,788
        2002                                                898
        2003                                                859

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<PAGE>
(9) SHORT-TERM BORROWINGS

        A summary of short-term borrowings (in thousands) at December 31, 1998
           and 1997 is as follows:

<TABLE>
                                                                    1998      1997 
        <S>                                                       <C>      <C>
        Federal funds purchased                                    $4,550   $8,400 
        Securities sold under agreements to repurchase:                            
           U.S. Treasury and other government agency securities                    
              with carrying values of $81,116,000 and $64,559,000                  
              and market values of $81,129,000 and $64,588,000                     
              at December 31, 1998 and 1997, respectively          45,413   41,457 
                                                                  $49,963  $49,857 
</TABLE>

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

<TABLE>
                                                             1998     1997      1996 
        <S>                                                <C>      <C>       <C>
        Federal funds purchased:                                                      
           Average daily balance                            $3,881   $3,763    $4,267 
           Maximum balance at month-end                      4,840    9,100     7,650 
           Weighted average interest rate at year-end        3.44%    5.15%     6.99% 
           Weighted average interest rate for the year       5.11%    5.35%     5.32% 
                                                                                      
        Securities sold under agreements to repurchase:                               
           Average daily balance                           $44,806  $39,221   $35,331 
           Maximum balance at month-end                     53,080   41,457    38,277 
           Weighted average interest rate at year-end        4.38%    5.43%     5.20% 
           Weighted average interest rate for the year       4.92%    5.29%     5.04% 
</TABLE>

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

(10)    FEDERAL HOME LOAN BANK ADVANCES

        A summary of Federal Home Loan Bank (FHLB) advances (dollars in
           thousands) at December 31, 1998 is as follows:

                                                                 WEIGHTED
                                                                  AVERAGE
                                                         AMOUNT      RATE
        Maturing in year ending:                                         
           1999                                          $3,000     6.51%
           2000                                           1,000     6.57%
           2001                                           1,000     6.76%
           2008                                           5,000     5.40%
                                                        $10,000     5.99%

        The terms of a security agreement with the FHLB require BankIllinois
           to pledge as collateral for advances both qualifying first
           mortgage loans in an amount equal to at least 167% of these
           advances and all stock of the FHLB.  Advances are subject to
           restrictions or penalties in the event of prepayment. 
           BankIllinois had a total remaining borrowing capacity with the
           FHLB of approximately $7,489,000 at December 31, 1998 at a rate
           equal to the FHLB current advance rates.

(11)    LINE OF CREDIT

        The Company has an unsecured line of credit of $2,000,000 from a third
           party lender.  As of December 31, 1998, the entire line was
           available.

(12)    INCOME TAXES

        Federal income tax expense (in thousands) for 1998, 1997 and 1996 is
           summarized as follows:

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<PAGE>
<TABLE>
                                                         1998      1997      1996                      
           <S>                                          <C>       <C>       <C>
           Current                                      $2,970    $2,686    $1,766 
           Deferred                                        (49)      (27)      417 
           Total                                        $2,921    $2,659    $2,183 
</TABLE>

        Actual income tax expense (in thousands) for 1998, 1997 and 1996
           differ from the "expected" income taxes (computed by applying the
           maximum U.S. federal corporate income tax rate of 35% to earnings
           before income taxes) as follows:

<TABLE>
                                                          1998      1997      1996 
        <S>                                             <C>       <C>       <C>
        Computed "expected" income taxes                $3,148    $2,821    $2,339 
        Tax-exempt interest income, net of                                         
           disallowed interest expense                    (136)      (97)     (116)
        Other, net                                         (91)      (65)      (40)
                                                        $2,921    $2,659    $2,183 
</TABLE>

        The tax effects of temporary differences (in thousands) that give rise
           to significant portions of the deferred tax assets and deferred
           tax liabilities at December 31, 1998 and 1997 are as follows:

<TABLE>
                                                                    1998      1997 
        <S>                                                       <C>      <C>
        Deferred tax assets:                                                       
           Allowance for loan losses                              $1,148      $973 
           Deferred compensation                                     955       901 
           Other real estate                                         153         0 
           Severance payable                                         157       112 
           Stock appreciation rights                                 113        87 
           Other                                                     138       162 
                 Total deferred tax assets                        $2,664    $2,235 
        Deferred tax liabilities:                                                  
           Unrealized holding gain on 
                 available-for-sale securities                     ($532)    ($153)
           Premises and equipment                                   (925)     (827)
           Other real estate                                           0       (15)
           Other                                                    (577)     (280)
                 Total deferred tax liabilities                  ($2,034)  ($1,275)
                 Net deferred tax assets                            $630      $960 
</TABLE>

        A valuation allowance would be provided when it is more likely than
           not that some portion of the deferred tax assets will not be
           realized.  The Company has not established a valuation allowance
           as of December 31, 1998 or 1997, due to management's belief that
           all criteria for asset recognition have been met, including the
           existence of a history of taxes paid sufficient to support the
           realization of the deferred tax assets.

(13)    RETIREMENT PLANS

        The Company has established a profit sharing plan and a 401(k) plan
           for substantially all employees who meet the eligibility
           requirements.  The 401(k) plan allows for participants'
           contributions of up to 10% of gross salary, the first 6% of which
           is available for the Company's 50% match.  The profit sharing plan
           is non-contributory.  All contributions to the profit sharing plan
           are at the discretion of the Company.

        The Company has merged the profit sharing plan of the former Central
           Illinois Financial Corporation and the defined contribution plan
           of the former BankIllinois Financial Co., and 401(k) plans of both
           companies into the respective BankIllinois Financial Corporation
           profit sharing and 401(k) plans.  The assets of the plans were
           transferred during 1997.

        Total contributions by the Company under the retirement plans
           discussed above totaled $409,000, $386,000 and $379,000 for 1998,
           1997 and 1996, respectively.

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<PAGE>
        Certain key officers and directors participate in various deferred
           compensation or supplemental retirement agreements with the
           Company.  The Company accrues the liability for these agreements
           based on the present value of the amount the employee or director
           is currently eligible to receive.  The Company recorded expenses
           of $243,000, $236,000 and $207,000 in 1998, 1997 and 1996,
           respectively, related to these agreements.

