<PAGE>

                                  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, 1996
                                 ------------------------
                                           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)

Heritage Financial Corporation
--------------------------------------------------------------
(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 January 21, 1997, 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


                                                                        PAGE
                                                                       ------   
Part I.  Financial Information

         Item 1.  Financial Statements

         Consolidated Statements of Financial Condition at
         December 31, 1996 and June 30, 1996                               1
         

         Consolidated Statements of Income for the 
         three months and six months                            
         ended December 31, 1996 and 1995                                  2

         Consolidated Statements of Changes in Stockholders'
         Equity for the six months ended December 31, 1996 and 1995        3
         

         Consolidated Statements of Cash Flows for the
         three and six months ended December 31, 1996 and 1995             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








<PAGE>



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

<TABLE>
<CAPTION>


                                                                  (Unaudited)
                                                                  December 30,      June 30,
                                                                      1996            1996
                                                                  ------------    ------------
                         ASSETS
<S>                                                               <C>             <C>         
Cash and equivalents                                              $  1,690,849    $  3,853,156
Certificates of deposit with other banks                               163,011         601,459
Investments available for sale at fair value                         1,108,851       2,132,044
Investments held to maturity at cost                                 1,027,595          31,684
Loans receivable, net                                               12,863,124      10,247,277
Federal Home Loan Bank stock at cost                                    66,000          66,000
Federal Reserve Bank stock at cost                                      67,800          67,800
Accrued interest receivable                                            147,169         139,787
Office property and equipment, net                                      44,109          42,944
Other assets                                                            48,162          56,522
                                                                  ------------    ------------
         Total Assets                                             $ 17,226,670    $ 17,238,673
                                                                  ============    ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Passbook savings                                               $  2,203,989    $  1,426,133
   Money market deposit accounts                                       194,143       1,180,808
   Certificates of deposit                                           5,843,807       6,076,221
   Certificates of deposit $100,000 and over                           532,420         229,199
                                                                  ------------    ------------
         Total Deposits                                              8,774,359       8,912,361

Other Liabilities:                                                     236,598         168,296
                                                                  ------------    ------------
         Total Liabilities                                           9,010,957       9,080,657
                                                                  ------------    ------------

Stockholders' Equity:
   Common stock, $.01 par value, 2 million shares authorized,
     493,320 issued and outstanding                                      4,933           4,933
   Additional paid in capital                                        4,505,471       4,505,471
   Retained earnings                                                 3,970,494       3,954,530
   Net unrealized appreciation on available-for-sale securities
     net of tax of $62,000 at December 31, 1996 and
     $43,000 at June 30, 1996                                           90,000          68,000
   Unearned ESOP compensation                                         (355,185)       (374,918)
                                                                  ------------    ------------
         Total Stockholders' Equity                                  8,215,713       8,158,016
                                                                  ------------    ------------

         Total Liabilities and Stockholders' Equity               $ 17,226,670    $ 17,238,673
                                                                  ============    ============

</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)
                                                          1996                1995               1996              1995
                                                       ---------           ---------          ---------         ---------
INTEREST INCOME                                                                                                
<S>                                                    <C>                 <C>                <C>               <C>      
   Loans receivable                                    $ 281,185           $ 209,244          $ 527,818         $ 414,262
   Investments                                            94,833              54,882            195,364           108,358
                                                       ---------           ---------          ---------         ---------
         Total Interest Income                           376,018             264,126            723,182           522,620
                                                       ---------           ---------          ---------         ---------
                                                                                                               
INTEREST EXPENSE                                                                                               
   Interest on deposits                                  115,522             119,691            227,358           239,131
                                                       ---------           ---------          ---------         ---------
         Total Interest Expense                          115,522             119,691            227,358           239,131
                                                       ---------           ---------          ---------         ---------
                                                                                                               
         Net Interest Income                             260,496             144,435            495,824           283,489
   Provision for Loan Losses                               5,000               5,000              5,000             5,000
                                                       ---------           ---------          ---------         ---------
         Net interest income after provision                                                                   
           for loan losses                               255,496             139,435            490,824           278,489
                                                       ---------           ---------          ---------         ---------
                                                                                                               
