<PAGE>

                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549

                                     FORM 10-Q


       [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1998


       [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                For the transaction period from __________ to __________

                         Commission File Number:  333-57917

                       CARLINVILLE NATIONAL BANK SHARES, INC.
                       --------------------------------------
               (Exact name of Registrant as specified in its charter)



            DELAWARE                                  37-1125050
---------------------------------       ---------------------------------------
  (State or other jurisdiction          (I.R.S. Employer Identification Number)
of incorporated or organization)



                WEST SIDE SQUARE, CARLINVILLE, ILLINOIS  62626
     --------------------------------------------------------------------
     (Address of principal executive offices)                  (Zip Code)



                                   (217) 854-2674
               ----------------------------------------------------
               (Registrant's telephone number, including area code)



     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X    No        *
                                               -----     -----

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:  As of September 30, 1998,
the registrant had outstanding 186,498 shares of common stock, $1.00 par value
per share.

_______________

*    Issuer became subject to the periodic reporting requirements of the
     Securities Exchange Act of 1934 on August 12, 1998, the effective date of
     the Issuer's Form S-4 Registration Statement.

<PAGE>

                       CARLINVILLE NATIONAL BANK SHARES, INC.

                             FORM 10-Q QUARTERLY REPORT

                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                         Page
                                                                        Number
                                                                        ------
<S>                                                                      <C>
                                      PART I

Item 1.   Financial Statements (unaudited)                                  1
Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                             8


                                      PART II

Item 1.   Legal Proceedings                                                30
Item 2.   Changes in Securities                                            30
Item 3.   Defaults Upon Senior Securities                                  30
Item 4.   Submission of Matters to a Vote of Security Holders              30
Item 5.   Other Information                                                30
Item 6.   Exhibits and Reports on Form 8-K                                 30

Form 10-Q Signature Page 31
</TABLE>
<PAGE>

                           PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

                   Interim Condensed Consolidated Balance Sheets

                      September 30, 1998 and December 31, 1997

                                    (unaudited)

<TABLE>
<CAPTION>

                                                      September 30, December 31,
                                                          1998          1997
                                                      ------------- ------------
<S>                                                  <C>           <C>
ASSETS

Cash and due from banks                               $  4,711,273  $  4,803,829
Federal funds sold                                      12,200,000     8,429,000
Investments in debt and equity securities:
   Available-for-sale, at fair value                    44,853,872    44,142,416
   Held-to-maturity, at amortized cost 
   (approximate fair value of $15,402,000 
   and $19,238,450 at September 30, 1998
   and December 31, 1997, respectively)                 15,009,994    18,875,321

Loans                                                  119,886,014   111,925,209
   Less:
      Unearned discount                                    (32,632)      (47,060)
      Reserve for possible loan losses                    (911,348)   (1,098,038)
                                                      ------------  ------------
         Net loans                                     118,942,034   110,780,111
                                                      ------------  ------------
Bank premises and equipment, net                         2,774,531     2,421,358
Accrued interest receivable                              3,081,382     2,619,870
Intangible assets                                        3,649,488     3,855,584
Other assets                                             1,433,536     1,253,401
                                                      ------------  ------------
                                                      $206,656,110  $197,180,890
                                                      ------------  ------------
                                                      ------------  ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Noninterest-bearing deposits                          $ 17,766,912  $ 16,442,262
Interest-bearing deposits                              162,001,019   151,172,610
                                                      ------------  ------------
         Total deposits                                179,767,931   167,614,872
Short-term borrowings                                    3,417,717     7,932,881
Accrued interest payable                                 1,147,128       966,818
Other liabilities                                          581,320       232,684
                                                      ------------  ------------
         Total liabilities                             184,914,096   176,747,255
                                                      ------------  ------------
Commitments and contingencies
Stockholders' equity:
   Common stock, $1 par value; 310,000 shares 
      authorized at September 30, 1998, 210,000 shares
      authorized at December 31, 1997; 200,000 shares
      issued                                               200,000       200,000
   Surplus                                                 270,464       270,464
   Retained earnings                                    21,129,436    19,758,353
   Accumulated other comprehensive income - unrealized
      holding gains and losses on available-for-sale
      securities, net of tax                               463,202       525,906
   Treasury stock at cost - 13,502 shares                 (321,088)     (321,088)
                                                      ------------  ------------
         Total stockholders' equity                     21,742,014    20,433,635
                                                      ------------  ------------
                                                      $206,656,110  $197,180,890
                                                      ------------  ------------
                                                      ------------  ------------
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.

                                       1
<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

    Interim Condensed Consolidated Statements of Income and Comprehensive Income

              Three and nine months ended September 30, 1998 and 1997

                                    (unaudited)

<TABLE>
<CAPTION>


                                                          Three Months Ended          Nine Months Ended
                                                             September 30,              September 30,
                                                       ------------------------    -------------------------
                                                          1998          1997          1998          1997
                                                       ----------    ----------    -----------   -----------
<S>                                                   <C>           <C>           <C>           <C>
Interest income:
   Interest and fees on loans                          $2,685,585    $2,361,425    $ 7,746,794   $ 6,767,855
   Interest and dividends on debt and equity 
     securities:
      Taxable                                             728,699       804,475      2,171,964     2,433,969
      Exempt from Federal income taxes                    164,118       193,918        518,846       573,659
   Interest on short-term investments                     170,247       101,784        521,439       415,018
                                                       ----------    ----------    -----------   -----------
         Total interest income                          3,748,649     3,461,602     10,959,043    10,190,501
                                                       ----------    ----------    -----------   -----------

Interest expense:
   Interest on deposits                                 1,960,437     1,792,202      5,725,585     5,140,731
   Interest on short-term borrowings                       85,316       107,701        297,190       357,933
                                                       ----------    ----------    -----------   -----------
         Total interest expense                         2,045,753     1,899,903      6,022,775     5,498,664
                                                       ----------    ----------    -----------   -----------
         Net interest income                            1,702,896     1,561,699      4,936,268     4,691,837
Provision for possible loan losses                         30,000        30,000        240,000        30,000
                                                       ----------    ----------    -----------   -----------
         Net interest income after provision
           for possible loan losses                     1,672,896     1,531,699      4,696,268     4,661,837
                                                       ----------    ----------    -----------   -----------

Noninterest income:
   Service charges on deposit accounts                    138,498       126,652        408,510       345,915
   Income from fiduciary activities                        40,047        24,887        124,543       115,625
   Net security sale gains                                  3,589       171,144        311,943       190,807
   Net gain on sale of mortgage loans                      27,714        27,320         96,252        43,372
   Other noninterest income                                79,917        63,147        258,394       191,654
                                                       ----------    ----------    -----------   -----------
         Total noninterest income                         289,765       413,150      1,199,642       887,373
                                                       ----------    ----------    -----------   -----------
Noninterest expense:
   Salaries and employee benefits                         654,650       647,038      1,954,078     1,812,558
   Occupancy and equipment expense                        173,554       193,514        530,005       524,342
   Legal and professional fees                             14,240         3,189         43,856        50,070
   Postage, printing and supplies                          63,638        62,560        191,872       205,980
   FDIC insurance expense                                   9,841         7,591         26,329        55,201
   Amortization of intangible assets                       68,699        60,059        206,096       169,642
   Other noninterest expense                              220,433       199,520        692,836       631,161
                                                       ----------    ----------    -----------   -----------
         Total noninterest expense                      1,205,055     1,173,471      3,645,072     3,448,954
                                                       ----------    ----------    -----------   -----------
         Income before applicable income taxes            757,606       771,378      2,250,838     2,100,256
Applicable income taxes                                   210,479       209,497        609,333       550,761
                                                       ----------    ----------    -----------   -----------
         Net income                                       547,127       561,881      1,641,505     1,549,495
                                                       ----------    ----------    -----------   -----------

Other comprehensive income (loss), before tax:
   Net unrealized gains (losses) on 
      available-for-sale securities                       160,122       466,093        216,937       665,192
   Less reclassification adjustment for gains 
      included in net income                               (3,589)     (171,144)      (311,943)     (190,807)
                                                       ----------    ----------    -----------   -----------
         Other comprehensive income (loss), 
           before tax                                     156,533       294,949        (95,006)      474,385
Income tax related to items of other 
   comprehensive income (loss)                             53,221       100,283        (32,302)      161,291
                                                       ----------    ----------    -----------   -----------
         Other comprehensive income (loss),
           net of tax                                     103,312       194,666        (62,704)      313,094
                                                       ----------    ----------    -----------   -----------
         Total comprehensive income                    $  650,439    $  756,547    $ 1,578,801   $ 1,862,589
                                                       ----------    ----------    -----------   -----------
                                                       ----------    ----------    -----------   -----------

Net income per common share:
   Average common shares outstanding                      186,498       186,498        186,498       186,355
                                                       ----------    ----------    -----------   -----------
                                                       ----------    ----------    -----------   -----------

   Net income per common share                         $     2.93    $     3.01    $      8.80   $      8.31
                                                       ----------    ----------    -----------   -----------
                                                       ----------    ----------    -----------   -----------
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.

                                       2

<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

         Interim Condensed Consolidated Statements of Stockholders' Equity

                   Nine months ended September 30, 1998 and 1997

                                    (unaudited)

<TABLE>
<CAPTION>

                                                                                                                          Total
                                                                                                          Accumulated    stock-
                                                Common                      Retained       Treasury      other compre-   holders'
                                                stock         Surplus       earnings        stock       hensive income    equity
                                               --------       --------    -----------      ---------    -------------- -----------
<S>                                           <C>            <C>         <C>              <C>             <C>         <C>
Balance at December 31, 1996                   $200,000       $224,732    $18,420,545      $(335,356)      $ 75,858    $18,585,779

Issuance of 600 shares from treasury                  -         45,732              -         14,268              -         60,000

Net income                                            -              -      1,549,495              -              -      1,549,495

Cash dividends paid - $1.35 per share                 -              -       (251,774)             -              -       (251,774)

Unrealized gains (losses) on
   available-for-sale securities,
   net of related tax effect                          -              -              -              -        313,094        313,094
                                               --------       --------    -----------      ---------       --------    -----------

Balance at September 30, 1997                  $200,000       $270,464    $19,718,266      $(321,088)      $388,952    $20,256,594
                                               --------       --------    -----------      ---------       --------    -----------
                                               --------       --------    -----------      ---------       --------    -----------

Balance at December 31, 1997                   $200,000       $270,464    $19,758,353      $(321,088)      $525,906    $20,433,635

Net income                                            -              -      1,641,505              -              -      1,641,505

Cash dividends paid - $1.45 per share                 -              -       (270,422)             -              -       (270,422)

Unrealized gains (losses)
   on available-for-sale securities,
   net of related tax effect                          -              -              -              -        (62,704)       (62,704)
                                               --------       --------    -----------      ---------       --------    -----------

Balance at September 30, 1998                  $200,000       $270,464    $21,129,436      $(321,088)      $463,202    $21,742,014
                                               --------       --------    -----------      ---------       --------    -----------
                                               --------       --------    -----------      ---------       --------    -----------
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.

