UNITED STATES
                        SECURITY AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


{X}  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended   December 31, 1998
                                       or

{ }  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ______________________ to ______________________

Commission File Number:  0-27700

                              HBancorporation, Inc.
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   37-1351506
                      (I.R.S. Employer identification No.)

619 12th Street, Lawrenceville, Illinois                         62439
(Address of principal executive offices)                       (Zip Code)

                                 (618) 943-2515
              (Registrant's telephone number, including area code)

                                       N/A
         (Former name, former address and former fiscal year, if changed
                               since last report)

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 shorter  period that the  registrant was required to
file such  reports),  and (2) has been  subject  to such  filing for the past 90
days. {X}Yes { }No

As of December 31, 1998,  there were 493,320 shares of the  Registrant's  common
stock issued and outstanding.

Transitional Small Business Disclosure Format (Check One):

{ }  Yes       {X}  No


<PAGE>


                              HBANCORPORATION, INC.

                                      INDEX

<TABLE>
                                                                                              PAGE
                                                                                              ----
<S>                                                                                           <C>
Part I.  Financial Information

         Item 1.  Financial Statements

         Consolidated Statements of Financial Condition at December 31, 1998
         and June 30, 1998                                                                     1

         Consolidated Statements of Income for the three and six months ended
         December 31, 1998 and 1997                                                            2

         Consolidated Statement of Changes in Stockholders' Equity for the
         six months ended December 31, 1998 and 1997                                           3

         Consolidated Statements of Cash Flows for the three and six months
         ended December 31, 1998 and 1997                                                      4

         Notes to Consolidated Financial Statements                                           5-6

         Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                            7-11

Part II.  Other Information

         Item 1.  Legal Proceedings                                                            12

         Item 2.  Exhibits and Reports on Form 8-K                                             12

         Signatures                                                                            13
</TABLE>


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


<TABLE>
<CAPTION>
                                                                            (Unaudited)
                                                                            December 31,        June 30,
                                                                                1998              1998     
                                                                           ---------------  ---------------
<S>                                                                         <C>               <C>         
             ASSETS
Cash and equivalents:
   Cash                                                                     $     96,978      $    612,736
   Interest bearing deposits                                                   2,906,591         2,120,840
                                                                            ------------      ------------
         Total cash and cash equivalents                                       3,003,569         2,733,576

Investments available for sale at fair value                                   1,373,193         1,628,638
Investments held to maturity at cost                                           4,416,959         1,022,166
Loans receivable, net                                                         16,323,642        15,582,966
Federal Home Loan Bank stock at cost                                              87,500            87,500
Federal Reserve Bank stock at cost                                                67,800            67,800
Accrued interest receivable                                                      199,500           247,437
Office property and equipment, net                                               194,373            51,451
Other assets                                                                      34,204            36,716
                                                                            ------------      ------------
         Total Assets                                                       $ 25,700,740      $ 21,458,250
                                                                            ============      ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Passbook savings                                                         $  1,907,099      $  1,871,150
   Money market accounts                                                         603,914           681,126
   Certificates of deposit                                                     9,831,653         7,969,700
   Certificates of deposit $100,000 and over                                   4,043,802         1,771,564
                                                                            ------------      ------------
         Total Deposits                                                       16,386,468        12,293,540

   Advances from FHLB                                                          1,750,000         1,750,000

Other Liabilities:                                                               430,531           365,237
                                                                            ------------      ------------
         Total Liabilities                                                    18,566,999        14,408,777
                                                                            ------------      ------------

Stockholders' Equity:
   Common stock,  $.01 par value,  2 million shares  authorized,
     493,320 shares issued; 403,460 shares outstanding at
     December 31, 1998; and 409,560 shares outstanding at
     June 30, 1998                                                                 4,933             4,933
   Additional paid in capital                                                  4,546,806         4,540,644
   Retained earnings                                                           4,235,312         4,166,189
   Treasury stock at cost                                                     (1,433,378)       (1,359,078)
   Net unrealized appreciation on available-for-sale securities
     net of deferred tax                                                         217,000           164,250
   Unearned ESOP and recognition and retention shares                           (436,932)         (467,465)
                                                                            ------------      ------------
         Total Stockholders' Equity                                            7,133,741         7,049,473
                                                                            ------------      ------------

         Total Liabilities and Stockholders' Equity                         $ 25,700,740      $ 21,458,250
                                                                            ============      ============
</TABLE>

See notes to consolidated financial statements.