(14)    STOCKHOLDERS' EQUITY

        SHARE PURCHASE RIGHTS PLAN
        The Company has established the BankIllinois Financial Corporation
           Rights Agreement (the Rights Agreement).  The Rights Agreement
           gives the holder of each share of common stock of the Company a
           purchase right to acquire one one-hundredth of a share of the
           authorized no par value preferred stock (Purchase Right).  The
           Rights Agreement has the effect of substantially diluting the
           percentage of ownership of certain acquirers of common stock of
           the Company unless sale or merger of the Company is approved by
           certain continuing directors of the Company.  Each Purchase Right
           trades in tandem with its respective share of common stock until
           the occurrence of certain events, in which case it would separate
           and entitle the registered holder, subject to the terms of the
           Rights Agreement, to purchase certain equity securities at a price
           below market value.

        STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
        In 1994, the former BankIllinois Financial Co. established a stock
           incentive plan, which provides for the granting of both qualified
           and non-qualified options of the Company's common stock to certain
           key managerial employees.  In 1994, the former Central Illinois
           Financial Corporation established a stock option plan which
           provides for the granting of non-qualified stock options and stock
           appreciation rights (SARs) to certain key managerial employees. 
           The option price must be at least 100% of the fair market value of
           the common stock on the date the option is granted and the maximum
           option term cannot exceed 10 years.  The plan allows for the
           granting of options in tandem with SARs.  Exercise of a SAR
           cancels the related option and entitles the holder to receive a
           payment in return, equal to the excess of the fair market value of
           the shares subject to the option surrendered over the exercise
           price.  Payment by the Company will be made in shares of the
           Company's common stock with cash paid in lieu of fractional
           shares.  The exercise of a SAR is subject to all of the terms and
           conditions of the related option.  As of December 31, 1997, all of
           these options were fully vested.

        In 1996, BankIllinois Financial Corporation established a stock
           incentive plan, which provides for the granting of options of the
           Company's common stock to certain directors, officers and
           employees.  This plan provides for the granting of both qualified
           and non-qualified options which vest and thus become exercisable
           ratably over a three-year period from the date granted.  All
           options granted subsequent to January 1, 1996 were issued from the
           1996 plan.

        The following is a summary of the changes in options outstanding under
           the stock incentive and stock option plans:

<TABLE>
                                                             1998                  1997                   1996      
                                                               WEIGHTED              WEIGHTED               WEIGHTED
                                                                AVERAGE               AVERAGE                AVERAGE
                                                               EXERCISE              EXERCISE               EXERCISE     

  
                                                       SHARES     PRICE       SHARES    PRICE       SHARES     PRICE
        <S>                                           <C>         <C>        <C>        <C>        <C>         <C>
        Options outstanding, beginning                                                                              
             of year                                  375,650     $8.23      289,918    $6.48      290,516     $6.48
        Granted ($13.94-$19.52 per share)              81,900     19.52       87,080    14.06            0         0
        Exercised                                     (20,834)    10.26       (1,348)    8.01         (598)     8.01
        Options forfeited                              (3,599)    15.22            0        0            0         0
        Options outstanding, end of year              433,117    $10.21      375,650    $8.23      289,918     $6.48
                                                                                                                    
        Options exercisable, end of year              380,075     $9.15      335,054    $7.54      287,146     $6.46
                                                                                                                    
        Weighted average fair value of                                                                              
           options granted                                        $4.92                 $5.49                    N/A
</TABLE>

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<PAGE>
<TABLE>
                           OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                       WEIGHTED                                             
                        AVERAGE       WEIGHTED    WEIGHTED
                      REMAINING        AVERAGE     AVERAGE
          EXERCISE       NUMBER    CONTRACTUAL    EXERCISE            NUMBER    EXERCISE
             PRICE  OUTSTANDING           LIFE       PRICE       OUTSTANDING       PRICE
             <C>        <C>               <C>       <C>              <C>           <C>
             $6.21      244,608           5.00       $6.21           244,608       $6.21
              8.01       31,602           6.00        8.01            31,602        8.01
             13.94       45,187           2.74       13.94            28,472       13.94
             14.29       30,870           3.25       14.29            30,870       14.29
             19.52       80,850           3.47       19.52            44,523       19.52
                        433,117           4.43      $10.21           380,075       $9.15
</TABLE>

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

<TABLE>
                                                         1998      1997       1996  
        <S>                                             <C>       <C>          <S>
        Number of options granted                       81,900    87,080       N/A
        Risk-free interest rate                           4.59%     5.58%      N/A
        Expected life, in years                           3.47      3.44       N/A
        Expected volatility                               7.57%    11.00%      N/A
        Expected dividend yield                           1.41%     1.68%      N/A
        Estimated fair value per option                  $4.92     $5.49       N/A
</TABLE>

        Grants under the stock incentive and stock option plan are accounted
           for following APB Opinion No. 25 and related interpretations. 
           Accordingly, no compensation cost has been recognized for
           incentive stock option grants under the plan.  Had compensation
           cost for all of the stock-based compensation plan been determined
           based on the fair values of awards (the method described by
           Statement No. 123), on the grant date, reported income and
           earnings per common share would have been reduced to the pro forma
           amounts shown below:

<TABLE>
                                                          1998      1997      1996 
        <S>                                              <C>       <C>         <C>
        Net income on common stock:                                                
           As reported                                   $6,074    $5,400      $N/A
           Pro forma                                      5,861     5,232       N/A
        Basic earnings per share:                                                  
           As reported                                    $1.13     $1.00       N/A
           Pro forma                                       1.09      0.97       N/A
        Diluted earnings per share:                                                
           As reported                                    $1.09     $0.98       N/A
           Pro forma                                       1.05      0.95       N/A
</TABLE>

        At December 31, 1998, 12,876 SARs remained outstanding.

(15)    DIVIDEND RESTRICTIONS

        Banking regulations and capital guidelines limit the amount of
           dividends that may be paid by banks.  Retained earnings of
           BankIllinois available for payment of dividends, subject to
           maintenance of minimum capital requirements, was $4,631,000 at
           December 31, 1998.