                                       3

<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

              Interim Condensed Consolidated Statements of Cash Flows

                   Nine months ended September 30, 1998 and 1997

                                    (unaudited)

<TABLE>
<CAPTION>

                                                           1998          1997
                                                           ----          ----
<S>                                                  <C>            <C>
Cash flows from operating activities:
   Net income                                         $  1,641,505     1,549,495
   Adjustments to reconcile net income to net cash 
      provided by operating activities:
         Depreciation and amortization                     490,770       411,519
         Provision for possible loan losses                240,000        30,000
         Increase in accrued interest receivable          (461,512)     (338,074)
         Net gains on security sales and calls            (311,943)     (190,807)
         Increase in accrued interest payable              180,310       171,395
         Other operating activities, net                   382,933       127,776
                                                      ------------   -----------
           Net cash provided by operating 
             activities                                  2,162,063     1,761,304
                                                      ------------   -----------
Cash flows from investing activities:
   Net cash and cash equivalents received from 
      acquisitions                                              --     5,575,404
   Proceeds from calls and maturities of and 
      principal payments on debt securities:
         Available-for-sale                             20,283,829     6,053,576
         Held-to-maturity                                3,976,746     3,601,909
   Proceeds from sale of securities                        712,901     2,507,960
   Purchases of debt and equity securities:
      Available-for-sale                               (21,836,569)  (15,320,938)
      Held-to-maturity                                          --      (725,682)
   Net increase in loans                                (8,401,923)   (5,173,479)
   Purchases of bank premises and equipment, net          (586,076)     (170,814)
                                                      ------------   -----------
           Net cash used in investing activities        (5,851,092)   (3,652,064)
                                                      ------------   -----------
Cash flows from financing activities:
   Net increase in deposits                             12,153,059     2,504,055
   Net increase (decrease) in short-term borrowings     (4,515,164)    1,114,356
   Proceeds from note payable                                   --     1,750,000
   Principal payment on note payable                            --    (1,750,000)
   Cash dividends paid                                    (270,422)     (251,774)
   Sale of treasury stock                                       --        60,000
                                                      ------------   -----------
           Net cash provided by financing activities     7,367,473     3,426,637
                                                      ------------   -----------
           Net increase in cash and cash equivalents     3,678,444     1,535,877
Cash and cash equivalents at beginning of period        13,232,829     8,128,650
                                                      ------------   -----------
Cash and cash equivalents at end of period            $ 16,911,273     9,664,527
                                                      ------------   -----------
                                                      ------------   -----------
Supplemental information - cash paid for:
   Interest                                           $  5,792,465     3,302,424
   Income taxes                                            544,500       578,755
                                                      ------------   -----------
                                                      ------------   -----------
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.

                                       4
<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

            Notes to Interim Condensed Consolidated Financial Statements

                                    (unaudited)

NOTE 1 - BASIS OF PRESENTATION

Carlinville National Bank Shares, Inc. (the "Company") provides a full range of
banking services to individual and corporate customers throughout Macoupin,
Montgomery, Christian, and Sangamon counties of central Illinois, through the
five locations of its wholly-owned subsidiary banks, Carlinville National Bank
and Palmer Bank (the "Banks").  The Company and the Banks are subject to
competition from other financial and nonfinancial institutions providing
financial products throughout the central Illinois area.  Additionally, the
Company and the Banks are subject to the regulations of certain Federal and
state agencies and undergo periodic examinations by those regulatory agencies. 
The Company also maintains a nonbanking subsidiary which operates a tax return
preparation service.  The operations of the nonbanking subsidiary are not
material to the Company's consolidated results of operations.

The accompanying unaudited interim condensed consolidated financial statements
as of September 30, 1998 and for the three and nine months ended September 30,
1998 and 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions outlined in Rule 10-01 of Regulation S-X of the Securities Exchange
Act of 1934.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation, have
been included.  Operating results for the periods ended September 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.  For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1997.

NOTE 2 - IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130").  FAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in financial
statements.  FAS 130 defines comprehensive income as the change in equity (net
assets) of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources, including all changes in equity
during a period, except those resulting from investments by and distributions to
owners.

FAS 130 requires that all items that are required to be recognized as
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.  FAS 130 also requires that
an enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid in
capital in the equity section of the consolidated balance sheet. 

FAS 130 is effective for fiscal years beginning after December 31, 1997, with
reclassification of financial statements of earlier periods required for
comparative purposes.  The accompanying interim condensed consolidated financial
statements as of September 30, 1998 and for the three 

                                       5
<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

            Notes to Interim Condensed Consolidated Financial Statements

                                    (unaudited)

and nine months ended September 30, 1998 and 1997 have been prepared in 
accordance with FAS 130.

                                       6
<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

            Notes to Interim Condensed Consolidated Financial Statements

                                    (unaudited)

Earnings per common share is based on the weighted average number of common
shares outstanding during each year.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which
amends existing accounting requirements and establishes standards for computing
and presenting earnings per share for entities with publicly-held common stock
or potential common stock.  FAS 128 simplifies the standards for computing
earnings per share, replacing the presentation of primary earnings per share
with basic earnings per share, which excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period.  FAS 128 also requires dual
presentation of basic and diluted earnings per share on the face of the income
statement for all entities with complex capital structures, and requires a
reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation.  Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shares in the earnings of the entity.

FAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior period earnings per
share information presented.  At September 30, 1998 and 1997, the Company did
not maintain a complex capital structure as defined by FAS 128.  

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 125, "Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities" ("FAS 125"), on January 1, 1997.  FAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on consistent
application of a financial components approach that focuses on control.  FAS 125
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings.  Adoption of FAS 125 did not have a material impact on
the Company's financial position, results of operations, or liquidity.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" ("FAS 129") which establishes standards for disclosing information
about an entity's capital structure.  FAS 129 is effective for financial
statements for periods ending after December 15, 1997.  Since FAS 129 is a
disclosure requirement, it has no impact on the Company's consolidated financial
position and results of operations.

NOTE 3 - ACQUISITIONS AND PENDING MERGERS

Effective January 24, 1997, the Company purchased 100% of the outstanding
capital stock of Lincoln Trail Bancshares, Inc. ("Lincoln Trail"), which owned
100% of the outstanding common stock of Palmer Bank in Taylorville, Illinois, in
exchange for cash of $3,045,984. Total consolidated assets of Lincoln Trail at
January 24, 1997 were approximately $35.4 million. The acquisition has been
accounted for as a purchase transaction and, accordingly, the consolidated 

                                       7
<PAGE>

              CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES

            Notes to Interim Condensed Consolidated Financial Statements

                                    (unaudited)

operations of Lincoln Trail from January 24, 1997 forward are included in the
consolidated results of operations of the Company.  The excess of cost over the
fair value of net assets acquired, which amounted to $2,048,407, is being
amortized on a straight line basis over 15 years.

The fair value of the consolidated net assets acquired from Lincoln Trail at
January 24, 1997 were as follows:

<TABLE>
<CAPTION>

    <S>                                                    <C>
     Cash and due from banks                                $    983,388
     Federal funds sold                                        7,638,000
     Investment securities                                     3,477,228
     Loans, net                                               21,659,223
     Premises and equipment                                    1,055,763
     Other assets                                                560,849
                                                            ------------
               Total assets                                   35,374,451
                                                            ------------
     Deposits                                                 33,920,247
     Other liabilities                                           456,627
                                                            ------------
               Total liabilities                              34,376,874
                                                            ------------
               Net assets acquired                               997,577
     Cost of acquisition                                       3,045,984
                                                            ------------
     Excess of cost over fair value of net assets acquired  $  2,048,407
                                                            ------------
                                                            ------------
</TABLE>

On October 1, 1998, the Company purchased 100% of the outstanding capital 
stock of Shipman Bancorp, Inc. ("Shipman") and its wholly-owned subsidiary, 
Citizens State Bank in Shipman, Illinois, in exchange for 62,651 shares of 
Company common stock valued at $6,027,520 and $134,963 of cash.  Total 
consolidated assets of Shipman at October 1, 1998 were approximately 
$49.6 million.  The acquisition has been accounted for as a purchase 
transaction and, accordingly, the consolidated operations of Shipman from 
October 1, 1998 forward are included in the consolidated results of 
operations of the Company.  The excess of cost over the fair value of the net 
assets acquired, which amounted to $1,092,663, is being amortized on a 
straight line basis over 15 years.  

The fair value of the consolidated net assets acquired from Shipman at October
1, 1998 were as follows:

<TABLE>
<CAPTION>

    <S>                                                    <C>
     Cash and due from banks                                $  5,644,590
     Federal funds sold                                        3,979,000
     Investment securities                                     5,223,185
     Loans, net                                               31,567,601
     Premises and equipment                                    1,038,107
     Other assets                                              2,102,025
                                                            ------------
               Total assets                                   49,554,508
                                                            ------------
     Deposits                                                 41,463,171
     Other liabilities                                         3,021,517
                                                            ------------
               Total liabilities                              44,484,688
                                                            ------------
               Net assets acquired                             5,069,820
     Cost of acquisition                                       6,162,483
                                                            ------------
     Excess of cost over fair value of net assets acquired  $  1,092,663
                                                            ------------
                                                            ------------
</TABLE>

                                       8
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

INTRODUCTION

        Carlinville National Bank Shares, Inc. (the "Company") provides a 
full range of financial services throughout Macoupin, Montgomery, Christian, 
and Sangamon counties in central Illinois.  The following discussion more 
fully explains the changes in financial condition and results of operations 
for the first nine months of 1998 compared to the first nine months of 1997, 
and for the third quarter of 1998 compared to the third quarter of 1997.  
Such information is provided on a consolidated basis for the Company, its two 
wholly-owned banking subsidiaries (Carlinville National Bank and Palmer Bank, 
referred to collectively as the "Banks"), and its wholly-owned nonbanking 
subsidiary, Carlinville Tax Service, Inc.