                                       -1-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS
                        CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                          Three months ended              Six months ended
                                                              December 31,                  December 31,
                                                      --------------------------     -------------------------
                                                              (Unaudited)                   (Unaudited)
                                                         1998            1997           1998           1997
                                                      ----------      ----------     ----------     ----------
<S>                                                   <C>             <C>            <C>            <C>       
INTEREST INCOME
   Loans receivable                                   $  399,681      $  328,284     $  758,060     $  665,528
   Investments                                           129,841          79,545        243,400        153,837
                                                      ----------      ----------     ----------     ----------
         Total Interest Income                           529,522         407,829      1,001,460        819,365
                                                      ----------      ----------     ----------     ----------

INTEREST EXPENSE
   Interest on deposits                                  206,535         123,777        380,047        239,542
   Interest on FHLB advances                              24,721          21,279         49,442         29,379
                                                      ----------      ----------     ----------     ----------
         Total Interest Expense                          231,256         145,056        429,489        268,921
                                                      ----------      ----------     ----------     ----------

         Net Interest Income                             298,266         262,773        571,971        550,444

   Provision for Loan Losses                               2,500             -0-          7,500            -0-
                                                      ----------      ----------     ----------     ----------
         Net interest income after provision
           for loan losses                               295,766         262,773        564,471        550,444
                                                      ----------      ----------     ----------     ----------

NONINTEREST INCOME
   Customer service fees and other                         8,286          15,634         15,012         21,402
                                                      ----------      ----------     ----------     ----------
         Total Noninterest Income                          8,286          15,634         15,012         21,402
                                                      ----------      ----------     ----------     ----------

NONINTEREST EXPENSES
   General and administrative
     Compensation and benefits                           112,674          78,912        203,864        157,094
     Occupancy and equipment                              14,747          10,262         26,218         19,205
     Deposit insurance premium                             5,237           4,861         10,426          9,641
     Computer expense                                      6,267           4,335         10,061          8,368
     Legal expense                                        12,859          18,592         21,312         29,687
     Other                                                32,615          25,777         56,845         50,853
                                                      ----------      ----------     ----------     ----------
         Total Noninterest Expenses                      184,399         142,739        328,726        274,848
                                                      ----------      ----------     ----------     ----------

INCOME BEFORE INCOME TAX                                 119,653         135,668        250,757        296,998

Income Tax Expense                                        55,000          68,200        116,602        137,700
                                                      ----------      ----------     ----------     ----------

NET INCOME                                            $   64,653      $   67,468     $  134,155     $  159,298
                                                      ==========      ==========     ==========     ==========

Earnings Per Share:
   Primary                                            $     0.13      $     0.16     $     0.28     $     0.36
                                                      ==========      ==========     ==========     ==========

   Fully diluted                                      $     0.13      $     0.16     $     0.27     $     0.35
                                                      ==========      ==========     ==========     ==========
</TABLE>


See notes to consolidated financial statements.

                                       -2-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                 Common       Paid in      Retained       Treasury   
                                                 Stock        Capital      Earnings        Stock     
                                              -----------   -----------   -----------    ----------- 
<S>                                           <C>           <C>           <C>            <C>         
BALANCE, June 30, 1997                        $     4,933   $ 4,514,279   $ 4,015,104    $   (26,838)
Net income for the six months ended
   December 31, 1997                                    0             0       159,298              0 
Cash dividends                                          0             0       (76,470)             0 
Change in net unrealized gain on securities
   available-for-sale, net of applicable
   deferred income taxes of $100,000                    0             0             0              0 
Effect of contribution to fund ESOP                     0             0             0              0 
Effect of contribution to fund RRP                      0        13,064             0              0 
Purchase of treasury stock                              0             0             0     (1,346,230)
                                              -----------   -----------   -----------    ----------- 

