UNITED STATES

                             WASHINGTON, DC  20549

                                   FORM 10-Q

               QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
               For the Quarterly Period Ended September 30, 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  61820
         (Address of principal executive offices)           (Zip Code)

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


Indicate by "X" whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
   YES   X     NO      

Indicate the number of shares outstanding of the registrant's common stock,
as of November 4, 1998:
   BankIllinois Financial Corporation Common Stock         5,328,919
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                               TABLE OF CONTENTS

                                                                   PAGE    
PART I.  FINANCIAL INFORMATION                                         

     Item 1.  Financial Statements                                   3

     Item 2.  Management's Discussion of Financial
                        Condition and Results of Operations          7

PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings                                     20

     Item 2.  Changes in Securities                                 20

     Item 3.  Defaults Upon Senior Securities                       20

     Item 4.  Submission of Matters to a Vote of Security Holders   20

     Item 5.  Other Information                                     20

     Item 6.  Exhibits and Reports on Form 8-K                      20

     SIGNATURES                                                     21

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PART I.  FINANCIAL INFORMATION                  

ITEM 1.     FINANCIAL STATEMENTS                            

<TABLE>
                        BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED BALANCE SHEETS
                              September 30, 1998 and December 31, 1997
                          (Unaudited, in thousands, except per share data)
                                                                                               
<S>                                                                  <C>              <C>
                                                                     Sept. 30,         Dec. 31,
                                                                        1998             1997  
ASSETS                                                                                         
Cash and due from banks                                               $15,270          $28,958 
Federal funds sold                                                     26,900           19,600 
Investments in debt and equity securities:                                                     
  Available-for-sale, at estimated market value                       129,833          135,317 
  Held-to-maturity, estimated market value of $31,189 and                                      
         $18,635 at September 30, 1998 and December 31, 1997, 
         respectively                                                  30,871           18,519 
  Non-marketable equity securities                                      1,620            1,550 
Mortgage loans held for sale                                            5,182            1,408 
Loans, net of allowance for loan losses of $5,441 and                                          
         $5,306 at September 30, 1998 and December 31, 1997,                                   
         respectively                                                 290,142          309,729 
Premises and equipment                                                  9,616           11,253 
Accrued interest receivable                                             4,989            4,833 
Other assets                                                            8,064            8,199 
         Total assets                                                $522,487         $539,366 
                                                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                                                           
Liabilities:                                                                                   
   Deposits:                                                                                   
     Demand - noninterest bearing                                     $51,510          $59,693 
     Demand - interest bearing                                        147,417          146,776 
     Savings                                                           16,754           16,623 
     Time deposits $100,000 and over                                   34,406           41,196 
     Other time                                                       139,583          152,866 
       Total deposits                                                 389,670          417,154 
   Federal funds purchased and securities sold under                                           
         repurchase agreements                                         53,417           49,857 
   Federal Home Loan Bank advances                                     12,000            8,000 
   Accrued interest payable                                             1,442            1,736 
   Other liabilities                                                    5,829            5,289 
         Total liabilities                                            462,358          482,036 
                                                                                               
Stockholders' equity:                                                                          
   Common stock, $0.01 par value; 6,500,000 shares authorized:                                 
     5,466,815 shares issued                                               55               55 
   Paid in capital                                                     28,944           28,880 
   Retained earnings                                                   31,991           29,006 
   Accumulated other comprehensive income                                 981              298 
                                                                       61,971           58,239 
   Less: treasury stock, at cost, 104,193 and 69,053 shares                                    
     at September 30, 1998 and December 31, 1997, respectively         (1,842)            (909)
                                                                                               
         Total stockholders' equity                                    60,129           57,330 
                                                                                               
         Total liabilities and stockholders' equity                  $522,487         $539,366 
</TABLE>                                                     
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
                        BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                       For the Nine Months Ended September 30, 1998 and 1997
                          (Unaudited, in thousands, except per share data)
<S>                                                                 <C>              <C>
Interest income:                                                        1998             1997  
   Interest and fees on loans                                         $20,974          $19,558 
   Interest and dividends on investments in debt and equity securities                         
      Taxable                                                           6,786            7,466 
      Tax-exempt                                                          323              228 
   Interest on federal funds sold and interest-bearing deposits           624              485 
         Total interest income                                         28,707           27,737 
                                                                                               
Interest expense:                                                                              
   Deposits                                                            12,287           12,238 
   Federal funds purchased and securities sold under                                           
                  repurchase agreements                                 1,766            1,674 
   Federal Home Loan Bank advances                                        404              447 
         Total interest expense                                        14,457           14,359 
                                                                                               