NET INCOME

        The Company had net income of $1,641,505 for the nine months ended 
September 30, 1998, compared with $1,549,495 for the nine months ended 
September 30, 1997, representing an increase of $92,010 (5.94%).  Net income 
per common share for the first nine months of 1998 was $8.80 per share, an 
increase of $0.49 (5.90%) over the $8.31 per share amount for the first nine 
months of 1997.

        The Company had net income of $547,127 for the three months ended 
September 30, 1998, which represented a decrease of $14,754 (2.63%) from the 
$561,881 earned for the three months ended September 30, 1997.  Net income 
per common share was $2.93 per share for the third quarter of 1998, compared 
with $3.01 per share for the third quarter of 1997.

NET INTEREST INCOME

        The Company's net interest income increased by $244,431 (5.21%) to 
$4,936,268 for the first nine months of 1998 from the $4,691,837 recorded for 
the first nine months of 1997.  The net interest margin for the two periods 
was comparable, with a net interest margin of 3.66% recorded for the first 
nine months of 1998, and 3.70% recorded for the first nine months of 1997.  
The Company's net interest income for the third quarter of 1998 increased 
$141,197 (9.04%) to $1,702,896 from the $1,561,699 earned for the third 
quarter of 1997.  The net interest margin for the third quarter of 1998 was 
3.71%, as compared with 3.70% for the third quarter of 1997.  

The reduction in the Company's net interest margin, which management believes 
to be temporary, is due primarily to the Company's acquisition activities in 
December 1996 and January 1997.  On December 13, 1996, the Company's banking 
subsidiary, Carlinville National Bank (the "Carlinville Bank"), purchased 
certain of the assets and assumed the liabilities of a branch facility (the 
"Hillsboro Branch") in Hillsboro, Illinois from an unaffiliated regional 
banking group.  Approximately five weeks later, on January 24, 1997, the 
Company purchased all of the outstanding capital stock of Lincoln Trail 
Bancshares, Inc. ("Lincoln Trail") and its wholly-owned banking subsidiary, 
Palmer Bank in Taylorville, Illinois.  As more fully discussed below, these 
acquisitions significantly changed the composition of the Company's balance 
sheet and mix of interest-earning assets and interest bearing liabilities, 
providing significantly more deposits than loans, with a significant 
percentage of the acquired deposits included in higher-rate 

                                       8
<PAGE>

certificates of deposit.  Additionally, with the wave of large bank mergers 
occurring in the Company's market area for the past several years, the 
Company has had the opportunity to expand its deposit base, as many banking 
customers have found the level of personal service at the larger 
non-locally-owned consolidated banks diminished, and have sought banking 
relationships with community banks such as Carlinville Bank and Palmer Bank.  
This deposit base expansion has not come without a cost, however, as the 
competition among community banks, as well as the larger consolidated banks 
seeking to retain their customers, has resulted in a higher level of interest 
rates on deposits, despite the relatively low interest rate environment in 
which the Company and all financial institutions have been operating for 
several years.  The Company's primary goal in achieving a higher net interest 
margin is to deploy these new deposits into quality loans, which is the 
Company's highest earning asset.  The Company's average loan-to-deposit ratio 
for the first nine months of 1998 was 67.12%, compared with 63.59% for the 
first nine months of 1997.

        As reflected in the tables below, average earning assets for the 
first nine months of 1998 increased by $10,293,270 (5.73%) to $189,794,346, 
from the $179,501,076 of average earning assets for the first nine months of 
1997.  The percentage of average earning assets comprised of loans, which is 
the Company's highest earning asset, increased to 61.56% for the first nine 
months of 1998, from 57.03% for the first nine months of 1997. 

        Average earning assets for the third quarter of 1998 increased 
$13,151,676 (7.36%) to $191,926,071 from the $178,774,395 of average earning 
assets for the third quarter of 1997.  The percentage of average earning 
assets comprised of loans, increased to 62.08% for the third quarter of 1998, 
from 58.75% for the third quarter of 1997. 

        The increase in loans in 1998 resulted from the Company's ability to 
make larger commercial loans to individuals and small businesses in its 
market area, with the increased lending limit available to a larger banking 
organization resulting from the Company's recent acquisitions.  Additionally, 
loan growth occurred from new banking relationships with customers moving 
their business out of the larger non-locally-owned consolidated banking 
institutions in the Company's market area.  Also, when the Company purchased 
Lincoln Trail in January 1997, Palmer Bank had significant problems in its 
loan portfolio.  As the Company has worked out of such problems, Company 
management has been able to concentrate more of its efforts on increasing the 
loan portfolio in its new markets.

        With the acquisition of the Hillsboro Branch in December 1996, the 
Company assumed approximately $24.4 million of deposits and acquired 
approximately $318,000 of loans.  The net cash received of approximately 
$22 million was invested at that time in taxable debt securities, many of 
which were callable in late 1997 or early 1998.  With the favorable interest 
rate environment which has existed for the past several years, coupled with 
the current strong bond market, many of these securities have been called or 
have matured.  Average taxable investment securities for the first nine 
months of 1998 declined $5,887,347 (10.90%) to $48,102,731 from the average 
taxable investment securities for the first nine months of 1997 of 
$53,990,078.  While the average yield on such securities remained consistent 
for the two periods, this decline in volume resulted in a decrease of the 
interest income thereon of $262,005 for the first nine months of 1998, from 
the interest income earned thereon for the first nine months of 1997.

                                       9
<PAGE>

        Average taxable investment securities for the third quarter of 1998 
declined $5,298,507 (9.88%) to $48,338,753 from the average taxable 
investment securities for the third quarter of 1997 of $53,637,260.  This 
reduction in the volume of taxable investment securities for the comparable 
third quarter periods resulted in a decrease in interest income of $75,776.

        The Company's level of Federal funds sold is directly attributable to 
the level of securities sold under repurchase agreements maintained with 
certain customers of the Carlinville Bank.  These customers invest on a 
short-term basis, generally overnight, in securities sold under repurchase 
agreements by the Carlinville Bank, thus providing a return on their excess 
funds.  These funds are invested by the Carlinville Bank in Federal funds 
sold to match the maturities of the repurchase agreements, with the 
Carlinville Bank generally earning approximately 50 basis points on each 
transaction.  As the excess funds of these customers fluctuate, so too has 
the Company's overall level of Federal funds sold. The acquisitions of 
Lincoln Trail and the Hillsboro Branch facility have provided additional 
liquidity, as has the increased deposit levels and the lack of more 
attractive investment options in the current bond market.

        Following is a summary of the average balances and weighted average 
interest rates earned or paid on Federal funds sold and securities sold under 
repurchase agreements for the first nine months of 1998 and 1997:

<TABLE>
<CAPTION>


                                              First Nine Months
                                    -------------------------------------
                                           1998                1997
                                    -----------------   ------------------
                                    Average   Average   Average   Average
                                    Balance     Rate    Balance     Rate
                                    -------   -------   -------   -------
<S>                              <C>          <C>    <C>          <C>
Federal funds sold                $12,800,773  5.47%  $10,564,228  5.27%
Securities sold under
  repurchase agreements             7,379,484  5.01%    8,488,686  4.77%
                                  -----------  ----   -----------  ----
                                  -----------  ----   -----------  ----
</TABLE>

        Company management believes this cash management service will 
continue at a consistent level, and the levels of additional Federal funds 
(over and above the level of securities sold under repurchase agreements) 
will eventually be invested in higher yielding loans and investment 
securities.

        The Company experienced an increase in its cost of funds for the 
first nine months of 1998, as compared with the first nine months of 1997.  
The average cost of funds was 4.89% for the first nine months of 1998, and 
4.75% for the first nine months of 1997.  The average cost of funds for the 
third quarter of 1998 was 4.91%, compared with 4.89% for the third quarter of 
1997.  Average interest-bearing deposits for the first nine months of 1998 
increased $11,725,559 (8.05%) to $157,356,270 from the level of $145,630,711 
for the first nine months of 1997. Average interest-bearing deposits for the 
third quarter of 1998 increased $13,073,257 (8.87%) to $160,394,988 from the 
level of $147,321,731 for the third quarter of 1997.  The increases in 
interest-bearing deposits from 1997 to 1998 has resulted from depositors 
moving from financial institutions which have been sold or are in process of 
being sold to larger, non-locally based financial institutions, as customers 
are seeking more personal service than that offered by the larger banking 
institutions.

                                       10
<PAGE>

        The Company's increase in its cost of funds is equally 
attributable to the composition of its deposit mix, as the Company's banking 
subsidiaries have experienced a general shift in deposits similar to most 
Midwestern financial institutions, with certificates of deposit comprising a 
growing proportion of its deposits.  Following is an analysis of the change 
in average deposit composition for the first nine months of 1998 and 1997,  
and the third quarters of 1998 and 1997:

<TABLE>
<CAPTION>

                                              As a Percentage of Average Deposits
                                                       First Nine Months
                                              -----------------------------------
                                                       1998        1997
                                                       ----        ----
  <S>                                                <C>        <C>
   Noninterest-bearing deposits                         9.60%       9.53%
   Interest-bearing transaction accounts               14.64       15.60
   Savings accounts                                    12.67       12.66
   Certificates of deposit:
      $100,000 and over                                10.65        8.24
      Under $100,000                                   52.44       53.97
                                                      ------      ------
                                                      100.00%     100.00%
                                                      ------      ------
                                                      ------      ------

                                                        Third Quarters
                                                       1998        1997
                                                       ----        ----
   Noninterest-bearing deposits                         9.56%       9.31%
   Interest-bearing transaction accounts               14.73       15.12
   Savings accounts                                    12.43       12.19
   Certificates of deposit:
      $100,000 and over                                11.38        8.97
      Under $100,000                                   51.90       54.41
                                                      ------      ------
                                                      100.00%     100.00%
                                                      ------      ------
                                                      ------      ------
</TABLE>

        In addition to the interest paid on securities sold under repurchase 
agreements, the Company also incurred interest on other short-term borrowings 
of $21,735 and $55,897 for the first nine months of 1998 and 1997, 
respectively, and $6,541 and $8,277 for the third quarters of 1998 and 1997, 
respectively.  These generally consist of borrowings under the Federal 
Reserve Bank's treasury, tax and loan note option.  Additionally, during the 
first nine months of 1997, the Company borrowed $1,750,000 from an 
unaffiliated financial institution for approximately three months to 
temporarily assist in funding the Lincoln Trail acquisition.  This short-term 
borrowing was repaid from additional dividends paid by the Carlinville Bank 
to the Company in April, 1997.