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<PAGE>
(16)    CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

        Following are the condensed balance sheets as of December 31, 1998 and
           1997 and the related condensed statements of income and cash flows
           for 1998, 1997 and 1996 for BankIllinois Financial Corporation:

<TABLE>
                                    CONDENSED BALANCE SHEETS
                                         (in thousands)
                                                                    1998     1997 
        <S>                                                       <C>      <C>
        Assets:                                                                    
           Cash                                                    $4,179   $4,409 
           Investment in BankIllinois                              53,629   52,579 
           Investment in equity securities                          3,179      696 
           Organization costs, net                                      0       11 
           Other assets                                               337      261 
                                                                  $61,324  $57,956 
        Liabilities and stockholders' equity:                                      
           Dividends payable                                         $425     $412 
           Other liabilities                                          192      214 
           Stockholders' equity                                    60,707   57,330 
                                                                  $61,324  $57,956 
</TABLE>

<TABLE>
        
                                                                 CONDENSED STATEMENTS OF INCOME
                                                                          (in thousands)
                                                                    1998      1997      1996 
        <S>                                                        <C>      <C>       <C>
        Revenue:                                                                             
           Dividends received from subsidiary                      $6,000   $5,200    $1,000 
           Interest income on deposits                                126       48         1 
           Dividend income on securities                               14        2         0 
                                                                    6,140    5,250     1,001 
                                                                                             
        Expenses:                                                                            
           Amortization of organization costs                          11       11        11 
           Other                                                      481      502       471 
                                                                      492      513       482 
                                                                                             
                 Income before applicable income tax                                         
                    benefit and equity in undistributed                                      
                    income of subsidiary                            5,648    4,737       519 
        Applicable income tax benefit                                 119      158       163 
        Equity in undistributed income of                                                    
           subsidiary                                                 307      505     3,819 
                 Net income                                        $6,074   $5,400    $4,501 
</TABLE>

<TABLE>
                                                           CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                                                                          (in thousands)
                                                                   1998      1997      1996 
        <S>                                                       <C>       <C>       <C>
        Net income                                                $6,074    $5,400    $4,501 
                                                                                             
        Unrealized gain (loss) on securities available-for-                                  
           sale arising this year net of tax of $393, $215                                   
           and ($113) in 1998, 1997 and 1996,                                                
           respectively                                              765       420      (223)
        Less:  reclassification adjustment for gains                                         
           included in net income, net of tax of ($15),                                      
           ($7) and $1 in 1998, 1997 and 1996,                                               
           respectively                                              (30)      (13)        2 
                                                                     735       407      (221)
        Comprehensive income                                      $6,809    $5,807    $4,280
</TABLE>

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<PAGE>
<TABLE>
                                                               CONDENSED STATEMENTS OF CASH FLOWS
                                                                         (in thousands)
                                                                   1998      1997      1996 
        <S>                                                       <C>       <C>       <C>
        Cash flows from operating activities:                                                
           Net income                                             $6,074    $5,400    $4,501 
           Adjustments to reconcile net income to net                                        
              cash provided by operating activities:                                         
                 Equity in undistributed (income) of                                         
                    subsidiary                                      (307)     (505)   (3,819)
                 Amortization of organization costs                   11        11        11 
                 Stock appreciation rights                             0       108        60 
                 Other, net                                          (18)      (12)       46 
                       Net cash provided by operating                                        
                          activities                               5,760     5,002       799 
        Cash flows from investing activities:                                                
           Purchases of equity securities                         (2,496)     (495)      (91)
                       Net cash used in investing                                            
                          activities                              (2,496)     (495)      (91)
        Cash flows from financing activities:                                                
           Treasury stock transactions, net                       (1,806)     (266)     (649)
           Fractional shares purchased following                                             
              stock dividend                                          (4)       (3)       (3)
           Cash dividends paid                                    (1,684)        0      (378)
                       Net cash used in financing                                            
                          activities                              (3,494)     (269)   (1,030)
        Cash at beginning of year                                  4,409       171       493 
        Cash at end of year                                       $4,179    $4,409      $171 
</TABLE>

(17)    DISCLOSURES ABOUT FINANCIAL INSTRUMENTS

        The Company is a party to financial instruments with off-balance-sheet
           risk in the normal course of business to meet the financing needs
           of its customers.  These financial instruments include commitments
           to extend credit and standby letters of credit.  Those instruments
           involve, to varying degrees, elements of credit and interest rate
           risk in excess of amounts recognized in the consolidated balance
           sheets.  The contractual amounts of those instruments reflect the
           extent of involvement the Company has in particular classes of
           financial instruments.

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

        The following table summarizes these financial instruments and
           commitments (in thousands) at December 31, 1998 and 1997:

                                                          1998      1997 
        Financial instruments whose contract amounts                     
           represent credit risk:                                        
              Commitments to extend credit              $66,927   $63,913
              Standby letters of credit                   4,328     3,379

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

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<PAGE>
        Standby letters of credit are conditional commitments issued by the
           Company to guarantee the performance of a customer to a third
           party.  The credit risk involved in issuing letters of credit is
           essentially the same as that involved in extending loans to
           customers.  The standby letters of credit are unsecured.

        The Company does not engage in the use of interest rate swaps,
           futures, forwards or options contracts.

        Following is a summary of the carrying amounts and fair values of the
           Company's financial instruments at December 31, 1998 and 1997:

<TABLE>
                                                               1998                      1997       
                                                       CARRYING      FAIR        CARRYING      FAIR
                                                         AMOUNT     VALUE          AMOUNT     VALUE
        <S>                                            <C>       <C>             <C>       <C>
        Assets:                                                                                    
           Cash and cash equivalents                    $25,580   $25,580         $48,558   $48,558
           Investments in debt and equity securities    191,136   191,208         155,386   155,502
           Mortgage loans held-for-sale                  10,951    10,953           1,408     1,408
           Loans                                        287,306   290,227         309,729   308,078
           Accrued interest receivable                    4,865     4,865           4,833     4,833
        Liabilities:                                                                               
           Deposits                                    $409,898  $411,915        $417,154  $417,735
           Short-term borrowings                         49,963    49,976          49,857    49,869
           FHLB advances                                 10,000    10,069           8,000     8,083
           Accrued interest payable                       1,399     1,399           1,736     1,736
</TABLE>

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

           CASH AND CASH EQUIVALENTS
        The carrying value of cash and cash equivalents approximates fair
           value due to the relatively short period of time between the
           origination of the instrument and its expected realization.  

        INVESTMENTS IN DEBT AND EQUITY SECURITIES
        The fair value of investments in debt and equity securities is
           estimated based on bid prices received from securities dealers. 

        LOANS
        Fair values are estimated for portfolios of loans with similar
           financial characteristics.  Loans are segregated by type such as
           commercial, commercial real estate, residential mortgage, and
           consumer.  Each loan category is further segmented into fixed and
           adjustable rate interest terms and by performing and nonperforming
           categories.  The fair value of performing loans is calculated by
           discounting scheduled cash flows through the estimated maturity
           using estimated market discount rates equal to rates at which
           loans, similar in type, would be originated at December 31, 1998
           and 1997.  Estimated maturities are based upon the average
           remaining contractual lives for each loan classification.  Fair
           value for nonperforming loans is based on the use of discounted
           cash flow techniques.  

        ACCRUED INTEREST RECEIVABLE
        The carrying value of accrued interest receivable approximates fair
           value due to the relatively short period of time between the
           origination of the instrument and its expected realization.  
        