BALANCE, September 30, 1997                   $     4,933   $ 4,527,343   $ 4,097,932    $(1,373,068)
                                              ===========   ===========   ===========    =========== 

BALANCE, June 30, 1998                        $     4,933   $ 4,540,644   $ 4,166,189    $(1,359,078)
Net income for the six months ended
   December 31, 1998                                    0             0       134,155              0 
Cash dividends                                          0             0       (65,032)             0 
Change in unrealized gain on securities
   available-for-sale, net of applicable
   deferred income taxes of $152,500                    0             0             0              0 
Effect of contribution to fund ESOP                     0         6,162             0              0 
Effect of contribution to fund RRP                      0             0             0              0 
Purchase of treasury stock                              0             0             0        (74,300)
                                              -----------   -----------   -----------    ----------- 

BALANCE, December 31, 1998                    $     4,933   $ 4,546,806   $ 4,235,312    $(1,433,378)
                                              ===========   ===========   ===========    =========== 




<CAPTION>
                                              Unrealized      Unearned         RRP
                                              Gain (Loss)      Compen-        Compen-        Total
                                              Securities       sation         sation         Equity
                                              -----------   -----------    -----------    -----------
<S>                                           <C>           <C>           <C>            <C>         
BALANCE, June 30, 1997                        $   111,500   $  (335,453)   $         0    $ 8,283,525
Net income for the six months ended
   December 31, 1997                                    0             0              0        159,298
Cash dividends                                          0             0              0        (76,470)
Change in net unrealized gain on securities
   available-for-sale, net of applicable
   deferred income taxes of $100,000               30,500             0              0         30,500
Effect of contribution to fund ESOP                     0        19,733              0         19,733
Effect of contribution to fund RRP                      0             0              0         13,064
Purchase of treasury stock                              0             0              0     (1,346,230)
                                              -----------   -----------    -----------    -----------

BALANCE, September 30, 1997                   $   142,000   $  (315,720)   $         0    $ 7,083,420
                                              ===========   ===========    ===========    ===========

BALANCE, June 30, 1998                        $   164,250   $  (295,988)   $  (171,477)   $ 7,049,473
Net income for the six months ended
   December 31, 1998                                    0             0              0        134,155
Cash dividends                                          0             0              0        (65,032)
Change in unrealized gain on securities
   available-for-sale, net of applicable
   deferred income taxes of $152,500               52,750             0              0         52,750
Effect of contribution to fund ESOP                     0        19,733              0         25,895
Effect of contribution to fund RRP                      0             0         10,800         10,800
Purchase of treasury stock                              0             0              0        (74,300)
                                              -----------   -----------    -----------    -----------