                                       11
<PAGE>

        The following tables show the condensed average balance sheets for 
the periods reported and the percentage of each principal category of assets, 
liabilities and stockholders' equity to total assets.  Also shown is the 
average yield on each category of interest-earning assets and the average 
rate paid on each category of interest-bearing liabilities for each of the 
periods reported.

<TABLE>
<CAPTION>

                                                              First Nine Months of 1998
                                                ------------------------------------------------
                                                                Percent    Interest     Average
                                                   Average      of Total   Income/       Yield/
                                                   Balance       Assets    Expense       Rate
                                                   -------      --------   --------     -------
<S>                                            <C>             <C>       <C>             <C>
ASSETS
Earning assets:
   Loans (1) (2) (3)                            $116,837,878      57.02%  $ 7,792,824     8.95%
   Investment securities, at amortized cost:
      Taxable                                     48,102,731       23.47    2,171,964     6.06
      Nontaxable (3)                              12,052,964        5.88      713,150     7.94
      Federal funds sold                          12,800,773        6.25      521,439     5.47
                                                ------------      ------  -----------
         Total earning assets                    189,794,346       92.62   11,199,377     7.92
                                                ------------      ------  -----------    -----
                                                                                         -----

Nonearning assets:
   Cash and due from banks                         5,030,211        2.45
   Reserve for possible loan losses               (1,000,827)      (0.49)
   Premises and equipment                          2,420,302        1.18
   Available-for-sale investment
      market valuation                               653,387        0.32
   Other assets                                    8,014,931        3.92
                                                ------------      ------
         Total nonearning assets                  15,118,004        7.38
                                                ------------      ------
            Total assets                        $204,912,350      100.00%
                                                ------------      ------
                                                ------------      ------
LIABILITIES
Interest-bearing liabilities:
   Interest-bearing transaction accounts        $ 25,476,230       12.43%     495,655     2.61%
   Savings                                        22,049,403       10.76      541,993     3.30
   Time deposits of $100,000 or more              18,539,638        9.05      804,481     5.82
   Other time deposits                            91,290,999       44.55    3,883,456     5.71
   Securities sold under repurchase
      agreements                                   7,379,484        3.60      275,455     5.01
   Other short-term borrowings                       530,975        0.26       21,735     5.49
                                                ------------      ------  -----------
         Total interest-bearing liabilities      165,266,729       80.65    6,022,775     4.89
                                                                          -----------    -----
Noninterest-bearing deposits                      16,715,978        8.16                 -----
Other liabilities                                  1,699,678        0.83
                                                ------------      ------
         Total liabilities                       183,682,385       89.64
SHAREHOLDERS' EQUITY                              21,229,965       10.36
                                                ------------      ------
   Total liabilities and shareholders' equity   $204,912,350      100.00%
                                                ------------      ------
                                                ------------      ------
   Net interest income/net yield
      on earning assets                                                   $ 5,176,602     3.66%
                                                                          -----------    -----
                                                                          -----------    -----

                                                                                     (Continued)
</TABLE>

                                       12
<PAGE>
<TABLE>
<CAPTION>

                                                              First Nine Months of 1997
                                                ------------------------------------------------
                                                                Percent    Interest     Average
                                                   Average      of Total   Income/       Yield/
                                                   Balance       Assets    Expense       Rate
                                                   -------      --------   --------     -------
<S>                                            <C>             <C>       <C>             <C>
ASSETS
Earning assets:
   Loans (1) (2) (3)                            $102,371,544      52.95%  $ 6,796,736     8.91%
   Investment securities, at amortized cost: 
      Taxable                                     53,990,078       27.92    2,433,969     6.05
      Nontaxable (3)                              12,575,226        6.50      799,927     8.54
      Federal funds sold                          10,564,228        5.47      415,018     5.27
                                                ------------      ------  -----------
         Total earning assets                    179,501,076       92.84   10,455,650     7.81
                                                ------------      ------  -----------    -----
                                                                                         -----
Nonearning assets:
   Cash and due from banks                         4,689,327        2.43
   Reserve for possible loan losses               (1,328,273)      (0.69)
   Premises and equipment                          2,556,294        1.32
   Available-for-sale investment
      market valuation                               135,183         .07
   Other assets                                    7,801,066        4.03
                                                ------------      ------
         Total nonearning assets                  13,853,597        7.16
                                                ------------      ------
         Total assets                           $193,354,673      100.00%
                                                ------------      ------
                                                ------------      ------
LIABILITIES
Interest-bearing liabilities: 
   Interest-bearing transaction accounts        $ 25,113,258       12.99%     503,841     2.69%
   Savings                                        20,374,366       10.54      467,347     3.08
   Time deposits of $100,000 or more              13,271,344        6.86      550,406     5.57
   Other time deposits                            86,871,743       44.93    3,619,137     5.59
   Securities sold under repurchase
      agreements                                   8,488,686        4.39      302,036     4.77
   Other short-term borrowings                     1,148,777        0.59       55,897     6.53
                                                ------------      ------  -----------
         Total interest-bearing liabilities      155,268,174       80.30    5,498,664     4.75
                                                                          -----------    -----
Noninterest-bearing deposits                      15,347,163        7.94                 -----
Other liabilities                                  2,629,928        1.36
                                                ------------      ------
         Total liabilities                       173,245,265       89.60
SHAREHOLDERS' EQUITY                              20,109,408       10.40
                                                ------------      ------
   Total liabilities and shareholders' equity   $193,354,673      100.00%
                                                ------------      ------
                                                ------------      ------
   Net interest income/net yield
      on earning assets                                                   $ 4,946,986     3.70%
                                                                          -----------    -----
                                                                          -----------    -----

                                                                                     (Continued)
</TABLE>
                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                              Third Quarter of 1998
                                                ------------------------------------------------
                                                                Percent    Interest     Average
                                                   Average      of Total   Income/       Yield/
                                                   Balance       Assets    Expense       Rate
                                                   -------      --------   --------     -------
<S>                                            <C>             <C>       <C>             <C>
ASSETS
Earning assets:
   Loans (1) (2) (3)                            $119,149,244       57.52% $ 2,696,847     9.08%
   Investment securities, at amortized cost: 
      Taxable                                     48,338,753       23.33      728,699     6.05
      Nontaxable (3)                              11,943,552        5.77      223,379     7.50
      Federal funds sold                          12,494,522        6.03      170,247     5.47
                                                ------------      ------  -----------
         Total earning assets                    191,926,071       92.65    3,819,172     7.98
                                                ------------      ------  -----------    -----
                                                                                         -----
Nonearning assets:
   Cash and due from banks                         5,129,133        2.48
   Reserve for possible loan losses                 (913,362)      (0.44)
   Premises and equipment                          2,512,756        1.21
   Available-for-sale investment
      market valuation                               494,788        0.24
   Other assets                                    8,007,228        3.86
                                                ------------      ------
         Total nonearning assets                  15,230,543        7.35
                                                ------------      ------
              Total assets                      $207,156,614      100.00%
                                                ------------      ------
                                                ------------      ------

LIABILITIES
Interest-bearing liabilities: 
   Interest-bearing transaction accounts        $ 26,125,115       12.61%     166,911     2.56%
   Savings                                        22,035,801       10.64      184,967     3.37
   Time deposits of $100,000 or more              20,188,521        9.75      291,934     5.80
   Other time deposits                            92,045,551       44.43    1,316,625     5.74
   Securities sold under repurchase
      agreements                                   6,223,666        3.00       78,775     5.08
   Other short-term borrowings                       493,694        0.24        6,541     5.31
                                                ------------      ------  -----------
         Total interest-bearing liabilities      167,112,348       80.67    2,045,753     4.91
                                                                          -----------    -----
Noninterest-bearing deposits                      16,949,629        8.18
Other liabilities                                  1,737,574        0.84
                                                ------------      ------
              Total liabilities                  185,799,551       89.69
SHAREHOLDERS' EQUITY                              21,357,063       10.31
                                                ------------      ------
   Total liabilities and shareholders' equity   $207,156,614      100.00%
                                                ------------      ------
                                                ------------      ------
   Net interest income/net yield
      on earning assets                                                   $ 1,773,419     3.71%
                                                                          -----------    -----
                                                                          -----------    -----

                                                                                     (Continued)
</TABLE>

                                       14

<PAGE>
<TABLE>
<CAPTION>

                                                              Third Quarter of 1997
                                                ------------------------------------------------
                                                                Percent    Interest     Average
                                                   Average      of Total   Income/       Yield/
                                                   Balance       Assets    Expense       Rate
                                                   -------      --------   --------     -------
<S>                                            <C>             <C>       <C>             <C>
ASSETS
Earning assets:
   Loans (1) (2) (3)                            $105,022,283       54.82% $ 2,371,958     9.06%
   Investment securities, at amortized cost: 
      Taxable                                     53,637,260       28.00      804,475     6.02
      Nontaxable (3)                              12,909,197        6.74      270,917     8.42
      Federal funds sold                           7,205,655        3.75      101,784     5.67
                                                ------------      ------  -----------
         Total earning assets                    178,774,395       93.31    3,549,134     7.96
                                                ------------      ------  -----------    -----
                                                                                         -----

Nonearning assets: 
   Cash and due from banks                         4,346,200        2.27
   Reserve for possible loan losses               (1,087,172)      (0.57)
   Premises and equipment                          2,543,578        1.33
   Available-for-sale investment
      market valuation                               393,778        0.21
   Other assets                                    6,621,818        3.45
                                                ------------      ------
         Total nonearning assets                  12,818,202        6.69
                                                ------------      ------
         Total assets                           $191,592,597      100.00%
                                                ------------      ------
                                                ------------      ------

LIABILITIES
Interest-bearing liabilities: 
   Interest-bearing transaction accounts        $ 24,559,516       12.82%     168,758     2.76%
   Savings                                        19,809,816       10.34      152,047     3.08
   Time deposits of $100,000 or more              14,568,932        7.60      209,253     5.76
   Other time deposits                            88,383,467       46.13    1,262,144     5.73
   Securities sold under repurchase
      agreements                                   7,807,716        4.08       99,424     5.11
   Other short-term borrowings                       585,503        0.30        8,277     5.67
                                                ------------      ------  -----------
         Total interest-bearing liabilities      155,714,950       81.27    1,899,903     4.89
                                                                          -----------    -----
Noninterest-bearing deposits                      15,128,162        7.90                 -----
Other liabilities                                    976,661        0.51
                                                ------------      ------
              Total liabilities                  171,819,773       89.68
SHAREHOLDERS' EQUITY                              19,772,824       10.32
                                                ------------      ------
   Total liabilities and shareholders' equity   $191,592,597      100.00%
                                                ------------      ------
                                                ------------      ------
   Net interest income/net yield
      on earning assets                                                   $ 1,649,231     3.70%
                                                                          -----------    -----
                                                                          -----------    -----
</TABLE>
_______________
(1)  Interest includes loan fees.