         Net interest income                                           14,250           13,378 
Provision for loan losses                                                 345              325 
         Net interest income after provision for loan losses           13,905           13,053 
                                                                                               
Noninterest income:                                                                            
   Trust fees                                                           1,622            1,529 
   Service charges on deposit accounts                                    461              488 
   Security transactions, net                                              46                8 
   Gain on sales of mortgage loans held-for-sale, net                     409              207 
   Other                                                                1,126            1,127 
         Total noninterest income                                       3,664            3,359 
                                                                                               
Noninterest expenses:                                                                          
   Salaries and employee benefits                                       6,418            5,847 
   Net occupancy                                                        1,042            1,146 
   Equipment                                                              670              673 
   Data processing                                                        555              551 
   Federal deposit insurance premiums                                      37               36 
   Other                                                                2,450            2,307 
         Total noninterest expenses                                    11,172           10,560 
                                                                                               
         Income before income taxes                                     6,397            5,852 
Income taxes                                                            2,075            1,938 
                                                                                               
         Net income                                                    $4,322           $3,914 
                                                                                               
Other comprehensive income, before tax:                                                        
         Unrealized gains on securities:                                                       
               Unrealized holding gains arising during period             704              310 
               Less:  reclassification adjustment for gains                                    
                           included in net income                         (21)               0 
               Other comprehensive income, net of tax                     683              310 
                                                                                               
               Comprehensive income                                    $5,005           $4,224 
                                                                                               
Per share data:                                                                                
   Basic earnings per share                                             $0.80            $0.72 
                                                                                               
   Weighted average shares of common stock outstanding              5,397,568        5,401,436 
                                                                                               
   Diluted earnings per share                                           $0.78            $0.71 
                                                                                               
   Weighted average shares of common stock and dilutive potential                              
    common shares outstanding                                       5,569,172        5,512,637 
                                                                                               
See accompanying notes to condensed consolidated financial statements. 
</TABLE>
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<TABLE>
                        BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                       For the Three Months Ended September 30, 1998 and 1997
                          (Unaudited, in thousands, except per share data)
<S>                                                                 <C>              <C>
Interest income:                                                        1998             1997  
   Interest and fees on loans                                          $7,008           $6,666 
   Interest and dividends on investments in debt and equity securities 
      Taxable                                                           2,211            2,470 
      Tax-exempt                                                          120               77 
   Interest on federal funds sold and interest-bearing deposits           258              152 
         Total interest income                                          9,597            9,365 
                                                                                               
Interest expense:                                                                              
   Deposits                                                             4,027            4,208 
   Federal funds purchased and securities sold under                                           
                  repurchase agreements                                   620              570 
   Federal Home Loan Bank advances                                        165              151 
         Total interest expense                                         4,812            4,929 
                                                                                               
         Net interest income                                            4,785            4,436 
Provision for loan losses                                                  90              175 
         Net interest income after provision for loan losses            4,695            4,261 
                                                                                               
Noninterest income:                                                                            
   Trust fees                                                             520              530 
   Service charges on deposit accounts                                    158              160 
   Security transactions, net                                              11                1 
   Gain on sales of mortgage loans held-for-sale, net                     132               88 
   Other                                                                  455              381 
         Total noninterest income                                       1,276            1,160 
                                                                                               
Noninterest expenses:                                                                          
   Salaries and employee benefits                                       1,989            1,912 
   Net occupancy                                                          339              382 
   Equipment                                                              222              226 
   Data processing                                                        181              194 
   Federal deposit insurance premiums                                      12               12 
   Other                                                                  695              750 
         Total noninterest expenses                                     3,438            3,476 
                                                                                               
         Income before income taxes                                     2,533            1,945 
Income taxes                                                              818              643 
                                                                                               
         Net income                                                    $1,715           $1,302 
                                                                                               
Other comprehensive income, before tax:                                                        
         Unrealized gains on securities:                                                       
               Unrealized holding gains arising during period             573              429 
               Less:  reclassification adjustment for gains 
                           included in net income                          (1)               0 
               Other comprehensive income, net of tax                     572              429 
                                                                                               
               Comprehensive income                                    $2,287           $1,731 
                                                                                               
Per share data:                                                                                
   Basic earnings per share                                             $0.32            $0.24 
                                                                                               
   Weighted average shares of common stock outstanding              5,383,249        5,397,943 
                                                                                               