NONINTEREST INCOME                                                                                             
   Gain (loss) on sale of assets                             -0-               1,299                -0-             1,299
   Customer service fees and other                         1,724                 946              2,366             2,272
                                                       ---------           ---------          ---------         ---------
         Total Noninterest Income                          1,724               2,245              2,366             3,571
                                                       ---------           ---------          ---------         ---------
                                                                                                               
NONINTEREST EXPENSES                                                                                           
   General and administrative                                                                                  
     Compensation and benefits                            74,432              67,785            137,710           111,615
     Occupancy and equipment                               7,390               9,264             17,188            19,087
     Deposit insurance premium                             8,954               6,401             18,695            12,959
     SAIF assessment fee                                     -0-                 -0-             62,144               -0-
     Computer expense                                      3,990               2,979             11,045             6,509
     Legal expense                                        20,565               3,922             34,785             4,524
     Other                                                31,262              52,817             49,902            68,945
                                                       ---------           ---------          ---------         ---------
         Total Noninterest Expenses                      146,593             143,168            331,469           223,639
                                                       ---------           ---------          ---------         ---------
                                                                                                               
INCOME (LOSS) BEFORE INCOME TAX                          110,627              (1,488)           161,721            58,421
                                                                                                               
Income Tax Expense                                        48,450             118,992             66,827           142,592
                                                       ---------           ---------          ---------         ---------
                                                                                                               
NET INCOME (LOSS)                                      $  62,177           $(120,480)         $  94,894         $ (84,171)
                                                       =========           =========          =========         =========
                                                                                                               
Net income per share based on weighted                                                                         
   average shares outstanding of 455,836,                                                                      
   for 1996                                            $    0.14                 N/A          $    0.21               N/A
                                                       =========           =========          =========         =========
</TABLE>

See notes to consolidated financial statements.                            

                                                        -2-


<PAGE>


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


<TABLE>
<CAPTION>

                                                                                     Unrealized       Unearned
                                         Common          Paid in       Retained      Gain (Loss)       Compen-         Total
                                          Stock          Capital       Earnings      Securities        sation         Equity
                                      -------------  -------------   -------------  -------------  -------------   -------------
<S>                                   <C>            <C>             <C>            <C>            <C>             <C>          
BALANCE, June 30, 1995                $           0  $           0   $   3,783,280  $      51,157  $           0   $   3,834,437
Net (loss) for the six months ended
   December 31, 1995                              0              0         (84,171)             0              0         (84,171)
Change in net unrealized gain on
   securities available-for-sale,
   net of applicable deferred income
   taxes of $46,024                               0              0               0         12,400              0          12,400
                                      -------------  -------------   -------------  -------------  -------------   -------------

BALANCE, December 31, 1995            $           0  $           0   $   3,699,109  $      63,557  $           0   $   3,762,666
                                      =============  =============   =============  =============  =============   =============

BALANCE, June 30, 1996                $       4,933  $   4,505,471   $   3,954,530  $      68,000  $     (374,918) $   8,158,016
Net income for the six months ended
   December 31, 1996                              0              0          94,894              0              0          94,894
Cash dividends                                    0              0         (78,930)             0              0         (78,930)
Change in unrealized gain on
   securities available-for-sale,
   net of applicable deferred income
   taxes of $62,000                               0              0               0         22,000              0          22,000
Effect of contribution to fund ESOP               0              0               0              0         19,733          19,733
                                      -------------  -------------   -------------  -------------  -------------   -------------