BALANCE, December 31, 1998                    $   217,000   $  (276,255)   $  (160,677)   $ 7,133,741
                                              ===========   ===========    ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                       -3-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  Three months ended                  Six months ended
                                                                     December 31,                        December 31
                                                             ----------------------------        -----------------------------
                                                                     (Unaudited)                         (Unaudited)
                                                                1998              1997              1998               1997
                                                             -----------       -----------       -----------       -----------
<S>                                                          <C>               <C>               <C>               <C>        
NET INCOME (Loss)                                            $    64,653       $    67,468       $   134,155       $   159,298
Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                                  4,305             3,027             8,880             6,066
     Decrease in other assets                                      4,106             5,652             2,512             7,491
     Decrease in interest receivable                              69,108            54,799            47,937             7,675
     Increase (decrease) in other liabilities                     (6,369)           19,649            65,294            95,083
     Provision for loan loss                                       2,500               -0-             7,500               -0-
                                                             -----------       -----------       -----------       -----------
Cash provided by operating activities                            138,303           150,595           266,278           275,613
                                                             -----------       -----------       -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Investments in certificates of deposit in other
     financial institutions, net (increase) decrease                 -0-            (1,849)              -0-            98,151
   Purchase of Federal Home Loan Bank stock                          -0-           (21,500)              -0-           (21,500)
   Proceeds from maturities of investments
     held to maturity                                          1,012,166               475         1,016,350             1,134
   Proceeds from maturities of investments
     available-for-sale                                          176,074           110,653           308,195           110,653
   Purchase of investments held to maturity                   (2,409,078)              -0-        (4,411,143)              -0-
   Purchase of investments available-for-sale                        -0-               -0-               -0-        (1,013,534)
   Purchase of fixed assets                                     (146,401)           (3,442)         (151,802)           (4,698)
   Net (increase) in loans                                    (1,179,755)         (383,181)         (748,176)         (825,954)
                                                             -----------       -----------       -----------       -----------
Cash (used) by investing activities                           (2,546,994)         (298,844)       (3,986,576)       (1,655,748)
                                                             -----------       -----------       -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Advances from FHLB                                                -0-           750,000               -0-         1,750,000
   Payment of dividends                                          (32,277)          (37,002)          (65,032)          (76,470)
   Allocation of ESOP shares                                      22,763            13,485            25,895            19,733
   Allocation of RRP shares                                       10,800            13,064            10,800            13,064
   Net increase (decrease) in demand deposits,
     NOW accounts, savings accounts and
     certificates of deposit                                   1,434,550           658,919         4,092,928         1,421,955
   Purchases of treasury stock                                       -0-          (906,363)          (74,300)       (1,346,230)
                                                             -----------       -----------       -----------       -----------
Cash provided by financing activities                          1,435,836           492,103         3,990,291         1,782,052
                                                             -----------       -----------       -----------       -----------

   Net increase (decrease) in cash and
     cash equivalents                                           (972,855)          343,854           269,993           401,917

Cash and Cash Equivalents at Beginning
   of Period                                                   3,976,424         1,708,357         2,733,576         1,650,294
                                                             -----------       -----------       -----------       -----------

Cash and Cash Equivalents at End of Period                   $ 3,003,569       $ 2,052,211       $ 3,003,569       $ 2,052,211
                                                             ===========       ===========       ===========       ===========

Cash paid for:
   Interest                                                  $   207,111       $   125,418       $   383,006       $   237,680
                                                             ===========       ===========       ===========       ===========

   Income taxes                                              $    96,760       $    86,000       $   116,639       $   107,481
                                                             ===========       ===========       ===========       ===========
</TABLE>

See notes to consolidated financial statements 
                                       -4-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


NOTE 1 - BASIS OF PRESENTATION

The unaudited  information  for the quarters  ended  December 31, 1998 and 1997,
includes the results of operations of HBancorporation,  Inc. (the "Company") and
its wholly owned subsidiary  Heritage National Bank (the "Bank"). In the opinion
of management of the Company and the Bank, the financial  statements reflect all
adjustments  (consisting  only of normal  recurring  adjustments)  necessary  to
present fairly the consolidated  financial  statements.  These interim financial
statements  should be read in conjunction  with the Company's most recent annual
financial   statements   and   footnotes   included  in  the  annual  report  of
HBancorporation,  Inc. for the fiscal year ended June 30,  1998.  The results of
the  periods  presented  are not  necessarily  representative  of the results of
operations and cash flows which may be expected for the entire year.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
the Bank. All  significant  inter-company  balances and  transactions  have been
eliminated in consolidation.

NOTE 3 - STOCK CONVERSION

The Company issued 493,320 shares,  $.01 par value common stock, for proceeds of
$4,510,404 net of expenses of approximately  $423,000. The Bank converted from a
mutual savings association to a stock savings association and then to a national
bank immediately following the formation of the Company and received proceeds of
$2,255,202 in exchange for all its common stock.  This transaction was accounted
for using the pooling of interests  method.  On April 1, 1996, the Company began
trading  as a public  company on the OTC  Electronic  Bulletin  Board  under the
symbol "HBIN".