   Diluted earnings per share                                           $0.31            $0.24 
                                                                                               
   Weighted average shares of common stock and dilutive potential                              
    common shares outstanding                                       5,560,304        5,508,773 
                                                                                               
See accompanying notes to condensed consolidated financial statements.  
</TABLE>
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<TABLE>
                        BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       For the Nine Months Ending September 30, 1998 and 1997
                                     (Unaudited, in thousands)
<S>                                                                     <C>            <C>
                                                                        1998              1997 
Cash flows from operating activities:                                                          
   Net income                                                          $4,322           $3,914 
   Adjustments to reconcile net income to net cash                                             
     provided by operating activities:                                                         
      Depreciation and amortization                                       793              848 
      Amortization of bond premiums, net                                   12               16 
      Provision for loan losses                                           345              325 
      Gain on security transactions                                       (46)              (8)
      Gain on sales of loans, net                                        (409)            (207)
      Loss on sale of premises and equipment, net                         248              135 
      Increase in accrued interest receivable                            (156)            (354)
      (Decrease) increase  in accrued interest payable                   (294)               4 
      Decrease in other assets                                            148              418 
      Increase (decrease) in other liabilities                            170             (225)
      Stock appreciation rights                                            68               84 
      Proceeds from sales of loans originated for sale                 45,870           18,755 
      Loans originated for sale                                       (49,235)         (18,650)
                           Net cash provided by operating activities    1,836            5,055 
                                                                                               
Cash flows from investing activities:                                                          
   Net decrease (increase) in loans                                    19,216          (22,394)
   Proceeds from maturity of investments in debt securities:                                   
      Held-to-maturity                                                  3,069           12,595 
      Available-for-sale                                               54,980           27,550 
   Proceeds from sales of investments:                                                         
      Non-marketable                                                        0              145 
   Purchases of investments in debt and equity securities:                                     
      Held-to-maturity                                                (15,406)          (7,287)
      Available-for-sale                                              (57,916)         (43,133)
      Non-marketable                                                      (70)               0 
   Principal paydowns from mortgage-backed and mortgage-related securities:                    
      Held-to-maturity                                                      0              252 
      Available-for-sale                                                9,474            1,398 
   Purchases of premises and equipment                                   (771)          (1,422)
   Proceeds from sale of premises and equipment                         1,380                1 
                           Net cash provided by (used in) 
                             investing activities                      13,956          (32,295)
                                                                                               
Cash flows from financing activities:                                                          
         Net decrease in demand and savings deposits                   (7,411)          (3,181)
         Net (decrease) increase in time deposits $100 and over        (6,790)           2,671 
         Net decrease in other time deposits                          (13,283)          (2,571)
         Net increase in federal funds purchased and                                           
                        securities sold under repurchase agreements     3,560              196 
         Net increase in Federal Home Loan Bank advances                4,000                0 
         Cash dividends paid                                           (1,255)               0 
         Treasury stock transactions, net                                (997)            (254)
         Fractional shares purchased following stock dividend              (4)              (3)
                           Net cash used in financing activities      (22,180)          (3,142)
                           Net decrease in cash and cash equivalents   (6,388)         (30,382)
Cash and cash equivalents at beginning of year                         48,558           59,195 
Cash and cash equivalents at end of year                              $42,170          $28,813 
                                                                                               
Supplemental disclosures of cash flow information:                                             
   Cash paid during the year for:                                                              
      Interest                                                        $12,580          $14,355 
      Income taxes                                                      1,858            1,460 
   Disposal of premises and equipment subject to valuation allowance      304                0 
   Change in unrealized gain on securities available-for-sale           1,035              469 
   Change in deferred taxes attributable to unrealized gain on securities                      
     available-for-sale                                                   352              159 
   Real estate acquired through or in lieu of foreclosure                  26            1,842 
   Dividends declared not paid                                            429                0 
</TABLE>                                                         
See accompanying notes to condensed consolidated financial statements.

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              BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  BASIS OF PRESENTATION

   The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for fair
presentation of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles.

   In the opinion of management, the condensed consolidated financial
statements of BankIllinois Financial Corporation (the "Company") and
subsidiaries as of September 30, 1998 and for the three-month and nine-month
periods ended September 30, 1998 and 1997 include all adjustments necessary
for fair presentation of the results of those periods.  All such adjustments
are of a normal recurring nature.

   Results of operations for the three-month and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results which may be
expected for the year ended December 31, 1998.