(2)  Average balances include nonaccrual loans.  The income on such loans is
     included in interest, but is recognized only upon receipt.

(3)  Interest yields are presented on a tax-equivalent basis.  Nontaxable income
     has been adjusted upward by the amount of Federal income tax that would
     have been paid if the income would have been taxable at a rate of 34%,
     adjusted downward by the disallowance of the interest cost to carry
     nontaxable loans and securities.

                                       15
<PAGE>

        The following tables set forth, on a tax-equivalent basis for the 
periods indicated, a summary of the changes in interest income and interest 
expense resulting from changes in volumes and changes in yields/rates.

<TABLE>
<CAPTION>

                                                                              FIRST NINE MONTH PERIODS
                                                    ------------------------------------------------------------------------------
                                                                            Amount of Increase (Decrease)
                                                    ------------------------------------------------------------------------------
                                                             Change From 1997                           Change From 1996
                                                              to 1998 Due to                             to 1997 Due to
                                                    -------------------------------------     ------------------------------------
                                                     Volume        Yield/                        Volume       Yield/
                                                       (1)        Rate (2)         Total           (1)       Rate (2)     Total
                                                    --------     ---------       --------     ----------    ---------   ----------
<S>                                                <C>          <C>             <C>          <C>           <C>         <C>
INTEREST INCOME:
Loans                                               $965,418     $  30,670       $996,088     $1,574,678    $ (5,928)   $1,568,750
                                                    --------     ---------       --------     ----------    ---------   ----------
Investment securities:
   Taxable                                          (266,049)        4,044       (262,005)     1,270,242       1,923     1,272,165
   Nontaxable                                        (32,239)      (54,538        (86,777)        55,270     (29,051)       26,219
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total interest securities                     (298,288)      (50,494)      (348,782)     1,325,512     (27,128)    1,298,384
                                                    --------     ---------       --------     ----------    ---------   ----------

Federal funds sold                                    90,244        16,177        106,421        137,805     (12,110)      125,695
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total interest income                          757,374        (3,647)       753,727      3,037,995     (45,166)    2,992,829
                                                    --------     ---------       --------     ----------    ---------   ----------

INTEREST EXPENSE:
Interest bearing transaction
   accounts                                            7,152       (15,338)        (8,186)       166,256       5,085       171,341
Savings                                               39,943        34,703         74,646        146,907       9,592       156,499
Time deposits of $100,000
   or more                                           228,266        25,809        254,075         62,881      17,773        80,654
Other time deposits                                  185,880        78,439        264,319      1,495,605     (31,036)    1,464,569
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total deposits                                 461,241       123,613        584,854      1,871,649       1,414     1,873,063
Securities sold under 
   repurchase agreements                             (41,194)       14,613        (26,581)        78,573      (4,318)       74,255
Other short-term borrowings                          (26,357)       (7,805)       (34,162)        31,991       8,414        40,405
                                                    --------     ---------       --------     ----------    ---------   ----------
   Total interest expense                            393,690       130,421        524,111      1,982,213       5,510     1,987,723
                                                    --------     ---------       --------     ----------    ---------   ----------

Net interest income                                 $363,684     $(134,068)      $229,616     $1,055,782    $(50,676)   $1,005,106
                                                    --------     ---------       --------     ----------    ---------   ----------
                                                    --------     ---------       --------     ----------    ---------   ----------

                                                                                                                        (Continued)
</TABLE>
                                       16
<PAGE>
<TABLE>
<CAPTION>

                                                                                THIRD QUARTER PERIODS
                                                    ------------------------------------------------------------------------------
                                                                            Amount of Increase (Decrease)
                                                    ------------------------------------------------------------------------------
                                                             Change From 1997                           Change From 1996
                                                              to 1998 Due to                             to 1997 Due to
                                                    -------------------------------------     ------------------------------------
                                                     Volume        Yield/                        Volume       Yield/
                                                       (1)        Rate (2)         Total           (1)       Rate (2)     Total
                                                    --------     ---------       --------     ----------    ---------   ----------
<S>                                                <C>          <C>             <C>          <C>           <C>         <C>
INTEREST INCOME:
Loans                                               $319,643     $   5,246       $324,889     $  568,674    $(20,345)   $  548,329
                                                    --------     ---------       --------     ----------    ---------   ----------
Investment securities:
   Taxable                                           (79,859)        4,083        (75,776)       429,560      (9,077)      420,483
   Nontaxable                                        (19,319)      (28,219)       (47,538)        23,418     (11,491)       11,927
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total interest securities                      (99,178)      (24,136)      (123,314)       452,978     (20,568)      432,410
                                                    --------     ---------       --------     ----------    ---------   ----------

Federal funds sold                                    72,255        (3,792)        68,463         34,928      (1,591)       33,337
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total interest income                          292,720       (22,682)       270,038      1,056,580     (42,504)    1,014,076
                                                    --------     ---------       --------     ----------    ---------   ----------

INTEREST EXPENSE:
Interest bearing transaction
   accounts                                           10,724       (12,571)        (1,847)        59,425       4,543        63,968
Savings                                               17,911        15,009         32,920         47,273       2,094        49,367
Time deposits of $100,000
   or more                                            81,219         1,462         82,681         38,953       9,654        48,607
Other time deposits                                   52,279         2,202         54,481        531,121      (1,299)      529,822
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total deposits                                 162,133         6,102        168,235        676,772      14,992       691,764
Securities sold under 
   repurchase agreements                             (20,068)         (581)       (20,649)        26,633       1,913        28,546
Other short-term borrowings                           (1,923)          187         (1,736)         2,055       1,259         3,314
                                                    --------     ---------       --------     ----------    ---------   ----------
      Total interest expense                         140,142         5,708        145,850        705,460      18,164       723,624
                                                    --------     ---------       --------     ----------    ---------   ----------

Net interest income                                 $152,578     $ (28,390)      $124,188     $  351,120    $(60,668)   $  290,452
                                                    --------     ---------       --------     ----------    ---------   ----------
                                                    --------     ---------       --------     ----------    ---------   ----------
</TABLE>

_______________

(1)  Change in volume multiplied by yield/rate of prior year.
(2)  Change in yield/rate multiplied by volume of prior year.

NOTE:  The change in interest due to both rate and volume has been allocated to
       volume and rate changes in proportion to the relationship of the absolute
       dollar amounts of the change in each.

                                       17
<PAGE>

PROVISION FOR POSSIBLE LOAN LOSSES

        A significant determinant of the Company's operating results is the 
level of loan losses and the provision for possible loan losses charged to 
operations. During the first nine months of 1998, the Company recorded a 
provision for possible loan losses of $240,000, with $30,000 of this amount 
recorded in the third quarter of 1998.  The Company did not record a 
provision during the first six months of 1997, and recorded a provision of 
$30,000 in the third quarter of 1997.  Following is a summary of the activity 
in the Company's reserve for possible loan losses for the first nine months 
of 1998 and 1997, and the third quarters of 1998 and 1997:

<TABLE>
<CAPTION>

                                       First Nine Months        Third Quarter
                                   ------------------------  --------------------
                                      1998          1997       1998       1997
                                   ----------   -----------  --------  ----------
<S>                               <C>          <C>          <C>       <C>
Balance at beginning of period     $1,098,038   $   800,418  $915,370  $1,105,674
Reserve for possible loan losses
   of acquired subsidiary               -         1,183,535      -          -
Provision for possible loan losses
   charged to operations              240,000        30,000    30,000      30,000
Charge-offs during period            (507,798)   (1,090,275)  (50,304)   (111,323)
Recoveries during period               81,108       171,019    16,282      70,346
                                   ----------   -----------  --------  ----------
Balance at end of period           $  911,348   $ 1,094,697  $911,348  $1,094,697
                                   ----------   -----------  --------  ----------
                                   ----------   -----------  --------  ----------
</TABLE>

        In determining an adequate balance in the reserve for possible loan 
losses, management places its emphasis as follows:  evaluation of the loan 
portfolio with regard to potential future exposure on loans to specific 
customers and industries, including a formal internal loan review function; 
re-evaluation of each nonperforming loan or loan classified by supervisory 
authorities; and an overall review of the remaining portfolio in light of 
past loan loss experience.  Any problems or loss exposure estimated in these 
categories was provided for in the total current period reserve.

        The reserve for possible loan losses at September 30, 1998 was 0.76% 
of net outstanding loans.  Nonperforming loans totaled approximately 
$1,097,000 at September 30, 1998, resulting in a reserve coverage of 
nonperforming loans of 83.08%.  Total nonperforming loans at December 31, 
1997 totaled $1,107,121, with a reserve coverage on that date of 99.2%.  
Company management believes the reserve for possible loan losses allocated 
for such loans is adequate when the underlying collateral values on such 
credits is considered.

When the Company acquired Palmer Bank on January 24, 1997 in connection with 
the acquisition of Lincoln Trail, the Bank was undercapitalized, due 
primarily to a significant level of problem loans in the Palmer Bank 
portfolio made prior to the Company's acquisition thereof.  Prior to the 
acquisition, Palmer Bank increased its reserve for possible loan losses to 
$1,183,535 or 5.18% of the net outstanding loans in the portfolio on the 
acquisition date.  In the ensuing months, as Company and Palmer Bank 
management began to work through these problem loans, $968,372 of charge-offs 
were recorded at Palmer Bank, with $115,275 of recoveries received, for the 
year ended December 31, 1997.  The level of nonaccrual loans at Palmer Bank 
at December 31, 1997 was $545,949, compared with $1,494,585 on the 
acquisition date. Nonaccrual loans at Palmer Bank at September 30, 1998 were 
$297,000.  While Company management believes this clean-up effort was 
substantially completed by December 31, 1997, certain additional loans, all 
of which had been identified and reserved for at December 31, 1997, were 
charged off during the 

                                       18
<PAGE>

first nine months of 1998. During the third quarter of 1998, the Company 
recorded net charge-offs of $34,022, and replenished the reserve for possible 
loan losses with a provision charged to expense of $30,000.  Company 
management believes the reserve for possible loan losses of $911,348 at 
September 30, 1998 is adequate to absorb the potential exposure presently 
inherent in the loan portfolio.