Federal regulations require that, upon conversion from a mutual to stock form of
ownership,  a  "liquidation  account" be established by restricting a portion of
net worth for the benefit of eligible savings account holders who maintain their
savings  accounts  with the Bank  after  conversion.  In the  event of  complete
liquidation  (and only in such event) each savings  account holder who continues
to maintain his savings account shall be entitled to receive a distribution from
the  liquidation  account  after  payment  of  all  creditors,  but  before  any
liquidation  distribution  with respect to capital  stock.  This account will be
proportionately  reduced for any subsequent  reduction in such holders'  savings
account.  Federal regulations impose limitations on the payment of dividends and
other capital distributions,  including,  among others, that the Company may not
declare or pay a cash dividend on any of its capital stock if the effect thereof
would cause the Bank's  capital to be reduced below the amount  required for the
liquidation  account  or the  capital  requirements  imposed  by  the  Financial
Institutions Reform, Recovery, and Enforcement Act.

Concurrent with the conversion,  the board of directors approved the adoption of
the Company's  Employee Stock  Ownership  Plan (the "ESOP").  The ESOP qualifies
under Sections  401(a) and 501(a) of the Internal  Revenue Code,  eligibility is
based on hours of service, date of hire, and age.  Contributions to the ESOP are
determined  by the  board of  directors,  in the  form of cash or the  Company's
common  stock.  No  employee  contributions  are  accepted.   Contributions  are
allocated  based  on  the  ratio  of the  participant's  compensation  to  total
compensation  of all  participants.  Participant's  account  balances  are fully
vested after five years of service.

                                       -5-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1998 AND 1997


NOTE 4 - EMPLOYEE BENEFIT AND STOCK OPTION PLANS

On  April  28,  1997,  the  stockholders'  approved  the  HBancorporation,  Inc.
Recognition  and  Retention  Plan.  The  purpose  of  this  plan  is to  provide
directors,  officers and employees with a proprietary interest in the Company in
a manner  designed to encourage such  individuals to remain with the Company and
the Bank. The terms of each RRP will be identical, only the participants and the
number of shares awarded to each participant vary. Eligible directors,  officers
and other key employees of the Company will earn (i.e., become vested in) shares
of common stock covered by the award at a rate not to exceed 20% per year,  with
the first installment vesting April 28, 1997.

On April 28, 1997,  the  stockholders  approved the  HBancorporation,  Inc. 1997
Stock Option and Incentive Plan.  Pursuant to the Stock Option Plan, the Company
will reserve for issuance  thereunder either from authorized but unissued shares
or from issued shares  reacquired and held as treasury shares,  59,198 shares of
Common Stock (12.0% of the Company's  current  shares  outstanding).  Management
currently  intends,  to the extent  practicable and feasible,  to fund the Stock
Option Plan from issued  shares  reacquired  by the Company in the open  market.
Awards under the plan may be in the form of stock  options,  stock  appreciation
rights or limited stock appreciation rights.  Awards made under the plan vest at
a rate of one-fifth of the initial  award per year,  subject to the  participant
maintaining continuous service since the date of grant.

NOTE 5 - EARNINGS PER SHARE

Primary  earnings per share  amounts for the six months ended  December 31, 1998
and 1997 are computed based on the  weighted-average  number of shares  actually
outstanding,  479,212 in 1998, and 438,696 in 1997.  Fully diluted  earnings per
share  amounts  are  based  on an  increased  number  of  shares  that  would be
outstanding assuming exercise of the stock options and RRP awards. The number of
shares used in the  computations of fully diluted earnings per share for the six
months ended December 31, 1998 and 1997 were 496,804 and 458,560, respectively.


                                       -6-

<PAGE>


                              HBANCORPORATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION


Forward-Looking  Statements.  When used in this filing and in future  filings by
the Company with the Securities and Exchange Commission,  in the Company's press
releases or other public or shareholder  communications,  or in oral  statements
made with the approval of an authorized  executive officer, the words or phrases
"would be", "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated,"  "estimate," "project" or similar expressions
are intended to identify "forward-looking  statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and  uncertainties,  including  but not  limited to  changes  in  economic
conditions  in the  Company's  market  area,  changes in policies by  regulatory
agencies,  fluctuations  in interest  rates,  demand for loans in the  Company's
market area and competition,  all or some of which could cause actual results to
differ  materially from historical  earnings and those presently  anticipated or
projected.