        DEPOSIT LIABILITIES
        The fair value of deposits with no stated maturity, such as non-
           interest-bearing and interest-bearing demand deposits and savings
           deposits is the amount payable on demand.  The fair value of time
           deposits is based on the discounted value of contractual cash
           flows.  The discount rate is estimated using rates currently
           offered for deposits of similar remaining maturities.  The fair
           value estimates do not include the benefit that results from the
           low-cost funding provided by the deposit liabilities compared to
           the cost of borrowing funds in the market nor the benefit derived
           from the customer relationship inherent in existing deposits.

        SHORT-TERM BORROWINGS
        The fair value of federal funds purchased and securities sold under
           agreements to repurchase is based on the discounted value of
           contractual cash flows.  The discount rate is estimated using
           current rates on federal funds purchased and securities sold under
           agreements to repurchase with similar remaining maturities.

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<PAGE>
        FEDERAL HOME LOAN BANK (FHLB) ADVANCES
        The fair value of FHLB advances is based on the discounted value of
           contractual cash flows.  The discount rate is estimated using
           rates on current FHLB advances with similar remaining maturities.

        ACCRUED INTEREST PAYABLE
        The carrying value of accrued interest payable approximates fair value
           due to the relatively short period of time between the origination
           of the instrument and its expected realization. 
        
        COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
        The fair value of commitments to extend credit is generally estimated
           using the fees currently charged to enter into similar agreements,
           taking into account the remaining terms of the agreements and the
           present creditworthiness of the counterparties.  For fixed rate
           loan commitments, fair value also considers the difference between
           current levels of interest rates and the committed rates.  The
           fair value of letters of credit is based on fees currently charged
           for similar agreements or on the estimated cost to terminate them
           or otherwise settle the obligations with the counterparties.  The
           estimated fair value of commitments to extend credit and standby
           letters of credit approximates the balances of such commitments. 

(18)    LITIGATION

        Various legal claims have arisen in the normal course of business,
           which, in the opinion of Company management, will not result in
           any material liability to the Company.

(19)    REGULATORY CAPITAL

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

        Quantitative measures established by regulation to ensure capital
           adequacy require the Company and BankIllinois to maintain minimum
           amounts and ratios (set forth in the table below) of Total and
           Tier I capital (as defined in the regulations) to risk-weighted
           assets (as defined), and of Tier I capital (as defined) to average
           assets (as defined).  Management believes, as of December 31,
           1998, that the Company and BankIllinois meet all capital adequacy
           requirements to which they are subject.

        As of December 31, 1998, the most recent notification from the primary
           regulatory agency categorized BankIllinois as well capitalized
           under the regulatory framework for prompt corrective action.  To
           be categorized as well capitalized, BankIllinois must maintain
           minimum Total capital to risk-weighted assets, Tier I capital to
           risk-weighted assets, and Tier I capital to average assets ratios
           as set forth in the table.  There are no conditions or events
           since that notification that management believes have changed
           BankIllinois' category.

        The Company's and BankIllinois' actual capital amounts and ratios as
           of December 31, 1998 and 1997 are presented in the following
           tables:
Page 49
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<PAGE>
<TABLE>
                                                                                                      TO BE WELL
                                                                                                  CAPITALIZED UNDER
                                                                               FOR CAPITAL        PROMPT CORRECTIVE
                                                           ACTUAL          ADEQUACY PURPOSES:     ACTION PROVISIONS:
                                                       AMOUNT   RATIO        AMOUNT    RATIO        AMOUNT   RATIO
        <S>                                           <C>       <C>         <C>         <C>        <C>       <C>
        As of December 31, 1998:                                                                                  
           Total capital                                                                                          
              (to risk-weighted assets)                                                                           
             Consolidated                             $63,933   19.1%       $26,754     8.0%           N/A        
             BankIllinois                             $56,835   17.2%       $26,496     8.0%       $33,119   10.0%
           Tier I capital                                                                                         
              (to risk-weighted assets)                                                                           
             Consolidated                             $59,664   17.8%       $13,377     4.0%           N/A        
             BankIllinois                             $52,650   15.9%       $13,248     4.0%       $19,872    6.0%
           Tier I capital                                                                                         
              (to average assets)                                                                                 
             Consolidated                             $59,664   11.1%       $21,488     4.0%           N/A        
             BankIllinois                             $52,650    9.8%       $21,416     4.0%       $26,770    5.0%
</TABLE>

<TABLE>
                                                                                                      TO BE WELL
                                                                                                  CAPITALIZED UNDER
                                                                               FOR CAPITAL        PROMPT CORRECTIVE
                                                           ACTUAL          ADEQUACY PURPOSES:     ACTION PROVISIONS:
                                                       AMOUNT   RATIO        AMOUNT    RATIO        AMOUNT   RATIO
        <S>                                           <C>       <C>         <C>         <C>        <C>       <C>
        As of December 31, 1997:                                                                                  
           Total capital                                                                                          
              (to risk-weighted assets)                                                                           
             Consolidated                             $61,340   17.7%       $27,746     8.0%           N/A        
             BankIllinois                             $56,664   16.4%       $27,699     8.0%       $34,624   10.0%
           Tier I capital                                                                                         
              (to risk-weighted assets)                                                                           
             Consolidated                             $56,993   16.4%       $13,873     4.0%           N/A        
             BankIllinois                             $52,324   15.1%       $13,850     4.0%       $20,775    6.0%
           Tier I capital                                                                                         
              (to average assets)                                                                                 
             Consolidated                             $56,993   10.9%       $20,974     4.0%           N/A        
             BankIllinois                             $52,324   10.0%       $20,950     4.0%       $26,188    5.0%
</TABLE>
Page 50
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<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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<PAGE>
PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS                               

                                     POSITION WITH THE COMPANY AND
NAME                   DIRECTOR      BANK AND OCCUPATION FOR THE 
(AGE)                  SINCE <F1>    LAST FIVE YEARS
CLASS I   
(TERM EXPIRES 1999)                                           
David J. Downey        1992          Director of the Company; President, The
(Age 57)                             Downey Group, Inc. (estate planning,
                                     wealth transfer and executive
                                     compensation organization) 
                                     (1963-present)

Van A. Dukeman         1994          Director, President and Chief Executive
(Age 40)                             Officer of the Company and the Bank;
                                     Director and President of BIFC and
                                     BankIllinois (1994-1995)

Gene A. Salmon         1991          Director of the Company; President,
(Age 54)                             Cross Construction, Inc. (1979-present)