        The Company had no loans to any foreign countries at September 30, 
1998, nor did it have any concentration of loans to any industry, other than 
the agricultural industry on September 30, 1998.  The Company has also 
refrained from financing speculative transactions such as highly leveraged 
corporate buyouts.  Additionally, the Company had no other interest-earning 
assets which were considered to be risk element assets at September 30, 1998.

        At September 30, 1998, the Company had loans outstanding to the 
agricultural sector of approximately $42,116,000, which comprised 35.14% of 
the Company's total loan portfolio.  Additionally, the Company's direct 
financing leases involve agricultural equipment which is being leased to 
local farmers.  The Company's agricultural credits are concentrated in 
Macoupin, Montgomery, Christian and Sangamon counties in central Illinois, 
and are generally fully-secured with either growing crops, farmland, 
livestock, and/or machinery and equipment.  Additionally, the Company's 
lending personnel work with their agricultural borrowers to monitor cash flow 
capabilities.

NONINTEREST INCOME

        Total noninterest income for the first nine months of 1998 increased 
$312,269 (35.19%) to $1,199,642 from the $887,373 recorded for the first nine 
months of 1997.  Total noninterest income for the third quarter of 1998 
decreased $123,385 (29.86%) to $289,765 from the $413,150 recorded for the 
third quarter of 1997. Several factors caused these period-to-period 
increases, including the following:

     -    The results for the first nine months of 1997 included the operations
          of Palmer Bank from January 24, 1997 forward.  Accordingly, the first
          nine months of 1998 included a full period of Palmer Bank operations,
          while the first nine months of 1997 excluded the Palmer Bank 
          operations for most of the first month.

     -    During 1997, the Carlinville Bank introduced a fee-based commercial
          checking product which has proven quite successful.  This program was
          in place for the entire 1998 period, while only being in place for a
          portion of the first nine months of 1997.

     -    In 1997, the Company established a mortgage banking department, which
          originates loans for sale in the secondary market.  This program was 
          in place for the entire 1998 period, while only in a start-up mode
          during the first nine months of 1997.

     -    Other noninterest income for the first nine months of 1998 and third
          quarter of 1998 included $40,090 and $13,490, respectively for the
          increase in cash surrender value on life insurance policies purchased
          in connection with the Directors' Incentive Deferral Plan adopted in
          December 1997.  This plan was adopted for certain of the Carlinville
          Bank's directors, allowing such directors to defer their current
          compensation earned as directors, with the Carlinville Bank agreeing
          to pay to such directors, or their designated

                                       19
<PAGE>

          beneficiaries or survivors, the total amount of deferred compensation
          plus accumulated interest at or following retirement.  Under the plan,
          interest is added to the accumulated deferred compensation at a 
          periodic compound rate equal to the Carlinville Bank's return on 
          equity before such interest charges.  To fund the individual 
          agreements with each director covered under the plan, the Carlinville
          Bank purchased flexible premium universal life insurance policies on
          the lives of such directors (payable upon death to the Carlinville
          Bank), and paid a single one-time premium at the inception of the 
          policies totaling $910,000.  No other payments or premiums are 
          required of the Carlinville Bank.  Each life insurance policy has a
          cash surrender value feature which allows the Carlinville Bank to
          receive an amount in cash upon cancellation or lapse of the policy.
          The cash surrender value of the policies, which is included in other
          assets in the consolidated balance sheet, increases monthly, based
          upon an interest factor, net of mortality, administration and early
          termination costs that are inherent in the contracts.

     -    The Company had net securities gains of $311,943 and $3,589 for the
          first nine months of 1998 and third quarter of 1998, respectively,
          compared with $190,807 and $171,144 for the first nine months and 
          third quarter of 1997, respectively. Approximately $9,000 of the net
          gains for the first nine months of 1997 were recorded at Palmer Bank
          shortly after the Company's acquisition thereof, on sales made to 
          restructure the portfolio in line with the Company's investment 
          strategies. The Company recorded gains of $134,428 and $169,614, in
          the first and second quarters of 1998, respectively, and $170,483
          in the third quarter of 1997, on three separate sales of a mutual
          fund investment made thereby.  In late 1995 and throughout 1996,
          the Company invested a total of $1,000,000 in a mutual fund
          comprised of regional bank stocks.  With the banking consolidation 
          and strong market performance by regional banks occurring during
          the past few years, this fund appreciated significantly. By year-end
          1996, the fund had appreciated to $1,215,719.  By June 1997, the fund
          had appreciated further to $1,446,915, and shortly thereafter, the 
          Company sold a portion of the fund to invest $450,000 in a similar
          fund, recording a gain of $170,483 in the process.  During the first
          quarter of 1998, the Company sold $330,000 of the fund investment and
          injected the proceeds into Palmer Bank to increase its capital,
          recording a $134,428 gain on the sale.  In the second quarter of 1998,
          the Company sold an additional $375,000 of the funds, again injecting
          the proceeds into Palmer Bank to increase its capital, recording a 
          gain of $169,614.  The regional bank stock mutual fund investments are
          included in the Company's available-for-sale securities and, at 
          September 30, 1998, had a fair value and amortized cost of $1,095,553
          and $834,506, respectively.

NONINTEREST EXPENSE

        Noninterest expense for the first nine months of 1998 increased 
$196,118 (5.69%) to $3,645,072 from the $3,448,954 recorded for the first 
nine months of 1997. Noninterest expense for the third quarter of 1998 
increased $31,584 (2.69%) to $1,205,055 from the $1,173,471 recorded for the 
third quarter of 1997.  Several factors caused these period-to-period 
increases, including the following:

                                       20
<PAGE>

     -    The results of the first nine months of 1997 included the Palmer 
          Bank from January 24, 1997 forward. Accordingly, the first nine months
          of 1998 included operating expenses of Palmer Bank for the entire
          period, while the first nine months of 1997 excluded the Palmer 
          Bank operations for the first 24 days of the period.

     -    During the second quarter of 1997, the Company established its
          mortgage banking operations and the related expenses thereof are
          included for only a portion of 1997, but for the entire period
          in 1998.

     -    During the second half of 1997, the Company upgraded its management
          personnel at Palmer Bank, resulting in increased operating expense.

INCOME TAXES

        Applicable income taxes for the first nine months of 1998 increased 
$58,572 (10.63%) to $609,333 from the $550,761 recorded for the first nine 
months of 1997. Applicable income taxes for the third quarter of 1998 
increased $982 (0.47%) to $210,479 from the $209,497 recorded for the third 
quarter of 1997.  The effective tax rates for the first nine months of 1998 
and 1997 were 27.07% and 26.22%, respectively, and 27.78% and 27.16% for the 
third quarters of 1998 and 1997, respectively.  The changes in the levels of 
effective tax related primarily to the level of state tax-exempt U.S. agency 
securities on hand for the particular periods.

FINANCIAL CONDITION

        The Company's total assets increased $9,475,220 (4.81%) to 
$206,656,110 at September 30, 1998, from $197,180,890 at December 31, 1997.  
This increase was due primarily to an influx of deposits.

        Total deposits increased $12,153,059 (7.25%) to $179,767,931 at 
September 30, 1998 from $167,614,872 at December 31, 1997.  This growth in 
deposits resulted primarily from the influx of deposits of customers from 
larger regional banks affected by the consolidation in the banking industry, 
as such customers looked for a bank with more personal service.

        Short-term borrowings decreased $4,515,164 (56.92%) to $3,417,717 at 
September 30, 1998 from $7,932,881 at December 31, 1997.  These balances tend 
to have significant fluctuations depending upon the cash levels of the 
customers which use the cash management facilities of the Carlinville Bank 
through the purchase of securities under repurchase agreements.  The Company 
believes these companies are experiencing strong operations again in 1998, 
resulting in excess cash.  The level of Federal funds sold generally tracks 
with the level of securities sold under repurchase agreements; however, 
Federal funds sold actually increased $3,771,000 (44.74%) at September 30, 
1998 to $12,200,000 from $8,429,000 at December 31, 1997, as the funds 
available from the reduction in the investment portfolio at September 30, 
1998 more than offset the reduction in short-term borrowings.

                                       21
<PAGE>

        Investment securities decreased $3,153,871 (5.00%) to $59,863,866 at 
September 30, 1998 from $63,017,737 at December 31, 1997.  Proceeds from 
maturities and calls of and principal payments on debt securities were 
$24,260,575 for the first nine months of 1998, of which $21,836,569 were 
reinvested in debt securities.  The low interest rate environment has 
provided the Company less attractive investment opportunities and, as such, 
more funds have been temporarily shifted to Federal funds sold, to be 
subsequently invested in anticipated loan growth.  The total fair value of 
the Company's investment portfolio at September 30, 1998 was approximately 
$60,256,000, or 101% of the portfolio's book value on that date.  The market 
valuation of the Company's investment securities portfolio at December 31, 
1997 was 101% of the portfolio's book value.

        Total loans increased $7,960,805 (7.11%) to $119,886,014 at 
September 30, 1998 from $111,925,209 at December 31, 1997.  This increase 
resulted from the Company's increased lending capacity afforded a larger 
banking organization, as well as loan growth coming from new customers 
shifting their banking relationships away from the larger non-local banks in 
the Company's market area.

        The Company's capitalization remained at a strong level at June 30, 
1998. Total capital was $21,742,014 or 10.52% of total assets at September 
30, 1998, as compared with 10.36% at December 31, 1997.

        The Federal Reserve Board has established risk-based capital 
guidelines for bank holding companies, which require bank holding companies 
to maintain minimum levels of "Tier 1 Capital" and "Total Capital."  Tier 1 
Capital consists of common and qualifying preferred stockholders' equity and 
minority interests in equity accounts of consolidated subsidiaries, less 
goodwill and 50% of investments in unconsolidated subsidiaries.  Total 
Capital consists of, in addition to Tier 1 Capital, mandatory convertible 
debt, preferred stock not qualifying as Tier 1 Capital, subordinated and 
other qualifying term debt and a portion of the reserve for possible loan 
losses, less the remaining 50% of qualifying total capital. Risk-based 
capital ratios are calculated with reference to risk-weighted assets, which 
include both on-and off-balance sheet exposures.  The minimum required ratio 
for qualifying Total Capital is 8%, of which at least 4% must consist of 
Tier 1 Capital.

        In addition, Federal Reserve Board guidelines require bank holding 
companies to maintain a minimum ratio of Tier 1 Capital to average total 
assets (net of goodwill) of 3.0%.  The Federal Reserve Board guidelines state 
that all of these capital ratios constitute the minimum requirements for the 
most highly-rated banking organizations, and other banking organizations are 
expected to maintain capital at higher levels.