NOTE 2.  GAINS ON SECURITIES TRANSACTIONS

   Gains on security transactions include proceeds from sales, calls and
maturities of available-for-sale securities as well as calls and maturities
of held-to-maturity securities.  Gross gains and losses were as follows:


                       Nine Months Ended             Three Months Ended
                  Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
Available-for-sale       $32             $-             $2             $-
Held-to-maturity          14              8              9              1
Total                    $46             $8            $11             $1

NOTE 3.  STOCK DIVIDEND

At its regular board meeting on May 19, 1998, the Board of Directors of the
Company declared a one-for-twenty, or five percent, common stock dividend. 
The record date of the stock dividend was May 22, 1998, and the distribution
date was June 8, 1998.  The accompanying unaudited condensed consolidated
financial statements have been restated to take the stock dividend into
account.
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ITEM 2.  MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

                              FINANCIAL CONDITION

ASSETS AND LIABILITIES

   Total assets decreased $16,879,000, or 3.1%, from $539,366,000 at
December 31, 1997 to $522,487,000 at September 30, 1998.  Decreases primarily
in cash and due from banks, loans, securities available-for-sale and premises
and equipment, offset somewhat by increases in securities held-to-maturity,
federal funds sold and mortgage loans held-for-sale resulted in the decrease
in assets.

   The decrease in cash and due from banks of $13,688,000, or 47.3%, at
September 30, 1998 compared to December 31, 1997 was attributable to a
smaller dollar amount of deposit items in process of collection at September
30, 1998 compared to December 31, 1997.
   
   Loans decreased $19,587,000, or 6.3%, from December 31, 1997 to
September 30, 1998.  Included in this change was a decrease of $12,320,000,
or 10.1%, in commercial loans, a decrease of $2,191,000, or 4.2% in consumer
loans, a decrease of $844,000, or 1.5%, in residential real estate loans, and
a decrease of $323,000, or 0.4% in commercial real estate loans.  The
decrease in loans was caused by some large commercial loans being paid off
during the third quarter of 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.  
   
   Premises and equipment decreased $1,637,000, or 14.6%, from December 31,
1997 to September 30, 1998.  This decrease was primarily due to the sale of a
vacant building and the adjacent parking lot, with a combined book value of
$1,499,000.
   
   Other assets decreased $135,000, or 1.7%, from December 31, 1997 to
September 30, 1998.  This decrease was affected by the sale of $600,000 of
repossessed real estate.  The decrease in other assets was 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.

   Federal funds sold increased $7,300,000, or 37.2%, at September 30, 1998
compared to December 31, 1997 due to an increase in funds available for
investing as a result of the decrease in the loan category.

   Investments in securities held-to-maturity increased $12,352,000, or
66.7%, at September 30, 1998 compared to December 31, 1997.  Investments in
securities available-for-sale decreased $5,484,000, or 4.1%, at September 30,
1998 compared to December 31, 1997.  The net increase in investments in debt
and equity securities was the result of shifting assets from loans.  The
Company has approximately $66,000,000 of investments maturing within one
year.

   Mortgage loans held-for-sale increased $3,774,000 or 268.0%, from
December 31, 1997 to September 30, 1998.  The increase was due to strong
demand in the mortgage loan area.  A
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decrease in interest rates in the first nine months of 1998 caused a large
increase in refinancing as well as originating new mortgage loans. 

   Total liabilities decreased $19,678,000, or 4.1%, from $482,036,000 at
December 31, 1997 to $462,358,000 at September 30, 1998.  The decrease was
primarily due to a decrease in deposits, somewhat offset by increases in
federal funds purchased and securities sold under repurchase agreements and
Federal Home Loan Bank advances.

   Total deposits decreased $27,484,000, or 6.6%, from $417,154,000 at
December 31, 1997 to $389,670,000 at September 30, 1998.  The decrease
included a $13,283,000, or 8.7%, decrease in other time deposits, an
$8,183,000, or 13.7% decrease in noninterest bearing demand deposits and a
$6,790,000, or 16.5%, decrease in time deposits $100,000 and over.  These
decreases were somewhat offset by an increase of $641,000, or 0.4%, in
interest bearing demand deposits, and an increase of $131,000, or 0.8%, in
savings deposits. The decrease in deposits was attributable to seasonal run-
off, as experienced in prior years. 

   Federal funds purchased and securities sold under repurchase agreements
increased $3,560,000, or 7.1%, from $49,857,000 at December 31, 1997 to
$53,417,000 at September 30, 1998.  Included in this change were decreases in
federal funds purchased of $3,560,000 and term repurchase agreements of
$273,000.  Somewhat offsetting these decreases was an increase in daily
repurchase agreements of $7,393,000.