James A. Sullivan      1984          Director of the Company; Retired Chief
(Age 71)                             Executive Officer, Sullivan Chevrolet
                                     Company (1976-1997)

CLASS II 
(TERM EXPIRES 2000)                  
Gregory B. Lykins      1994          Director, Chairman of the Board of the
(Age 51)                             Company and the Bank; Director, Chairman
                                     of the Board and Chief Executive Officer
                                     of BIFC and BankIllinois (1994-1995)

August C. Meyer, Jr.   1962          Director of the Company; President,
(Age 61)                             Midwest Television Inc. (1976-present)

CLASS III  
(TERM EXPIRES 2001)
Roy V. VanBuskirk      1991          Director of the Company; Retired, Chief
(Age 68)                             Executive Officer, Bacon and VanBuskirk
                                     Glass Company and Danville Bacon and
                                     VanBuskirk Glass Company, Inc. 
                                     (1968-1997)

George T. Shapland     1994          Director of the Company; President,
(Age 68)                             Shapland Management Co. (1990-present)

Dean R. Stewart        1984          Director of the Company; Chairman of the
(Age 70)                             Board, CIF (1991-1995); Chairman and
                                     Chief Executive Officer, Tri Star
                                     Marketing, Inc. (1974-present)

[FN]
<F1>  Indicates year first elected to the board of directors of the Company,
      the Bank or their predecessors.
</FN>

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<PAGE>

          All of the Company's directors will hold office for the terms
indicated, or until their respective successors are duly elected and
qualified, and all executive officers hold office for a term of one year. 
There are no arrangements or understandings between any of the directors,
executive officers or any other person pursuant to which any of the Company's
directors or executive officers have been selected for their respective
positions.  Non-employee directors of the Company received fully vested
options to purchase 4,000 shares of Common Stock for serving on the Boards of
Directors and committees of the Company and certain of the subsidiaries in
1998.  It is anticipated that options will be granted to the directors as
compensation in the future on an annual basis.  Directors of the Company who
are also employees of the Company were not separately compensated for service
on such Boards or committees.

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<PAGE>
BOARD COMMITTEES AND MEETINGS

          A total of eleven regularly scheduled and special meetings were
held by the Board of Directors of the Company during 1998.  The Board of
Directors of the Company has established an Audit Committee, a Compensation
Committee and an Executive Committee.  During 1998, all directors attended at
least 75 percent of the meetings of the Board and the committees on which
they served, except Messrs. Sullivan and VanBuskirk, who attended 70% of such
meetings.

          Members of the Audit Committee are Messrs. Stewart (Chair), Meyer,
VanBuskirk and Sullivan, and Messrs. Lykins and Dukeman serve ex officio. 
The Audit Committee reports to the Board of Directors and has the
responsibility to review and approve internal control procedures, accounting
practices and reporting activities of the Bank.  The committee also has the
responsibility for establishing and maintaining communications between the
Board and the independent auditors and regulatory agencies.  The Audit
Committee reviews with the independent auditors the scope of their
examinations, with particular emphasis on the areas to which either the Audit
Committee or the auditors believe special attention should be directed.  It
also reviews the examination reports of regulatory agencies and reports to
the full Board regarding matters discussed therein.  Finally, it oversees the
establishment and maintenance of effective controls over the business
operations of the Bank.  The Audit Committee met four times in 1998.

          The members of the Compensation Committee are Messrs. VanBuskirk
(Chair), Meyer and Stewart, and Messrs. Lykins and Dukeman serve ex officio. 
The Compensation Committee reports to the Board of Directors and has
responsibility for all matters related to compensation of executive officers
of the Company, including review and approval of base salaries, review of
salaries of executive officers compared to other financial services holding
companies in the region, fringe benefits, including modification of the
retirement plan, and incentive compensation.  The Compensation Committee met
two times in 1998.

          The members of the Executive Committee are Messrs. Lykins (Chair),
VanBuskirk, Downey, Shapland and Stewart, and Mr. Dukeman serves ex officio. 
The Executive Committee reviews compensation to be paid to the Company's
directors for service on the Board of Directors and attendance at Board and
committee meetings, reviews the Company's dividend policy and nominates
persons to serve on the Company's Board of Directors.  The Executive
Committee will consider nominations to the Board of Directors submitted by
stockholders if such nominations are made in writing to the committee and
otherwise comply with Article 2, Section 14 of the Company's bylaws.  The
Executive Committee met two times in 1998.

EXECUTIVE OFFICERS

          The term of office for the executive officers of the Company is
from the date of election until the next annual organizational meeting of the
Board of Directors.  The names and ages of the executive officers of the
Company as of December 31, 1998, as well as the offices held by these
officers on that date, other positions held with the Company and its
subsidiary and principal occupations for the past five years are set forth
below.

                               POSITION WITH THE COMPANY AND 
NAME                  AGE      BANK AND PRINCIPAL OCCUPATION
Gregory B. Lykins     51       Chairman of the Board of the Company and
                               BankIllinois.  Prior to the Merger, Mr.
                               Lykins served as Chairman of the Board and
                               Chief Executive Officer of BankIllinois
                               Financial Co. and BankIllinois.  

Van A. Dukeman        40       Director, President and Chief Executive
                               Officer of the Company and BankIllinois. 
                               Prior to the Merger, Mr. Dukeman served as
                               President and director of BankIllinois
                               Financial Co.

David B. White        47       Executive Vice President and Chief Financial
                               Officer of the Company and BankIllinois.
                               Prior to the Merger, Mr. White served as
                               Executive Vice President and Chief Financial
                               Officer of BankIllinois.

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<PAGE>
Charles R. Eyman      52       Executive Vice President of BankIllinois. 
                               Prior to the Merger, Mr. Eyman served as
                               Senior Vice President of The Champaign
                               National Bank.

Robert F. Plecki, Jr. 38       Executive Vice President of BankIllinois. 
                               Prior to his current position, Mr. Plecki
                               served as Senior Vice President and Vice
                               President of BankIllinois.

Leanne C. Heacock     33       Senior Vice President of BankIllinois.  Prior
                               to her current position, Ms. Heacock served
                               as Vice President of BankIllinois.  Prior to
                               the merger, Ms. Heacock served as Assistant
                               Vice President and Operations Officer for the
                               Champaign National Bank.