The Company  wishes to caution  readers not to place undue  reliance on any such
forward-looking  statements,  which speak only as of the date made,  and advises
readers  that  various  factors,   including   regional  and  national  economic
conditions,  substantial  changes in levels of market interest rates, credit and
other risks of lending and investment  activities and competitive and regulatory
factors,  could affect the Company's  financial  performance and could cause the
Company's  actual  results for future  periods to differ  materially  from those
anticipated or projected.

The Company does not undertake,  and specifically  disclaims any obligation,  to
update any  forward-looking  statements to reflect  occurrences or unanticipated
events or circumstances after the date of such statements.

Impact of the Year 2000. The Company has conducted a comprehensive review of its
computer  systems to identify  applications  that could be affected by the "Year
2000" issue, and has developed an implementation  plan to address the issue. The
Company's data processing is performed by an outside service bureau. The Company
has  already  contacted  each  vendor  to  request  time  tables  for year  2000
compliance  and expected  costs,  if any, to be passed along to the Company.  To
date,  the  Company  has  been  informed  that  its  primary  service  providers
anticipate  that all  reprogramming  efforts  will be  completed by December 31,
1999, allowing the Company adequate time for testing. Certain other vendors have
not yet responded,  however, the Company will pursue other options if it appears
that these  vendors will be unable to comply.  Management  does not expect these
costs to have a  significant  impact on its  financial  position  or  results of
operations  however,  there can be no assurance that the vendors systems will be
2000  compliant,  consequently  the  Company  could incur  incremental  costs to
convert to another  vendor.  The Company has identified  certain of its hardware
and  software  equipment  that will not be Year 2000  compliant  and  intends to
purchase new  equipment  and software  prior to March 31,  1999.  These  capital
expenditures are expected to total approximately $20,000.

General

The  Company  is  incorporated  under  the  laws of  Delaware  and is  generally
authorized  to engage  in any  activity  that is  permitted  for a bank  holding
company under  federal  banking law. The Company owns all the stock of the Bank.
The Company had not engaged in any material operations at December 31, 1998, and
had no significant  assets other than its equity investment in the Bank's stock,
cash, investments, and a loan to the Company's ESOP.


                                       -7-

<PAGE>


                              HBANCORPORATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION


Established in 1935, the Bank (formerly named Lawrenceville  Federal Savings and
Loan  Association)  is a  community-oriented  financial  institution  offering a
variety of financial  services to meet the needs of the  communities  it serves.
The Bank's  primary  market  area covers  Lawrence  County,  Illinois,  and Knox
County,  Indiana.  The Bank attracts  deposits from the general  public and uses
such deposits,  together with  borrowings  and other funds,  to originate one to
four family residential  mortgages,  commercial business loans,  consumer loans,
and  finance  leases.  The Bank  also  invests  in U.S.  government  and  agency
obligations and may invest in other permissible investments.

The Bank's results of operations  are primarily  dependent upon its net interest
income, which is the difference between interest earned on loans and investments
and interest paid on deposits and other borrowed  funds.  Net interest income is
directly  affected  by the  relative  amounts  of  interest  earning  assets and
interest  bearing  liabilities  and the  interest  rates  earned or paid on such
amounts. The Bank's results of operations are also affected by the provision for
loan losses and the level of noninterest income and expenses. Noninterest income
consists primarily of service charges. Noninterest expense includes salaries and
employee benefits,  occupancy expenses, federal deposit insurance premiums, data
processing expenses, and other operating expenses.

The  operating  results  of the Bank  are  also  affected  by  general  economic
conditions,  the  monetary  and fiscal  policies  of federal  agencies,  and the
policies of agencies that regulate  financial  institutions.  The Bank's cost of
funds is  influenced  by interest  rates on  competing  investments  and general
market rates of interest.  Lending  activities  are influenced by the demand for
real  estate  loans and other  types of loans,  which in turn is affected by the
rates of  interest  at which  loans are  offered,  general  economic  conditions
affecting loan demand, and the availability of funds for lending activities.