BALANCE, December 31, 1996            $       4,933  $   4,505,471   $   3,970,494  $      90,000  $     (355,185) $   8,215,713
                                      =============  =============   =============  =============  ==============  =============
</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)
                                                        1996           1995             1996            1995
                                                   -------------  --------------    -------------  -------------
<S>                                                <C>            <C>               <C>            <C>            
NET INCOME (LOSS)                                  $      62,177  $     (120,480)   $      94,894  $      (84,171)
Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                          2,724           2,659            5,168          4,827
     Decrease (increase) in other assets                   1,772        (118,636)           8,360         (98,337)
     (Increase) decrease in interest receivable           50,396          57,405           (7,382)        21,977
     Increase in other liabilities                        42,561         149,907          133,228        148,658
     Provision for loan loss                               5,000           5,000            5,000          5,000
                                                   -------------  --------------    -------------  -------------
Cash provided (used) by operating activities             164,630         (24,145)         239,268          (2,046)
                                                   -------------  --------------    -------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Investments in certificates of deposit in other
     financial institutions, net (increase)
     decrease                                            188,448        (196,763)         438,448        (196,763)
   Proceeds from maturities of investments
     held to maturity                                      2,536             732            4,089          2,432
   Proceeds from sales of investments
     available-for-sale                                      -0-       1,085,405              -0-      1,085,405
   Purchase of fixed assets                               (2,803)         (8,977)          (6,333)        (10,446)
   Net (increase) in loans                              (774,350)       (159,062)      (2,620,847)        (62,049)
                                                   -------------  --------------    -------------  --------------
Cash provided (used) by investing activities            (586,169)        721,335       (2,184,643)       818,579
                                                   -------------  --------------    -------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Payment of dividends                                  (39,465)            -0-          (78,930)           -0-
   Net increase (decrease) in demand deposits,
     NOW accounts, savings accounts and
     certificates of deposit                            (430,656)        134,374         (138,002)       446,334
                                                   -------------  --------------    -------------  -------------
Cash provided (used) by financing activities            (470,121)        134,374         (216,932)       446,334
                                                   -------------  --------------    -------------  -------------

   Net increase (decrease) in cash and
     cash equivalents                                   (891,660)        831,564       (2,162,307)     1,262,867

Cash and Cash Equivalents at Beginning
   of Period                                           2,582,509       2,468,535        3,853,156      2,037,232
                                                   -------------  --------------    -------------  -------------

Cash and Cash Equivalents at End of Period         $   1,690,849  $    3,300,099    $   1,690,849  $   3,300,099
                                                   =============  ==============    =============  =============

Cash paid for:
   Interest                                        $     109,304  $      112,483    $     224,384  $     229,122
                                                   =============  ==============    =============  =============

   Income taxes                                    $      27,600  $        9,901    $      28,418  $      13,295
                                                   =============  ==============    =============  =============
</TABLE>

See notes to consolidated financial statements.


                                       -4-


<PAGE>


                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995



NOTE 1 - BASIS OF PRESENTATION

The unaudited information for the quarter ended December 31, 1996, includes the
results of operations of HBancorporation, Inc.(the "Company") and its wholly
owned subsidiary Heritage National Bank (the "Bank"). The unaudited information
for the quarter ended December 31, 1995, consists only of the results of
operations of the Bank since the Company was not in existence at such time. 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 Heritage Financial Corporation for the fiscal year ended June 30, 1996. The
Company changed its name from Heritage Financial Corporation to HBancorporation,
Inc. on October 29, 1996. The results of the period 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 "pink sheets" published by the National
Quotation Bureau, Inc.

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.






                                       -5-
<PAGE>

                              HBANCORPORATION, INC.
                             LAWRENCEVILLE, ILLINOIS

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995



NOTE 3 - STOCK CONVERSION,CONTINUED

Concurrent with the conversion, the board of directors approved the adoption of
the Heritage Financial Corporation Employees 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.

NOTE 4 - NET INCOME PER SHARE

Net income per share of common stock for the six months ended December 31, 1996
has been computed on the basis of the weighted-average number of shares of
common stock outstanding.































                                       -6-

<PAGE>

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



General

The Company was formed at the direction of Lawrenceville Federal Savings and
Loan Association, the predecessor financial institution to the Bank, for the
purpose of owning all the stock outstanding in the Bank. 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 acquired all the stock of the Bank in accordance with the
approved plan of conversion. The Company had not engaged in any material
operations at December 31, 1996, 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.