Mark J. Wisniewski    35       Senior Vice President of BankIllinois.  Prior
                               to his current position, Mr. Wisniewski
                               served as Vice President of BankIllinois. 
                               Mr. Wisniewski was Vice President and
                               Assistant Vice President of First of America
                               prior to joining the Company.
Page 55
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<PAGE>
ITEM 11.              EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

          The following table shows the compensation earned during the three
most recently completed fiscal years by the Chief Executive Officer and the
three other most highly compensated executive officers of the Company
(including those employed by the Company's subsidiaries) whose 1998 salary
and bonus exceeded $100,000:

<TABLE>
                                                            SUMMARY COMPENSATION TABLE
                                                                    LONG TERM
                                                                  COMPENSATION
                                         ANNUAL COMPENSATION         AWARDS
(A)                           (B)      (C)       (D)       (E)         (G)          (I)
                                                                   SECURITIES
                                                                   UNDERLYING    ALL OTHER
NAME AND                              <F1>                          OPTIONS/   COMPENSATION
PRINCIPAL POSITION           YEAR   SALARY($) BONUS($)  OTHER($)    SARS <F2>    ($) <F3>
<S>                          <C>   <C>        <C>         <C>         <C>        <C>
Gregory B. Lykins,           1996  $180,000   $35,000      --         3,150      $17,177
Chairman of the Board        1997   180,000    40,000      --         3,150       18,550
                             1998   134,307    50,000     3,792       5,250       17,329

Van A. Dukeman,              1996  $127,000   $30,000      --          --        $12,540
President and Chief          1997   127,000    40,000      --         3,150       13,445
Executive Officer            1998   151,346    60,000     1,729       5,250       14,207

David B. White,              1996   $95,000   $12,000      --          --         $9,080
Executive Vice President     1997    95,000    15,000      --         3,150        9,395
and Chief Financial Officer  1998   107,115    22,000     1,625       3,150       10,639

Charles R. Eyman,            1996   $95,000   $12,000      --          --         $9,208
Executive Vice President     1997    95,000    15,000      --         3,150       10,107
                             1998   107,115    22,000     4,119       3,150       11,115
_______________
<FN>
<F1>  Includes amounts deferred and, with respect to Mr. Lykins, includes
      amounts received for service as Chairman of the Board of the Company.

<F2>  As adjusted for stock dividends.

<F3>  The total amounts in this column reflect the Company's contributions
      under its 401(K) Plan, Non-Qualified Retirement Plan, Profit Sharing
      Plan and amounts paid for premiums on insurance policies with respect
      to each named executive officer.  These amounts were $3,238, $3,189,
      $7,500 and $3,250 for Mr. Lykins for 1996, $3,200, $3,400, $8,000 and
      $3,950 for 1997, and $1,590, $2,329, $8,800 and $4,610 for 1998;
      $3,162, $1,493, $7,500 and $385 for Mr. Dukeman for 1996, $3,200,
      $1,810, $8,000 and $435 for 1997, and $1,787, $3,140, $8,800 and $480
      for 1998; $2,248, $1,510, $5,045 and $277 for Mr. White for 1996,
      $2,200, $1,705, $5,200 and $290 for 1997, and $1,570, $2,072, $6,695
      and $302 for 1998; and $2,254, $1,300, $5,268 and $386 for Mr. Eyman
      for 1996, $2,200, $1,705, $5,200 and $1,002 for 1997, and $1,570,
      $2,072, $6,695 and $778 for 1998.
</FN>
</TABLE>

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<PAGE>
STOCK OPTION INFORMATION

        The following table sets forth certain information concerning the
number and value of stock options granted in the last fiscal year to the
individuals named in the Summary Compensation Table:

<TABLE>
                                             OPTION GRANTS IN LAST FISCAL YEAR
                                                      INDIVIDUAL GRANTS
                                                                                       POTENTIAL REALIZABLE VALUE
                                                                                       AT ASSUMED ANNUAL RATES OF
                                                                                        STOCK PRICE APPRECIATION
                                                                                             FOR OPTION TERM
(A)                          (B)               (C)               (D)              (E)         (F)        (G)
                                           % OF TOTAL
                                             OPTIONS
                           OPTIONS         GRANTED TO
                           GRANTED        EMPLOYEES IN    EXERCISE OR BASE    EXPIRATION
NAME                    (#) <F1><F2>    FISCAL YEAR <F2>  PRICE ($/Sh)<F2>       DATE        5%($)       10%($)
<S>                         <C>              <C>               <C>             <C>          <C>        <C>
Gregory B. Lykins           5,250            10.0%             $19.52          03/01/08     $64,449    $163,326
Van A. Dukeman              5,250            10.0%              19.52          03/01/08      64,449     163,326
David B. White              3,150             6.0%              19.52          03/01/08      38,669      97,996
Charles R. Eyman            3,150             6.0%              19.52          03/01/08      38,669      97,996

<FN>
<F1>  Such options vest over a three-year period.
<F2>  As adjusted for stock dividends.
</FN>
</TABLE>

        The following table sets forth certain information concerning the
exercisable and nonexercisable stock options at December 31, 1998, held by
the individuals named in the Summary Compensation Table:

<TABLE>
                                       AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
                                                              OPTION VALUES

                           SHARES                      NUMBER OF SECURITIES
                          ACQUIRED                    UNDERLYING UNEXERCISED            VALUE OF UNEXERCISED IN-
                             ON          VALUE           OPTIONS AT FY-END                  THE-MONEY OPTIONS
      NAME                EXERCISE     REALIZED               (#)(D)                        AT FY-END ($)(E)
     (#)(A)                (#)(B)       ($)(C)       EXERCISABLE    UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
<S>                          <S>         <C>          <C>               <C>            <C>              <C>
Gregory B. Lykins            ---         $---         120,216           5,145          1,939,239        23,120
Van A. Dukeman               ---          ---         120,216           5,145          1,939,239        23,120
David B. White               680         11,162        13,858           3,599            200,746        18,320
Charles R. Eyman             ---          ---           5,854           3,599             63,967        18,320
</TABLE>

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<PAGE>
EMPLOYMENT AGREEMENTS

        The Company has entered into employment agreements with certain of
its executive officers, including each of the executive officers named in the
Summary Compensation Table.  Employment agreements for two former executive
officers, Mr. Robert J. Cochran and Mr. Larry J. Kallembach, terminated upon
their resignations, effective April 30, 1998 and March 17, 1998,
respectively.  Each employment agreement provides for an initial term of one
year and, at the end of its initial term as well as any subsequent term, is
automatically extended for one year until either the Company or the employee
gives written notice to the contrary.  Each agreement terminates upon the
employee's death, disability, discharge for cause or in the event of
"constructive discharge" or a change of control (as defined in the employment
agreements).  The employment agreements are also terminable by the employee
upon 90 days' notice to the Company.