Financial Condition

For the six months ended December 31, 1998, total assets increased approximately
$4.2 million from $21.5 million to $25.7 million.  Assets  increased as a result
of  an  increase  in  investments  held  to  maturity.   Deposits  increased  by
approximately  $4.1 million to $16.4  million at December  31, 1998,  from $12.3
million at June 30, 1998.  Management  believes  the increase in deposits  stems
from customers  seeking higher  yielding  investment  alternatives.  For the six
months  ended  December  31,  1998,   total   stockholders'   equity   increased
approximately  $84,000. The increase was primarily a result of net income offset
by the purchase of treasury stock and payment of dividends.

Results of Operations:

Comparison of the three months ended December 31, 1998 and 1997.

General. Net income decreased to $65,000 for the three months ended December 31,
1998,  compared  to  $67,000  for the same  period  in 1997.  The  decrease  was
primarily related to higher interest expense on deposits and FHLB advances.

Interest Income.  Total interest income increased by $22,000 or 5.3% to $530,000
for the three months ended  December 31, 1998,  compared to the same period last
year.  Income from loans grew by $71,000 for the three month period.  Investment
income  increased by $50,000 for the three months due  primarily to the purchase
of investment securities.


                                       -8-

<PAGE>


                              HBANCORPORATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION


Interest  Expense.  Total  interest  expense  increased by $86,000 for the three
months ended December 31, 1998, to $231,000 compared to $145,000 in the previous
three month period.  The amount of  certificates  of deposit have increased $5.7
million at  December  31,  1998 from the same  period a year ago.  The Bank paid
$25,000  interest to FHLB on advances for the three  months  ended  December 31,
1998.

Net  Interest  Income.  Net interest  income  before  provision  for loan losses
increased  $35,000 or 13.5% for the recent  three month  period  compared to the
same period a year ago, from $263,000 to $298,000.

Nonperforming  Assets and  Provisions  for Loan Losses.  The  provision for loan
losses is a result of  management's  periodic  analysis  of the  adequacy of the
Bank's  allowance for loan losses.  During the three month period ended December
31, 1998 the Bank recorded a $2,500  provision  for loan losses,  compared to no
provision for the three month period ended December 31, 1997. As of December 31,
1998 and June 30, 1998,  the Bank's  allowance  for loan losses was $141,000 and
$133,000, respectively.

The Bank had no  nonperforming  assets at December  31,  1998 or June 30,  1998.
There was no  foreclosed  real estate  owned by the Bank at December 31, 1998 or
June 30, 1998.

Noninterest  Income.  Noninterest  income was $8,300 for the three month  period
ended December 31, 1998,  compared to $15,000 for the same period in 1997.  This
decrease is primarily due to a decrease in commercial loan fees.

Noninterest  Expense.  For the three months ended  December 31, 1998,  the total
noninterest  expense was $184,000 compared to $143,000 for the same three months
in  1997.  The  increase  is  primarily  due  to  an  increase  in  general  and
administrative costs as a result of hiring additional employees.

Income Tax  Expense.  Income tax expense  decreased  to $55,000  during the most
recent  three months  compared to $68,000 for the same period a year ago.  Lower
taxes were the result of  decreased  income  before tax of $120,000 for the most
recent three months compared to $136,000 for a year ago.

Comparison of the six months ended December 31, 1998 and 1997.

General.  Net income decreased to $134,000 for the six months ended December 31,
1998,  compared  to  $159,000  for the same  period in 1997.  The  decrease  was
primarily due to a $22,000  increase in net interest  income,  and lower deposit
insurance premiums, offset by contributions to the ESOP and RRP.

Interest  Income.  Total  interest  income  increased  by  $182,000  or 22.2% to
approximately $1.0 million for the six months ended December 31, 1998,  compared
to the same period last year. Income from loans increased by $92,000 for the six
months.  Investment income increased by $90,000 for the six months due primarily
to an increased amount of investments.

Interest  Expense.  Total  interest  expense  increased  by $160,000 for the six
months ended December 31, 1998 to $429,000  compared to $269,000 in the previous
six month  period.  The increase was  primarily due to interest on FHLB advances
and deposits.