   Federal Home Loan Bank advances increased $4,000,000, or 50.0%, from
$8,000,000 at December 31, 1997 to $12,000,000 at September 30, 1998.  The
increase was the result of acquiring a $5,000,000 long-term advance in July
1998.  This advance will help to narrow the long-term repricing gap.  This
advance was somewhat offset by a $1,000,000 advance maturing during the first
quarter of 1998.

   Other liabilities increased $540,000, or 10.2%, from $5,289,000 at
December 31, 1997 to $5,829,000 at September 30, 1998.  Included in this
increase was $340,000 attributable to organizational changes implemented to
improve efficiency, including the merger of subsidiaries (BankIllinois Trust
Company into BankIllinois) in September 1998.

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CAPITAL 

   Total stockholders' equity increased $2,799,000 from December 31, 1997
to September 30, 1998.  The change is summarized as follows:


                                                      (IN THOUSANDS)
Stockholders' equity, December 31, 1997                     $57,330 
Net income                                                    4,322 
Treasury stock transactions, net                               (997)
Stock appreciation rights                                        68 
Purchase of fractional shares related to stock dividend          (4)
Cash dividends declared                                      (1,273)
Other comprehensive income                                      683 
Stockholders' equity, September 30, 1998                    $60,129 


At its regular board meeting on September 15, 1998, the Board of Directors of
the Company declared a cash dividend of $0.08 per share of the Company's
common stock.  The dividend of $429,000 was payable on October 19, 1998 to
holders of record on October 5, 1998.  A first and second quarter cash
dividend of $412,000 and $432,000 was paid on April 17, 1998 and July 16,
1998, respectively.

   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 September 30, 1998, that the Company and BankIllinois meet all capital
adequacy requirements to which they are subject.

   As of September 30, 1998, the most recent notification from its 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.
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   The Company's and BankIllinois' actual capital amounts and ratios are
presented in the following table (in thousands):
<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 September 30, 1998:
   Total capital                                                                                       
     (to risk-weighted assets)                                                                         
     Consolidated                      $63,262       19.2%    $26,389        8.0%       N/A            
     BankIllinois                      $56,984       17.3%    $26,300        8.0%   $32,875       10.0%
   Tier I capital                                                                                      
      (to risk-weighted assets)                                                                        
     Consolidated                      $59,123       17.9%    $13,194        4.0%       N/A            
     BankIllinois                      $52,858       16.1%    $13,150        4.0%   $19,725        6.0%
   Tier I capital                                                                                      
      (to average assets)                                                                              
     Consolidated                      $59,123       11.2%    $21,088        4.0%       N/A            
     BankIllinois                      $52,858       10.1%    $21,025        4.0%   $26,282        5.0%
</TABLE>

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.  
     
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     The following table presents the Company's interest rate sensitivity at
various intervals at September 30, 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                        $26,900        --         --         --           --       26,900 
   Debt and equity securities <F1>             9,587     13,437     15,765     27,636       95,899     162,324 
   Loans <F2>                                 73,492     17,880     19,178     34,702      155,513     300,765 
    Total interest earning assets            109,979     31,317     34,943     62,338      251,412     489,989 
Interest bearing liabilities:                                   
   Savings and interest-bearing                                 
     demand deposits                        $164,171        --         --         --           --      164,171 
   Time deposits                               8,329     19,707     21,480     39,677       84,796     173,989 
   Federal funds purchased and securities
     sold under repurchase agreements         48,167      2,050         --      3,000          200      53,417 
   Federal Home Loan Bank advances             1,000      1,000      1,000      1,000        8,000      12,000 
    Total interest bearing liabilities      $221,667     22,757     22,480     43,677       92,996     403,577 
Net asset (liability) funding gap          $(111,688)     8,560     12,463     18,661      158,416      86,412 
Repricing gap                                  0.50       1.38       1.55       1.43         2.70        1.21  
Cumulative repricing gap                       0.50       0.58       0.66       0.77         1.21        1.21  

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

   At September 30, 1998, the Company was liability-sensitive due to the
levels of savings and interest bearing demand deposits, short-term time
deposits, federal funds purchased and securities sold under repurchase
agreements.  As such, the effect of a decrease in the interest rate for all
interest earning assets and interest bearing liabilities of 100 basis points
would increase annualized net interest income by approximately $1,117,000 in
the 1-30 days category and $1,031,000 in the 1-90 days category assuming no
management intervention.  An increase in interest rates would have the
opposite effect for the same time periods.