        The employment agreements set forth the salaries, bonuses and
benefits to be provided to the respective officer and  provide for severance
payments in the event employment is terminated by the Company without cause
or in the event of "constructively discharge" (as defined in the employment
agreements).  The "severance payment" each officer would be entitled to
receive in such a case equals the sum of the applicable base salary, the
officer's most recent performance bonus and the value of contributions under
retirement and employee benefit plans that would have been made through the
term of the agreement.  Mr. Lykins and Mr. Dukeman (or their estates) are
also entitled to receive such severance payment in the event of termination
because of disability or death.

        In the event employment is terminated within one year of a change
of control (as defined in the agreements), or at any time by the Company or
its successor for any reason other than death or disability, the affected
officer would be entitled to receive similar amounts.  The amounts payable
upon a change of control are subject to reduction, if necessary, to prevent
certain adverse tax treatment.  

        The employment agreements also provide that the respective officer
may not compete within a 50-mile radius of the Company's main office, or
against the Company or any successor, for one year following the termination
of their employment agreement.  Each employment agreement also requires the
Company to indemnify and to advance certain legal expenses to the covered
employee to the maximum extent permitted by law.

        In 1998, Mr. Robert J. Cochran received $45,121 in regular
compensation.  Also in connection with his resignation, the Company has
expensed $305,566 which Mr. Cochran will receive in full by September 2000. 
Mr. Larry J. Kallembach received $23,356 in regular compensation in 1998, and
in connection with his resignation, the Company expensed an additional amount
of $133,170, which Mr. Kallembach will receive in full by July 1999.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
   
        The Compensation Committee of the Company establishes compensation
and benefits for the Chief Executive Officer and reviews and recommends
compensation and benefits for other officers and employees of the Bank. 
During 1998, no executive officer of the Company served as a member of
(i) the compensation committee of another entity in which one of the
executive officers of such entity served on the Bank's Compensation
Committee, (ii) the Board of Directors of another entity in which one of the
executive officers of such entity served on the Bank's Compensation Committee
or (iii) the compensation committee of another entity in which one of the
executive officers of such entity served as a member of the Company's Board
of Directors. 

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

        The Company's compensation program is administered by the
Compensation Committee (the "Committee").  The Chief Executive Officer serves
on this and all committees ex-officio, but on none as Chairman.

        In determining appropriate levels of executive compensation, the
Committee has at its disposal independent reference information regarding
compensation ranges and levels for executive positions in comparable
companies.  In determining compensation to be paid to executive officers,
primary consideration is given to quality, long-term earnings growth
accomplished by achieving both financial and non-financial goals such as
earnings per share, return on assets and return on equity.  The objectives of
this philosophy are to: (i) encourage consistent and competitive return to
stockholders; (ii) reward Company and individual performances; (iii) provide
financial rewards for performance by those having a significant impact on
corporate profitability; and (iv) provide competitive compensation in order
to attract and retain key personnel.

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<PAGE>
        There are three basic components to the total compensation of all
key executives -- base salary, incentive bonus and long-term incentive
compensation.  The salary component is reflective of levels of
responsibility, authority and performance, relative to similar positions in
the banking industry.  The incentive portion is directly related to financial
performance, as measured by net income, return on average assets, and other
financial factors.  The long-term incentive compensation component is
currently composed of the 1996 Stock Option Plan adopted by the Company.  The
Company maintains the stock option plan to reward senior executives of the
Company for outstanding performance and to help the Company attract and
retain qualified personnel in key positions.  The stock option plan is
further designed to give key employees a proprietary interest in the Company
as an incentive to contribute to the success of the Company.  Awards under
the plan are determined by the Compensation Committee based on each
respective officer's level of responsibility, overall performance and
significance to the Company's future growth and profitability.

        Members of the Compensation Committee are Messrs. VanBuskirk
(Chair), Meyer and Stewart, and Messrs. Lykins and Dukeman serve ex officio.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the
Company's Common Stock beneficially owned on March 15, 1999 with respect to
all persons known to the Company to be the beneficial owner of more than five
percent of the Company Common Stock, each director and nominee and all
directors and executive officers of the Company as a group.

<TABLE>
NAME OF INDIVIDUAL AND           AMOUNT AND NATURE OF        PERCENT
NUMBER OF PERSONS IN GROUP     BENEFICIAL OWNERSHIP<F1>     OF CLASS

DIRECTORS AND NOMINEES 
<S>                                <C>                       <C>
David J. Downey                      318,792<F2>              6.0%
Van A. Dukeman                       178,542<F3>              3.3%
Gregory B. Lykins                    402,834<F4>              7.4%
August C. Meyer, Jr.               1,612,063<F5>             30.2%
Gene A. Salmon                        90,355                  1.7%
George T. Shapland                   302,627                  5.7%
Dean R. Stewart                       28,339<F6>                 *
James A. Sullivan                     29,906                     *
Roy V. VanBuskirk                     33,882                     *

NAMED EXECUTIVE OFFICERS
Charles R. Eyman                      14,238                     *
David B. White                        16,027                     *

All directors and executive
officers as a group
(14 persons)                       3,032,321<F7>             53.6%
_____________

* Less than one percent.
<FN>
<F1>   The information contained in this column is based upon information
       furnished to the Company by the persons named above and the members of
       the designated group.  The nature of beneficial ownership for shares
       shown in this column is sole voting and investment power, except as
       set forth in the footnotes below.  Pursuant to the rules of the
       Securities and Exchange Commission, shares obtainable through the
       exercise of options which are currently exercisable, or which will
       become exercisable within 60 days of the date of the information
       contained in this table, and are included as beneficially owned.  The
       number of shares obtainable through options and included in this table
       are as follows:  6,644 shares for Mr. Eyman; 8,610 shares for Messrs.
       Downey, Meyer and Salmon, Shapland, Stewart, Sullivan and VanBuskirk;
       14,648 shares for Mr. White; and 121,263 shares for Messrs. Dukeman
       and Lykins.  Each director and officer has no voting and sole
       investment power over such shares.  Inclusion of shares shall not
       constitute an admission of beneficial ownership or voting or
       investment power over such shares.  

<F2>   Includes 15,913 shares over which Mr. Downey has shared voting and
       sole investment power.
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<PAGE>

<F3>   Includes 2,000 shares over which Mr. Dukeman has shared voting and
       sole investment power.

<F4>   Includes 18,338 shares over which Mr. Lykins has shared voting and
       sole investment power.

<F5>   Includes 1,354,237 shares held by certain trusts for which Mr. Meyer
       serves as trustee.  Mr. Meyer exercises sole voting and investment
       power over such shares.  Also includes 58,401 shares held by Mr.
       Meyer's spouse.  Mr. Meyer disclaims beneficial ownership over all
       such shares.