Net  Interest  Income.  Net interest  income  before  provision  for loan losses
increased  $22,000 or 3.9%,  from  $550,000 to $572,000 for the recent six month
period compared to the same period a year ago, respectively.


                                       -9-

<PAGE>


                              HBANCORPORATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION


Nonperforming  Assets and  Provisions  for Loan Losses.  The  provision for loan
losses is a result of  management's  periodic  analysis  of the  adequacy of the
Bank's allowance for loan losses. During the six month period ended December 31,
1998 the Bank  recorded  a $7,500  provision  for loan  losses,  compared  to no
provision  for the same  period in 1997.  As of  December  31, 1997 and June 30,
1997, the Bank's allowance for loan losses was $128,000.

The Bank had no  nonperforming  assets at December  31,  1997 or June 30,  1997.
There was no  foreclosed  real estate  owned by the Bank at December 31, 1997 or
June 30, 1997.

Noninterest  Income.  Noninterest  income was $15,000  for the six month  period
ended December 31, 1998,  compared to $21,000 for the same period in 1997.  This
decrease is primarily due to a decrease in commercial loan fees.

Noninterest  Expense.  For the six months ended  December  31,  1998,  the total
noninterest expense was $329,000 compared to $275,000 for the same six months in
1997. Compensation and benefits have increased approximately $47,000 as a result
of  contributions  to the ESOP,  costs associated with the RRP and the hiring of
additional employees.

Income Tax Expense.  Income tax expense  increased  to $117,000  during the most
recent six months  compared  to $138,000  for the same period a year ago.  Lower
taxes were the result of filing  consolidated  tax  returns for the bank and the
holding company.

Capital Requirements.  The Company's main sources of funds are deposits and loan
and investment repayments. Other potential sources would include borrowings from
the Federal Home Loan Bank of Chicago  (FHLB).  As a national  bank, the Bank is
not subject to any prescribed liquidity requirement.

The  Bank  uses its  capital  resources  to meet  ongoing  commitments,  to fund
maturing  certificates of deposit and deposit  withdrawals,  to invest,  to fund
existing  and  future  loan  commitments,  to  maintain  liquidity,  and to meet
operating  expenses.  The company  anticipates it will have sufficient  funds to
meet current loan commitments. At December 31, 1998, the Bank had no outstanding
commitments  to extend  credit.  Management  believes loan  repayments and other
sources  of funds will be  adequate  to meet the  Bank's  foreseeable  liquidity
needs.   FHLB   advances   could  be  used  to  take   advantage  of  investment
opportunities, but are not relied upon in the regular course of business.

The Bank is required to maintain specific amounts of regulatory capital pursuant
to federal  regulations.  The table  below  presents  the  capital  position  at
December 31, 1998 relative to the regulatory capital requirements for the Bank.

                                                           Amount
                                                       (in thousands)
                                                       --------------
       Tier 1 Capital                                      $6,062
       Tier 1 Capital Requirement                             764
                                                           ------
       Excess                                              $5,298
                                                           ======

       Total Risk-Based Capital                            $6,203
       Risk-Based Capital Requirement                       1,334
                                                           ------
       Excess                                              $4,869
                                                           ======


                                      -10-

<PAGE>


                           PART II. OTHER INFORMATION


Item 1.   Legal Proceedings

          There are no material  legal  proceedings  to which the Company or the
          Bank is a party or of which any of their  property  is  subject.  From
          time-to-time, the Bank is a party to legal proceedings incident to its
          business.

Item 2.   Exhibits and Reports on Form 8-K

          None


                                      -11-

<PAGE>


                                   SIGNATURES


Pursuant  to the  requirement  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.

                                             HBANCORPORATION, INC.
                                             Registrant



Date:       January 28, 1999                 /s/  Kevin J. Kavanaugh
       ---------------------------           -----------------------------
                                             Kevin J. Kavanaugh, President
                                             and Chief Executive Officer


Date:       January 28, 1999                 /s/  Cleora Gillespie
       ---------------------------           -----------------------------
                                             Cleora Gillespie, Secretary
                                             and Treasurer


                                      -12-