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.

Recent Developments

On September 30, 1996, federal legislation was enacted that requires the Savings
Association Insurance Fund ("SAIF") to be recapitalized with a one-time
assessment on virtually all SAIF-insured institutions, such as the Bank, equal
to 65.7 basis points on SAIF-insured deposits maintained by those institutions
as of March 31, 1995. The amount of $61,888 which was paid to the FDIC by
November 27, 1996, was accrued by the Company at September 30, 1996.






                                       -7-

<PAGE>

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



As a result of the SAIF recapitalization, the FDIC has amended its regulation
concerning the insurance premiums payable by SAIF-insured institutions.
Effective January 1, 1997, the SAIF insurance premium will range from 0 to 27
basis points per $100 of domestic deposits. Additionally, the FDIC has imposed a
Financing Corporation (FICO) assessment on SAIF-assessable deposits for the
first semiannual period of 1997 equal to 6.48 basis points.

Financial Condition

For the six months ended December 31, 1996, total assets decreased approximately
$12,000 from $17.24 million to $17.23 million. Assets decreased as a result of a
decrease in cash and certificates of deposits offset by an increase in loans
receivable. Deposits decreased by approximately $138,000 to $8.8 million at
December 31, 1996, from $8.9 million at June 30, 1996. Management believes the
decrease in deposits stems from higher rates offered by competitors. For the six
months ended December 31, 1996, total stockholders' equity increased
approximately $58,000 from $8.1 million to $8.2 million. The increase was a
result of increased net interest income offset by a one-time FDIC assessment fee
to recapitalize the SAIF insurance fund.

Results of Operations:

Comparison of the three months ended December 31, 1996 and 1995.

General. Net income increased to $62,000 for the three months ended December 31,
1996, compared to a loss of $120,000 for the same period in 1995. The increase
was primarily due to an increase in net interest income, a reduction in income
tax expense, offset by an increase in general and administrative costs as a
result of the conversion from a thrift to a national bank.

Interest Income. Total interest income increased by $112,000 or 42.4% to
$376,000 for the three months ended December 31, 1996, compared to the same
period last year. Income from loans grew by $72,000 for the three months.
Investment income increased by $40,000 for the three months due primarily to
higher yields on new investments.

Interest Expense. Total interest expense decreased by $4,000 for the three
months ended December 31, 1996, to $116,000 compared to $120,000 in the previous
three month period. The amount of deposits have decreased compared to the same
period a year ago.

Net Interest Income. Net interest income before provision for loan losses
increased $116,000 or 80.4% for the recent three month period compared to the
same period a year ago, from $144,000 to $260,000.

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 periods ended December
31, 1996 and 1995, the Bank recorded a provision for additional loan losses of
$5,000. The Bank continues to monitor and adjust its allowance for loan losses
as management's analysis of its loan portfolio and economic conditions dictate.




                                       -8-

<PAGE>

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



Noninterest Income. Noninterest income remained substantially the same for the
three month period ended December 31, 1996, compared with the same period in
1995.

Noninterest Expense. For the three months ended December 31, 1996, the total
noninterest expense was $147,000 compared to $143,000 for the same three months
in 1995. This increase is due to increased general and administrative costs as a
result of the conversion from a thrift to a national bank.

Income Tax Expense. Income tax expense decreased to $48,000 during the most
recent three months compared to $119,000 for the same period a year ago. The
Bank recorded a deferred tax liability of approximately $103,000 in response to
the probable conversion of the Association to a national bank and the subsequent
failure of the thrift definitional test, during the three month period ending
December 31, 1995. Tax laws in effect at that time required the Association to
reverse its tax bad debt reserve to the level allowed by a national bank over a
five year period. This deferred tax liability was recaptured during the three
month period ending June 30, 1996.

Comparison of the six months ended December 31, 1996 and 1995.

General. Net income increased to $95,000 for the six months ended December 31,
1996, compared to a loss of $84,000 for the same period in 1995. The increase
was primarily due to a $200,000 increase in net interest income, offset by a
one-time FDIC assessment fee of $62,144 to recapitalize the SAIF insurance fund.