<F6>   Includes 10,195 shares held jointly with Mr. Stewart's spouse, over
       which shares Mr. Stewart has shared voting and investment power.

<F7>   Includes 329,956 shares obtainable through the exercise of options
       considered presently exercisable.
</FN>
</TABLE>

AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT

       Certain principal stockholders of the Company have executed an Amended
and Restated Shareholders' Agreement (the "Shareholders' Agreement").  The
Shareholders' Agreement affects the purchase and sale of the capital stock of
the Company owned by the parties thereto.  The parties to the agreement are
August C. Meyer, Jr. and certain related entities, David J. Downey, George T.
Shapland, Gregory B. Lykins and Van A. Dukeman (the "Parties").
  
       The Shareholders' Agreement provides that the Parties to the
Shareholders' Agreement may not make voluntary transfers of their shares of
Company stock except for transfers to each other, family transfers, certain
pledges and certain open market sales.  In addition, involuntary transfers
occurring upon death are permitted.  Parties to the Shareholders' Agreement
are permitted to sell shares on the open market, but only after the other
Parties have elected not to exercise a right of first refusal to purchase the
shares.  Also, in the event any Party to the Shareholders' Agreement
purchases shares from any third party, the purchasing stockholder must allow
the other Parties the right to purchase a proportionate amount of such
shares.

       Each Party to the Shareholders' Agreement other than August C. Meyer
Jr. has the right to put his shares to Mr. Meyer, in which event Mr. Meyer
will be obligated to purchase all such shares subject to the rights of the
other Parties to join in the purchase on a proportionate basis.  Puts may be
exercised prior to the expiration of the three-year period following the
Merger only in the event of the death of a Party.  In any case, if a put is
exercised, and within 18 months thereafter there is a sale of the Company,
any profits realized on the sale of the put shares must be repaid to the
Party that previously exercised the put.

       The Shareholders' Agreement will terminate ten years after it becomes
effective.  It also will terminate upon a sale, dissolution or liquidation of
the Company or upon the written agreement of the Parties.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Directors and officers of the Company and the Bank and their
associates were customers, of and had transactions with, the Company and the
Bank during 1998.  Additional transactions may be expected to take place in
the future.  All outstanding loans, commitments to loan, transactions in
repurchase agreements and certificates of deposit and depository
relationships, in the opinion of management, 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 persons and did not involve more than the normal risk of collectibility
or present other unfavorable features.  During 1998, the Company incurred
approximately $190,000 in construction costs for services provided by Cross
Construction, Inc.  Mr. Salmon, a director of the Company, serves as the
President of Cross Construction.  An estimated additional $100,000 is
expected to be paid in 1999 for the remainder of the construction. 
Management believes that the terms of these services were no less favorable
to the Company than would have been obtained from non-affiliated parties.
Page 60
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<PAGE>
PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)  Index to Financial Statements

             See page 29.

(a)(2)  Financial Statement Schedules

             N/A

(a)(3)  Schedule of Exhibits

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


(b)     Reports on Form 8-K

             The Company did not file any Current Reports on Form 8-K during 
        the fourth quarter of 1998.


(c)     Exhibits

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

(d)     Financial Data Schedule

             Exhibit 27.1
Page 61
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<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 30, 1999.


By:  ____________________________          By:  ____________________________
     Gregory B. Lykins                          David B. White
     Chairman                                   Executive Vice President and
                                                Principal Financial and 
                                                Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 30, 1999.


/S/ GREGORY B. LYKINS                          Chairman and Director


/S/ VAN A. DUKEMAN                        President, CEO and Director


/S/ DAVID J. DOWNEY                       Director
 

/S/ AUGUST C. MEYER, JR.                  Director


/S/ GENE A. SALMON                        Director


/S/ GEORGE T. SHAPLAND                    Director


/S/ DEAN R. STEWART                       Director


/S/ JAMES A. SULLIVAN                     Director


/S/ ROY V. VANBUSKIRK                     Director


/S/ DAVID B. WHITE                        Executive Vice President and Chief
                                            Financial Officer
Page 62
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<PAGE>

BANKILLINOIS FINANCIAL CORPORATION
EXHIBIT INDEX
TO
ANNUAL REPORT ON FORM 10-K

                                   INCORPORATED
EXHIBIT                            HEREIN BY                FILED     SEQUENTIAL
NO.  DESCRIPTION                   REFERENCE TO             HEREWITH  PAGE NO.

3.1  Amended and Restated          Exhibit 3.1 to the Form 10-K 
     Certificate of Incorporation  filed with the Commission
                                   April 1, 1996 (SEC File No. 
                                   33-90342)

3.2  Amendment to Amended          Exhibit 3.2 to the Form 10-K
     and Restated Certificate      filed with the Commission
     of Incorporation              March 30, 1998 (SEC File No. 
                                   33-90342)

3.3  Bylaws                        Exhibit 3.2 to the Form 10-K 
                                   filed with the Commission 
                                   April 1, 1996 (SEC File No. 
                                   33-90342)

4.1  Amended and Restated          Exhibit 4.1 to the Registration 
     Shareholders'                 Statement on Form S-4 filed with 
     Agreement, dated as of        the Commission March 15, 1995, 
     December 13, 1994             as amended (SEC File No. 33-90342)

10.1 Employment Agreement for      Exhibit 10.3 to the Registration 
     Gregory B. Lykins             Statement on Form S-4 filed 
                                   with the Commission March 15, 1995, 
                                   as amended (SEC File No. 33-90342) 

10.2 Employment Agreement for      Exhibit 10.4 to the Registration 
     Van A. Dukeman                Statement on Form S-4 filed 
                                   with the Commission March 15, 1995, 
                                   as amended (SEC File No. 33-90342) 

10.3 Employment Agreement for      Exhibit 10.5 to the Registration 
     David B. White                Statement on Form S-4 filed 
                                   with the Commission March 15, 1995, 
                                   as amended (SEC File No. 33-90342)

10.4 Employment Agreement for      Exhibit 10.8 to the Form 10-K 
     Charles R. Eyman              filed with the Commission on 
                                   April 1, 1996 (SEC File No. 33-90342)

21.1 Subsidiaries of the Registrant                            X

23.1 Consent of McGladrey & Pullen, LLP                        X

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<PAGE>

27.1  Financial Data Schedule                                  X

27.2  Financial Data Schedule                                  
      Restated for 1997                                        X
     
27.3 Financial Data Schedule
      Restated for 1996                                        X
Page 64
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