LIQUIDITY

   The Company was able to meet liquidity needs during the first nine
months of 1998.  A review of the condensed consolidated statements of cash
flows included in the accompanying financial statements shows that the
Company's cash and cash equivalents decreased $6,388,000
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from December 31, 1997 to September 30, 1998.  Cash was used in the area of
financing, while cash was provided through operating and investing
activities.

   There were differences in sources and uses of cash during the first nine
months of 1998 compared to the first nine months of 1997.  Included in the
change in cash used by operating activities was an increase in loans
originated for sale.  Cash was provided by investment activities during the
first nine months of 1998 as compared to 1997 in which more cash was used for
investing.  In 1998 there was a slight decrease in loans while 1997
experienced rapid loan growth.  Paydowns on securities, which are reflective
of the current interest rate environment, were higher during the first nine
months of 1998 compared to the first nine months of 1997.  These were
somewhat offset by more cash used in purchasing investments in debt and
equity securities.  Cash used in financing activities was higher during the
first nine months of 1998 compared to the same period in 1997 because of
lower deposits and the payment of cash dividends, somewhat offset by an
increase in federal funds purchased and securities sold under repurchase
agreements as well as Federal Home Loan Bank advances.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

   The provision for loan losses is based on management's evaluation of the
loan portfolio in light of national and local economic conditions, changes in
the composition and volume of the loan portfolio, changes in the volume of
past due and nonaccrual loans, and other relevant factors.  The allowance for
loan losses, which is reported as a deduction from loans, is available for
loan charge-offs.  The allowance is increased by the provision charged to
expense and is reduced by loan charge-offs net of loan recoveries.  The
balance of the allowance for loan losses was $5,441,000 at September 30, 1998
compared to $5,306,000 at December 31, 1997, as provisions of $345,000
exceeded net charge-offs of $210,000 during the nine month period.  The
allowance for loan losses as a percentage of total loans rose to 1.81% at
September 30, 1998, compared to 1.68% at December 31, 1997 as total loans
fell from $316,000,000 to $301,000,000.

   The allowance for loan losses as a percentage of nonperforming loans
rose to 194% at September 30, 1998, compared to 180% at December 31, 1997. 
This increase was due to a $148,000 reduction in non-performing loans and a
$135,000 increase in the allowance for loan losses. Management believes that
problem assets have been effectively identified and that the allowance for
loan losses is adequate to absorb possible losses in the portfolio.

                             RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

   Net income for the first nine months of 1998 was $4,322,000, a $408,000,
or 10.4% increase from the first nine months of 1997.  Basic earnings per
share were $0.80 for the first nine months of 1998 and $0.72 for the same
period of 1997.  Diluted earnings per share were $0.78 for the first nine
months of 1998 and $0.71 for the same period of 1997.

   Operating earnings for the nine months ended September 30, 1998, were
$4,804,000 compared to $4,000,000 for the same period in 1997, a 20.1%
increase.  Basic operating
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earnings per share increased $0.15, or 20.3%, to $0.89 in the first nine
months of 1998 from $0.74 in the same period of 1997.  Diluted operating
earnings per share increased $0.13, or 17.8%, to $0.86 in the first nine
months of 1998 from $0.73 in the same period of 1997.  Net income for the
first nine months of 1998 and 1997 was $4,322,000 and $3,914,000,
respectively.  The difference between operating and net earnings was due to
non-recurring items affecting each of these two periods.  The non-recurring
expense items, net of tax, in the first nine months of 1998 were $482,000. 
Included in these items was $317,000 related to organizational changes
implemented to improve efficiency, including the merger of BankIllinois Trust
Company into BankIllinois.  Also included was $165,000 of expense related to
a loss on disposal of property.  The non-recurring item, net of tax, in the
first nine months of 1997 was $86,000 which was attributable to the closing
of the Champaign Money Market branch in May 1997.

   Net interest income was $872,000, or 6.5% higher for the first nine
months of 1998 compared to 1997.  Total interest income was $970,000, or 3.5%
higher in 1998 compared to 1997, and interest expense increased $98,000, or
0.7%.  The increase in interest income was due primarily to an increase in
average earning assets.  The increase in interest expense was primarily due
to an increase in average interest bearing liabilities, somewhat offset by a
decrease in interest rates.