        As of September 30, 1998, the Company and each of its banking 
subsidiaries were in compliance with the Tier 1 Capital ratio requirement and 
all other applicable regulatory capital requirements, as calculated in 
accordance with risk-based capital guidelines.  The Company's Tier 1, Total 
Capital and Leverage Ratios were 13.35%, 14.12% and 8.66%, respectively, at 
September 30, 1998.

                                       22
<PAGE>

        Federal law provides the Federal banking regulators with broad power 
to take prompt corrective action to resolve the problems of undercapitalized 
institutions. The extent of the regulators' powers depends on whether the 
institution in question is "well capitalized," "adequately capitalized," 
"undercapitalized," "significantly undercapitalized" or ""critically 
undercapitalized," which are defined by the regulators as follows:

<TABLE>
<CAPTION>

                                                     Minimum Capital Ratios
                                         ------------------------------------------------
                                             Total           Tier 1
                                          Risk-Based       Risk-Based        Leverage
                                             Ratio           Ratio            Ratio
                                         --------------   --------------   --------------
    <S>                                 <C>              <C>              <C>
     Well capitalized                          10%             6%               5%
     Adequately capitalized                     8              4                4
     Undercapitalized                     LESS THAN 8     LESS THAN 4      LESS THAN 4
     Significantly undercapitalized       LESS THAN 6     LESS THAN 3      LESS THAN 3
     Critically undercapitalized                *              *                *
</TABLE>

     *    critically undercapitalized institution is defined as having a
          tangible equity to total assets ratio of 2% or less

        Depending upon the capital category to which an institution is 
assigned, the regulators' corrective powers include:  requiring the 
submission of a capital restoration plan; placing limits on asset growth and 
restrictions on activities; requiring the institution to issue additional 
capital stock (including additional voting stock) or to be acquired; 
restricting transactions with affiliates; restricting the interest rate the 
institution may pay on deposits; ordering a new election of directors of the 
institution; requiring that senior executive officers or directors be 
dismissed; prohibiting the institution from accepting deposits from 
correspondent banks; requiring the institution to divest certain 
subsidiaries; prohibiting the payment of principal or interest on 
subordinated debt; and ultimately, appointing a receiver of the institution.  
The capital category of an institution also determined in part the amount of 
the premiums assessed against the institution for FDIC insurance.  At 
September 30, 1998, each of the Company's banking subsidiaries were 
considered "well capitalized."

LIQUIDITY AND RATE SENSITIVITY

        Management of rate-sensitive earning assets and interest-bearing 
liabilities remains a key to the Company's profitability.  Management's 
objective is to produce the optimal yield and maturity mix consistent with 
interest rate expectations and projected liquidity needs.

        Liquidity is a measurement of the Company's ability to meet the 
borrowing needs and the deposit withdrawal requirements of its customers.  
The composition of assets and liabilities is actively managed to maintain the 
appropriate level of liquidity in the balance sheet.  Management is guided by 
regularly-reviewed policies when determining the appropriate portion of total 
assets which should be comprised of readily-marketable assets available to 
meet conditions that are reasonably expected to occur.

                                       23
<PAGE>

        Liquidity is primarily provided to the Company through earning 
assets, including Federal funds sold and maturities and principal payments in 
the investment portfolio, all funded through continued deposit growth.  
Secondary sources of liquidity available to the Company include the sale of 
securities included in the available-for-sale category (with a carrying value 
of $44,853,872 at September 30, 1998), and borrowing capabilities through the 
Federal Reserve Bank's seasonal borrowing privilege of $4.1 million 
maintained at the Carlinville Bank.  Additionally, maturing loans also 
provide liquidity on an ongoing basis. Accordingly, the Company believes it 
has the liquidity necessary to meet unexpected deposit withdrawal 
requirements or increases in loan demand.

        Each of the Company's banking subsidiaries controls its own 
asset/liability mix within the constraints of its individual policies and 
loan and deposit structure, with overall guidance from the Company.

        The asset/liability management process, which involves structuring 
the consolidated balance sheet to allow approximately equal amounts of assets 
and liabilities to reprice at the same time, is a dynamic process essential 
to minimize the effect of fluctuating interest rates on net interest income.  
The following table reflects the Company's consolidated interest rate gap 
(rate-sensitive assets minus rate-sensitive liabilities) analysis as of 
September 30, 1998, individually and cumulatively, through various time 
horizons (in thousands of dollars):

<TABLE>
<CAPTION>


                                                                       Remaining Maturity if Fixed Rate;
                                                              Earliest Possible Repricing Interval if Floating Rate
                                                         --------------------------------------------------------------
                                                             3          Over 3        Over 1
                                                          months        months         year
                                                            or          through       through       Over 5
                                                           less        12 months      5 years       years         Total
                                                         --------      ---------     ---------     --------      ------
<S>                                                     <C>           <C>           <C>           <C>          <C>
Interest-earning assets:
   Loans, net of unearned discount                       $ 34,485      $ 28,153      $ 48,632      $  8,583     $ 119,853
   Investment securities                                    8,351         4,990        24,018        22,505        59,864
   Other interest-earning assets                           12,200             -             -             -        12,200
                                                         --------      --------      --------      --------     ---------
      Total interest-earnings assets                     $ 55,036      $ 33,143      $ 72,650      $ 31,088     $ 191,917
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
Interest-bearing liabilities:
   Savings, and interest bearing
      transaction accounts                               $ 48,884      $      -      $      -      $      -       $48,884
   Time certificates of deposit of
      $100,000 or more                                     11,939         3,870         4,619             -        20,428
   All other time deposits                                 18,632        33,036        41,021             -        92,689
   Nondeposit interest-bearing
      liabilities                                           3,418             -             -             -         3,418
                                                         --------      --------      --------      --------     ---------
      Total interest-bearing
         liabilities                                     $ 82,873      $ 36,906      $ 45,640      $      -     $ 165,419
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
Gap by period                                            $(27,837)     $ (3,763)     $ 27,010      $ 31,088     $  26,498
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
Cumulative gap                                           $(27,837)     $(31,600)     $ (4,590)     $ 26,498     $  26,498
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
Ratio of interest-sensitive
   assets to interest-sensitive
   liabilities                                              0.66x         0.90x         1.59x                       1.16x
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
Cumulative ratio of interest-
   sensitive assets to interest-
   sensitive liabilities                                    0.66x         0.74x         0.97x         1.16x         1.16x<PAGE>
                                                         --------      --------      --------      --------     ---------
                                                         --------      --------      --------      --------     ---------
</TABLE>

                                       24
<PAGE>

        As indicated in this table, the Company operates on a short-term 
basis similar to most other financial institutions, as its liabilities, with 
savings and interest-bearing transaction accounts included, could reprice 
more quickly than its assets.  However, the process of asset/liability 
management in a financial institution is dynamic.  Company management 
believes its current asset/liability management program will allow adequate 
reaction time for trends in the marketplace as they occur, allowing 
maintenance of adequate net interest margins. Additionally, the Company's 
historical analysis of customer savings and interest-bearing transaction 
accounts indicates that such deposits have certain "core deposit" 
characteristics and are not as susceptible to changes in the marketplace.

YEAR 2000 COMPLIANCE

        The Company utilizes and is dependent upon data processing hardware 
systems and banking application software to conduct its business.  The data 
processing hardware systems and banking application software include those 
developed and maintained by the Company's data processing hardware providers 
and purchased banking application software which is run on in-house computer 
networks.  The Year 2000 has posed a unique set of challenges to those 
industries reliant on information technology. As a result of methods employed 
by early programmers, many software applications and operational programs may 
be unable to distinguish the Year 2000 from the Year 1900.  If not 
effectively addressed, this problem could result in the production of 
inaccurate data, or in the worst cases, the inability of the systems to 
continue to function altogether.  Financial institutions are particularly 
vulnerable due to the industry's dependence on electronic data processing 
systems.  In 1997, the Company started the process of identifying the 
hardware and software issues required to be addressed to assure Year 2000 
compliance.  The Company began by assessing the issues related to the Year 
2000 and the potential for those issues to adversely affect the Company's 
operations and those of its subsidiaries.

        Since that time, the Company has established a Year 2000 management 
committee to deal with this issue.  The management committee meets with and 
utilizes various representatives from key areas throughout the organization 
to aid in analysis and testing.  It is the mission of this committee to 
identify areas subject to complications related to the Year 2000 and to 
initiate remedial measures designed to eliminate any adverse effects on the 
Company's operations.  The committee has identified all mission-critical 
software and hardware that may be adversely affected by the Year 2000 and has 
required vendors to represent that the systems and products provided are or 
will be Year 2000 compliant.

        The Company licenses all software used in conducting its business 
from third party vendors.  None of the Company's software has been internally 
developed.  The Company has developed a comprehensive list of all software, 
all hardware and all service providers used by the Company.  Every vendor has 
been contacted regarding the Year 2000 issue, and the Company continues to 
closely track the progress each vendor is making in resolving the problems 
associated with the issue.  The Company's vendor of primary software (ITI) 
has maintained that its products have been Year 2000 compliant since their 
inception.  Nevertheless, testing standards were formulated and comprehensive 
testing is now underway with an estimated completion date for testing of 
December 31, 1998.  At November 6, 1998, the testing was seventy percent 
complete, with no defects reported.  In addition, the Company continues to 
monitor all other major vendors of services to the Company for Year 2000 
issues in order to avoid shortages of supplies and 

                                       25
<PAGE>

services in the coming months.  The Company has not had any material delay 
regarding its information systems projects as a result of the Year 2000 
project.

        The Company's main commercial banking relationship is with United 
Missouri Bank in St. Louis UMB correspondence indicates substantial progress 
with Year 2000 readiness.

        There are several third party utilities with which the Company has an 
important relationship, i.e., PNG Communications (phone service), and 
Illinois Power (electricity and natural gas).  The Company has not identified 
any practical, long-term alternatives to relying on these companies for basic 
utility services.  In the event that the utilities significantly curtailed or 
interrupted their services to the Company, it would have a significant 
adverse effect on the Company's ability to conduct its business.

        The Company is also in the process of testing such things as vault 
doors, alarm systems, networks, etc. and is not aware of any significant 
problems with such systems.