Interest Income. Total interest income increased by $200,000 or 38.4% to
$723,000 for the six months ended December 31, 1996, compared to the same period
last year. Income from loans grew by $114,000 for the six months. Investment
income increased by $87,000 for the six months due primarily to higher yields on
new investments.

Interest Expense. Total interest expense decreased by $12,000 for the six months
ended December 31, 1996, to $227,000 compared to $239,000 in the previous six
month period. The amount of deposits have decreased for the most recent six
month period compared to the same period a year ago.

Net Interest Income. Net interest income before provision for loan losses
increased $212,000 or 74.6% for the recent six month period compared to the same
period a year ago, from $284,000 to $496,000.














                                       -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 periods ended December
31, 1996 and 1995, the Bank recorded a provision for additional loan losses of
$5,000. The Bank continues to monitor and adjust its allowance for loan losses
as management's analysis of its loan portfolio and economic conditions dictate.
The Bank believes it has taken an appropriate approach toward reserve levels,
consistent with the Bank's loan portfolio, the level of the Bank's allowance for
loan losses and any change in the related ratio of the allowance for loan losses
to non-performing loans are dependent upon the economy, changes in real estate
values and interest rates. Because the Bank has had extremely low loan losses
during its history, management also considers the loss experience of similar
portfolios in comparable lending markets. In addition, federal regulators may
require additional reserves as a result of their examination of the Bank.
Accordingly, the calculation of the adequacy of the allowance for loan losses is
not based directly on the level of nonperforming assets. The allowance for loan
losses reflects what the Bank currently believes is an adequate level of
resources, although there can be no assurance that future losses will not exceed
the estimated amounts, thereby adversely affecting future results of operations.
As of December 31, 1996, the Bank's allowance for loan losses was $123,000
compared to $118,000 at June 30, 1996.

The Bank had no nonperforming assets at December 31, 1996 or June 30, 1996.

Noninterest Income. Noninterest income remained substantially the same for the
six month period ended December 31, 1996, compared with the same period in 1995.

Noninterest Expense. For the six months ended December 31, 1996, the total
noninterest expense was $331,000 compared to $224,000 for the same six months in
1995. General and administrative costs have increased approximately $40,000 as a
result of the conversion from a thrift to a national bank. Deposit insurance
premiums increased $68,000 for the six months ended December 31, 1996, compared
with the same period in 1995. This increase is due to a one-time FDIC assessment
fee to recapitalize the SAIF insurance fund.

Income Tax Expense. Income tax expense decreased to $67,000 during the most
recent six months compared to $143,000 for the same period a year ago. Lower
taxes were the result of the recapture of deferred income taxes which had been
recorded in response to the probable conversion of the Association to a national
bank and the subsequent failure of the thrift definitional test. Tax laws
required the Association to reverse its bad debt reserve to the level allowed by
a national bank over a five year period, and record the respective income tax
liability.

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.








                                      -10-

<PAGE>

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



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, 1996, 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, 1996 relative to the regulatory capital requirements for the Bank.

                                                                  Amount
                                                              (in thousands)
         Tier 1 Capital                                      $          5,943
         Tier 1 Capital Requirement                                       514
                                                             ----------------
         Excess                                              $          5,429
                                                             ================

         Total Risk-Based Capital                            $          6,066
         Risk-Based Capital Requirement                                   962
                                                             ----------------
         Excess                                              $          5,104
                                                             ================



























                                      -11-
<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

                The Company filed a Form 8-K, dated January 7, 1997, announcing
                its name change to HBancorporation, Inc.






































                                      -12-
<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 21, 1997           /s/  Kevin J. Kavanaugh
       -------------------------      -----------------------
                                      Kevin J. Kavanaugh, President and Chief
                                      Executive Officer




Date:      January 21, 1997           /s/  Cleora Gillespie
       -------------------------      -----------------------
                                      Cleora Gillespie, Secretary and Treasurer































                                      -13-