   The increase in total interest income included an increase of
$1,416,000, or 7.2%, on loan interest income.  This increase was primarily
due to the increase in average loans outstanding.  Also contributing to the
increase in total interest income was an increase of $95,000, or 41.7%, on
tax-exempt investments in debt and equity securities.  This increase was
primarily due to an increase in tax-exempt investments.  There was also an
increase of $139,000, or 28.7%, on federal funds sold.  Somewhat offsetting
these increases was a decrease of $680,000, or 9.1%, on taxable investments
in debt and equity securities.  This decrease was attributable both to a
decrease in taxable investments as well as to lower interest rates.

   The provision for loan losses recorded was $345,000 during the first
nine months of 1998.  This was $20,000, or 6.2%, higher than the amount
recorded during the first nine months of 1997.  The provision during the
first nine months of 1998 was based on management's analysis of the loan
portfolio.

   Total noninterest income increased $305,000, or 9.1%, during the first
nine months of 1998 compared to the first nine months of 1997.  Included in
this increase was an increase of $202,000, or 97.6%, in gains on sales of
mortgage loans held-for-sale.  This increase reflected a $27,020,000, or
146.5%, increase in mortgage loans held-for-sale which were closed during the
first nine months of 1998 compared to the first nine months of 1997.  The
increase in closed loans was attributable to a decrease in interest rates. 
There was also an increase of $93,000, or 6.1%, in trust fees which was a
result of an increase in assets due to new accounts.  Also contributing to
the increase in noninterest income was a $38,000, or 475.0%, increase in
gains on debt securities.  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 the first nine months
of 1998 prior to their maturity dates which resulted in a gain being
recognized.  Included in the change in other income was a gain of $104,000
booked in September 1998 from the sale of the Visa portfolio.  Somewhat
offsetting this increase was a decrease in mortgage servicing income of
$58,000 as a result of a large number of early payoffs and a lower retention
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of servicing rights when selling loans during the first nine months of 1998
compared to 1997.  Lower service charges and fees also affected other income
in 1998 compared to 1997.  In addition, computer service income decreased
$18,000.  The first six months of 1997 included income from outside
processing which the Company is no longer performing.  Also affecting the
decrease in other income were some non-recurring items in the first nine
months of 1997 which included a prior period adjustment of $12,000 booked to
Visa merchant fee income and $19,000 booked to income for the sale of the
East Central Illinois Proprietary Network ATM system. 

   Total noninterest expenses increased $612,000, or 5.8%, during the first
nine months of 1998 compared to the first nine months of 1997.  Included in
the increase were increases in salaries and employee benefits of $571,000, or
9.8%.  Of this increase, $472,000 was due to non-recurring organizational
changes as discussed previously.  Other expenses also increased $143,000, or
6.2%.  Included in this increase was a loss on disposal of property of
$248,000 in 1998 compared to $131,000 of expense due to a 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
the organizational changes related to the merger of the Company's two
subsidiaries, BankIllinois and BankIllinois Trust Company.  In addition,
marketing expenses increased $31,000 due to costs associated with increasing
customer awareness of the Company and its products, including development of
an internet site.  The increase in noninterest expense was also attributable
to start-up and operating costs associated with opening a new branch in May
1998.  These increases in noninterest expense were somewhat offset by a
decrease in net occupancy expense of $104,000, or 9.1%, which 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. 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998

   Net income for the third quarter of 1998 was $1,715,000, a $413,000, or
31.7%, increase compared to the same period of 1997.  Operating earnings were
the same as net income for the third quarters of both 1998 and 1997, as there
were no significant non-recurring expenses during either of these periods. 
Basic earnings per share increased $0.08, or 33.3%, to $0.32 in the third
quarter of 1998 from $0.24 in the same period of 1997.  Diluted earnings per
share increased $0.07, or 29.2%, to $0.31 in the third quarter of 1998 from
$0.24 in the same period of 1997.

   Net interest income was $349,000, or 7.9% higher for the third quarter
of 1998 compared to 1997.  Total interest income was $232,000, or 2.5% higher
in the third quarter 1998 compared to the third quarter of 1997, and interest
expense decreased $117,000, or 2.4% during the same periods.  The increase in
interest income was due to an increase in average earning assets, somewhat
offset by lower yields.  The decrease in interest expense was primarily due
to lower interest rates, somewhat offset by an increase in average interest
bearing liabilities.