        The Company decided to consolidate computer processing among its 
three banks and benefit from economies of scale and from savings derived 
through conversion to check imaging.  In the process Year 2000 testing on new 
equipment was actually simplified.  Costs specific to Year 2000 remediation 
and testing are therefore not anticipated to be material.  At the present 
time, no situations that will require material cost expenditures to become 
fully compliant have been identified. However, the Year 2000 problem is 
pervasive and complex and can potentially affect any computer process.  
Accordingly, no assurance can be given that Year 2000 compliance can be 
achieved without additional unanticipated expenditures and uncertainties that 
might affect future financial results.

        It is not possible at this time to quantify the estimated future 
costs due to possible business disruption caused by vendors, suppliers, 
customers, and even the possible loss of electric power or phone service; 
however, such costs could be substantial.

        The Company is committed to a plan for achieving compliance, focusing 
not only on its own data processing systems, but also on its loan customers.  
The management committee has taken steps to educate and assist its customers 
with identifying their Year 2000 compliance problems.  In addition, the 
management committee has proposed policy and procedure changes to help 
identify potential risks to the Company and to gain an understanding of how 
customers are managing the risks associated with the Year 2000.  The Company 
is assessing the impact, if any, the Year 2000 will have on its credit risk 
and loan underwriting.  In connection with potential credit risk related to 
the Year 2000 issue, the Company has contacted its large commercial loan 
customers regarding their level of preparedness for the Year 2000.

        The Company has developed contingency plans for various Year 2000 
problems and continues to revise those plans based on testing results and 
vendor notifications.

ACCOUNTING PRONOUNCEMENTS

        Several accounting rule changes which will or have gone into effect 
recently, as promulgated by the Financial Accounting Standards Board, will 
have an effect on the Company's financial reporting process.  These 
accounting rule changes, issued in the form of Financial Accounting Standards 
("FAS") include the following:

                                       26
<PAGE>

   -  FAS 125 - The Company adopted the provisions of Statement of Financial
      Accounting Standards No. 125, "Transfer and Servicing of Financial Assets
      and Extinguishments of Liabilities" ("FAS 125"), on January 1, 1997. 
      FAS 125 provides accounting and reporting standards for transfers and
      servicing of financial assets and extinguishments of liabilities based on
      consistent application of a financial components approach that focuses
      on control.  FAS 125 distinguishes transfers of financial assets that are
      sales from transfers that are secured borrowings. Adoption of FAS 125 did
      not have a material impact on the Company's financial position, results
      of operations, or liquidity.

   -  FAS 128 - In February 1997, the Financial Accounting Standards Board
      issued Statement of Financial Accounting Standards No. 128, "Earnings
      per Share" ("FAS 128") which amends existing accounting requirements and
      establishes standards for computing and presenting earnings per share
      for entities with publicly-held common stock or potential common stock.
      FAS 128 simplifies the standards for computing earnings per share, 
      replacing the presentation of primary earnings per share with basic 
      earnings per share, which excludes dilution and is computed by dividing
      income available to common stockholders by the weighted average number of
      common share outstanding for the period.  FAS 128 also requires dual
      presentation of basic and diluted earnings per share on the face of the
      income statement for all entities with complex capital structures, and
      requires a reconciliation of the numerator and denominator of the basic
      earnings per share computation to the numerator and denominator of the
      diluted earnings per share computation.  Diluted earnings per share 
      reflects the potential dilution that could occur if securities or other
      contracts to issue common stock were exercised or converted into common
      stock or resulted in the issuance of common stock that then shares in
      the earnings of the entity.

      FAS 128 is effective for financial statements issued for periods ending
      after December 15, 1997, and requires restatement of all prior period
      earnings per share information presented.  At June 30, 1998, the Company
      did not maintain a complex capital structure as defined by FAS 128.
      Accordingly, the basic earnings per share computed under FAS 128 does 
      not differ from the earnings per share presented herein for the three 
      and nine month periods ended September 30, 1998 and 1997.

   -  FAS 130 - In June 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 130, "Reporting 
      Comprehensive Income" ("FAS 130").  FAS 130 establishes standards for
      reporting and display of comprehensive income and its components
      (revenues, expenses, gains and losses) in financial statements. FAS 130
      defines comprehensive income as the change in equity (net assets) of a
      business enterprise during a period from transactions and other events
      and circumstances from nonowner sources, including all changes in equity
      during a period, except those resulting from investments by and 
      distributions to owners.

      FAS 130 requires that all items that are required to be recognized as
      comprehensive income be reported in a financial statement that is 
      displayed with the same prominence as other financial statements.
      FAS 130 also requires that an enterprise (a) classify items of other
      comprehensive income by their nature in a financial statement and
      (b) display the accumulated balance of other comprehensive income
      separately from retained 

                                       27
<PAGE>

      earnings and additional paid in capital in the equity section of the
      consolidated balance sheet.

      FAS 130 is effective for fiscal years beginning after December 15, 1997,
      with reclassification of financial statements of earlier periods required
      for comparative purposes.  Accordingly, the Company has implemented 
      FAS 130 for all of the periods presented herein.

EFFECTS OF INFLATION

        Persistent high rates of inflation can have a significant effect on 
the reported financial condition and results of operations of all industries. 
 However, the asset and liability structure of a bank holding company is 
substantially different from that of an industrial company, in that virtually 
all assets and liabilities of a bank holding company are monetary in nature.  
Accordingly, changes in interest rates may have a significant impact on a 
banking holding company's performance. Interest rates do not necessarily move 
in the same direction, or in the same magnitude, as the prices of other goods 
and services.

        Inflation, however, does have an important impact on the growth of 
total assets in the banking industry, often resulting in a need to increase 
equity capital at higher than normal rates to maintain an appropriate 
equity-to-assets ratio.  One of the most important effects that inflation has 
had on the banking industry has been to reduce the proportion of earnings 
paid out in the form of dividends.

        Although it is obvious that inflation affects the growth of total 
assets, it is difficult to measure the impact precisely. Only new assets 
acquired each year are directly affected, so a simple adjustment of asset 
totals by use of an inflation index is not meaningful.  The results of 
operations also have been affected by inflation, but again, there is no 
simple way to measure the effect on the various categories of income and 
expense.

        Interest rates in particular are significantly affected by inflation, 
but neither the timing nor the magnitude of the changes coincide with changes 
in the consumer price index.  Additionally, changes in interest rates on some 
types of consumer deposits may be delayed.  These factors, in turn, affect 
the composition of sources of funds by reducing the growth of deposits that 
are less interest-sensitive, and increasing the need for funds that are more 
interest-sensitive.

RECENT REGULATORY DEVELOPMENTS/YEAR 2000

        The Federal banking regulators recently issued guidelines 
establishing minimum safety and soundness standards for achieving Year 2000 
compliance.  The guidelines, which took effect October 15, 1998 and apply to 
all FDIC-insured depository institutions, establish standards for developing 
and managing Year 2000 project plans, testing remediation efforts and 
planning for contingencies.  The guidelines are based upon guidance 
previously issued by the agencies under the auspices of the Federal Financial 
Institutions Examination Council (the "FFIEC"), but are not intended to 
replace or supplant the FFIEC guidance which will continue to apply to all 
federally insured depository institutions.

        The guidelines were issued under section 39 of the Federal Deposit 
Insurance Act, as amended (the "FDIA"), which requires the federal banking 
regulators to establish standards for 

                                       28
<PAGE>

the safe and sound operation of federally insured depository institutions.  
Under section 39 of the FDIA, if an institution fails to meet any of the 
standards established in the guidelines, the institution's primary federal 
regulator may require the institution to submit a plan for achieving 
compliance.  If an institution fails to submit an acceptable compliance plan, 
or fails in any material respect to implement a compliance plan that has been 
accepted by its primary federal regulator, the regulator is required to issue 
an order directing the institution to cure the deficiency.  Such an order is 
enforceable in court in the same manner as a cease and desist order.  Until 
the deficiency cited in the regulator's order is cured, the regulator may 
restrict the institution's rate of growth, require the institution to 
increase its capital, restrict the rates the institution pays on deposits or 
require the institution to take any action the regulator deems appropriate 
under the circumstances.  In addition to the enforcement procedures 
established in section 39 of the FDIA, noncompliance with the standards 
established by the guidelines may also be grounds for other enforcement 
action by the federal banking regulators, including cease and desist orders 
and civil money penalty assessments.

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

        This report contains certain forward-looking statements within the 
meaning of Section 17A of the Securities Act of 1933, as amended, and Section 
21E of the Securities Exchange Act of 1934, as amended.  The Company intends 
such forward-looking statements to be covered by the safe harbor provisions 
for forward-looking statements contained in the Private Securities Reform Act 
of 1995, and is including this statement for purposes of these safe harbor 
provisions.  Forward-looking statements, which are based on certain 
assumptions and describe future plans, strategies and expectations of the 
Company, are generally identifiable by use of the words "believe," "expect," 
"intend," "anticipate," "estimate," "project" or similar expressions.  The 
Company's ability to predict results or the actual effect of future plans or 
strategies is inherently uncertain.  Factors which could have a material 
adverse affect on the operations and future prospects of the Company and the 
subsidiaries include, but are not limited to, changes in:  interest rates, 
general economic conditions, legislative/regulatory changes, monetary and 
fiscal policies of the U.S. Government, including policies of the U.S. 
Treasury and the Federal Reserve Board, the quality or composition of the 
loan or investment portfolios, demand for loan products, deposit flows, 
competition, demand for financial services in the Company's market area and 
accounting principles, policies and guidelines.  These risks and 
uncertainties should be considered in evaluating forward-looking statements 
and undue reliance should not be placed on such statements.

                                       29
<PAGE>

        Further information concerning the Company and its business, 
including additional factors that could materially affect the Company's 
financial results, is included in the Company's filings with the Securities 
and Exchange Commission.

                            PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

The Company filed a Registration Statement on Form S-4 with the Securities 
and Exchange Commission on June 26, 1998 (Registration No. 333-57917), 
relating to the acquisition of Shipman Bancorp, Inc. ("Shipman").  The 
registration statement was declared effective on August 12, 1998.  The merger 
of Shipman into a wholly-owned subsidiary of the Company was approved by 
stockholders of Shipman at a special meeting held on September 15, 1998.  The 
transaction was closed on October 1, 1998.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Exhibits

         27.  Financial Data Schedule

         Reports on Form 8-K

         None

                                       30
<PAGE>

                                    SIGNATURES


        Pursuant to the requirements 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.

                                       CARLINVILLE NATIONAL BANK SHARES, INC.
                                       (Registrant)



                                       /s/  James T. Ashworth
                                       ---------------------------------------
                                       James T. Ashworth
                                       President and Principal Executive,
                                       Financial and Accounting Officer


Date:  November 13, 1998

                                       31