   The increase in total interest income included an increase of $342,000,
or 5.1%, on loan interest income.  This increase was primarily due to the
increase in average loans outstanding as well as higher rates during the
third quarter of 1998 compared to the third quarter of 1997. 
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In addition, there was an increase of $43,000, or 55.8%, on tax-exempt
investment income.  This increase was due to an increase in tax-exempt
investments.  There was also an increase of $106,000, or 69.7%, on income
from federal funds sold.  Somewhat offsetting these increases was a decrease
of $259,000, or 10.5%, on taxable investments in debt and equity securities. 
This decrease was primarily attributable to a decrease in lower interest
rates as well as taxable investments during the third quarter of 1998
compared to the third quarter of 1997.

   The provision for loan losses recorded was $90,000 during the third
quarter of 1998.  This was $85,000, or 48.6%, lower than the amount recorded
during the third quarter of 1997.  The provision recorded during each of
these periods was based on management's analysis of the loan portfolio.

   Total noninterest income increased $116,000, or 10.0%, during the third
quarter of 1998 compared to the same period of 1997.  Included in this
increase was an increase of $44,000, or 50.0%, in gains on sales of mortgage
loans held-for-sale.  This increase reflects a $9,502,000, or 114.6%,
increase in mortgage loans held-for-sale which were closed during the third
quarter of 1998 compared to the third quarter of 1997.  The increase in
closed loans was attributable to a decrease in interest rates.  Also
contributing to the increase in noninterest income was a $10,000, or
1,000.0%, increase in gains on debt securities.  This increase was the result
of the Company amortizing discounts on securities to their maturity date. 
Due to decreasing interest rates, several securities were called during the
third quarter of 1998 prior to their maturity dates which resulted in a gain
being recognized.  Other income increased $74,000 in the third quarter of
1998 compared to the third quarter of 1997.  Included in this increase was a
$104,000 gain which was recognized in the third quarter of 1998 from the sale
of the Visa portfolio.  Other income was also affected by a $34,000 decrease
in mortgage servicing income as a result of a large number of early payoffs
and a lower retention of servicing rights when selling loans during the third
quarter of 1998 compared to 1997.  Lower service charges and fees in the
third quarter of 1998 compared to the third quarter of 1997 also contributed
to the decrease in other income.  Somewhat offsetting these net increases in
noninterest income was a decrease of $10,000, or 1.9%, in trust fees due to
less fees produced in the third quarter of 1998 from farms sold in management
accounts, somewhat offset by an increase in income due to new accounts in
other trust areas.

   Total noninterest expenses decreased $38,000, or 1.1%, during the third
quarter of 1998 compared to the third quarter of 1997.  Included in the
decrease was a decrease in net occupancy of $43,000, or 11.3%.  This was due
to lower maintenance and repair costs in the third quarter of 1998 as well as
lower real estate taxes and utility costs due to the sale of a vacant
building and adjacent parking lot in March 1998.  Data processing expense
also decreased $13,000, or 6.7% during the third quarter of 1998 due to a
decrease in computer service expense related to lower maintenance costs in
1998.  Other expenses were $55,000 lower in the third quarter of 1998
compared to the same period of 1997.  Included in the change in other
expenses was a decrease in staff training expense of $26,000 in 1998.  The
third quarter of 1997 included expenses related to a training program
instituted to improve skills on providing effective service to customers. 
Also affecting the decrease in other expenses was a $21,000 decrease in other
real estate net expense in the third quarter of 1998 compared to 1997.  The
income which is netted with other real estate expense was higher in the third
quarter of 1998 compared to 1997 due to an increased number of tenants
renting space.  These decreases in noninterest expense were
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<PAGE> 
somewhat offset by an increase in salaries and employee benefits of $77,000,
or 4.0%.  This increase was reflective of salaries related to the new branch
which opened in May 1998, as well as incentive compensation accruals related
to third quarter performance in 1998.

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 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
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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.  To date,
testing is 33% complete.  Testing is being done on a test server which
emulates the current BankIllinois network and systems.  The Company expects
to have all mission critical systems renovated and tested prior to December
31, 1998.  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 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.

   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
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 $325,000. 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
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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.
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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The are no material pending legal proceedings to which the Company or its
subsidiaries is a party other than ordinary routine litigation incidental to
their respective businesses.


ITEM 2.  CHANGES IN SECURITIES

None


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None


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

None

ITEM 5.  OTHER INFORMATION

None


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a.  Exhibits

27.  Financial Data Schedule

b.  Reports

None
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                                   SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



BANKILLINOIS FINANCIAL CORPORATION



Date: November 12, 1998



By:     /s/ David B. White
        Executive Vice President 
        and Chief Financial Officer