FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549



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




FOR QUARTER ENDED                                        COMMISSION FILE NUMBER
   JUNE 30, 1998                                                0-24630





                           MAHASKA INVESTMENT COMPANY
             (Exact Name of Registrant as Specified in its Charter)




         IOWA                                           42-1003699
(State of Incorporation)                   (I.R.S. Employer Identification No.)



                  222 First Avenue East, Oskaloosa, Iowa 52577

                         Telephone Number (515) 673-8448






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

                             Yes   X           No______

As of August 6, 1998,  there were 3,651,842  shares of common stock $5 par value
outstanding.



<PAGE>



PART I -- Item 1. Financial Statements
<TABLE>
<CAPTION>

                           MAHASKA INVESTMENT COMPANY
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CONDITION

(unaudited)
(dollars in thousands)

                                                June 30,          December 31,
                                                  1998                1997
<S>                                          <C>                  <C>
               ASSETS
Cash and due from banks                        $  13,616              10,854
Interest-bearing deposits in banks                   225               1,526
Federal funds sold                                   817               6,815
   Cash and cash equivalents                      14,658              19,195
Investment securities:
   Available for sale                             26,662              23,228
   Held to maturity                               16,879              19,833
Loans                                            159,031             144,333
  Allowance for loan losses                       (1,736)             (1,816)
      Net loans                                  157,295             142,517
Loan pool participations                          45,703              54,326
Premises and equipment, net                        4,205               4,183
Accrued interest receivable                        2,745               2,927
Other assets                                       2,530               2,502
Goodwill                                           5,856               6,162
     Total assets                            $   276,533             274,873

   LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Demand                                    $    19,188              21,277
   NOW and Super NOW                              33,410              33,226
   Savings                                        59,664              59,020
   Certificates of deposit                       104,901             101,785
         Total deposits                          217,163             215,308
Federal funds purchased                            2,000                   0
Federal Home Loan Bank advances                    6,000               6,000
Note payable                                      10,300              14,050
Other liabilities                                  2,568               2,761
         Total liabilities                       238,031             238,119

Shareholders' equity:
   Common stock, $5 par value; authorized
     4,000,000 shares; issued 3,807,501
     shares                                       19,038              19,038
   Capital surplus                                   109                 119
   Treasury stock at cost, 125,905 shares
     as of June 30, 1998, and 142,007
     shares as of December 31, 1997               (1,777)             (1,752)
   Retained earnings                              21,004              19,230
Accumulated other comprehensive income               128                 119
         Total shareholders' equity               38,502              36,754
         Total liabilities and shareholders'
            equity                           $   276,533             274,873
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>



PART I -- Item 1. Financial Statements, continued.
<TABLE>
<CAPTION>

                           MAHASKA INVESTMENT COMPANY
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands,                   Three Months Ended   Six Months Ended
 except per share)                             June 30,          June 30,
                                           1998      1997      1998      1997
<S>                                      <C>        <C>       <C>      <C>
Interest income:
Interest and fees on loans               $ 3,652     2,999     7,052     5,720
Interest and discount on
  loan pools                               2,191     1,977     4,655     4,417
Interest on bank deposits                     47        14        88        56
Interest on federal funds sold               116        12       223        61
Interest on investment securities:
  Available for sale                         406       460       778       897
  Held to maturity                           226       329       476       678
    Total interest income                  6,638     5,791    13,272    11,829

Interest expense:
Interest on deposits:
   NOW and Super NOW                         176       168       341       333
   Savings                                   557       567     1,101     1,105
   Certificates of deposit                 1,484     1,358     2,944     2,684
Interest on federal funds
   purchased                                   1         8         1        11
Interest on Federal Home
   Loan Bank advances                         90        48       179        51
Interest on note payable                     225       159       479       317
   Total interest expense                  2,533     2,308     5,045     4,501
   Net interest income                     4,105     3,483     8,227     7,328
Provision for loan losses                    177        39       287       167
       Net interest income after
       provision for loan losses           3,928     3,444     7,940     7,161

Noninterest income:
Service charges                              300       272       588       535
Data processing income                        52        62       100       115
Other operating income                        90        97       169       210
Investment security gains                      0        (8)       26        (8)
   Total noninterest income                  442       423       883       852

Noninterest expense:
Salaries and employee benefits
   expense                                 1,173       986     2,330     1,949
Net occupancy expense                        331       288       655       559
FDIC assessment                               12        12        24        18
Professional fees                            163        92       249       189
Other operating expense                      396       418       871       925
Goodwill amortization                        153       159       306       317
   Total noninterest expense               2,228     1,955     4,435     3,957
   Income before income tax expense        2,142     1,912     4,388     4,056
Income tax expense                           768       685     1,584     1,451

       Net income                       $  1,374     1,227     2,804     2,605
                                         --------    ------    ------    ------


<PAGE>



Earnings per common share-basic         $   0.37      0.34      0.76      0.71
Earnings per common share-diluted           0.35      0.32      0.72      0.68
Dividends per common share                  0.14      0.12      0.28      0.24
</TABLE>
See accompanying notes to consolidated financial statements.


<PAGE>



PART I -- Item 1. Financial Statements, continued.
<TABLE>
<CAPTION>

                           MAHASKA INVESTMENT COMPANY
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands)                            Three Months Ended   Six Months Ended
                                                June 30,          June 30,
                                            1998       1997    1998       1997
<S>                                       <C>          <C>     <C>       <C>
Net income                             $   1,374      1,227     2,804    2,605
Other Comprehensive Income:
  Unrealized gains (losses) on
  securities available for sale:
    Unrealized holding gains
      (losses) arising during the
      period, net of tax                      (6)       105        23       25
    Less: reclassification adjustment
      for net (gains) losses included
          in net income, net of tax            0          5       (17)       5
Other comprehensive income, net of tax        (6)       110         6       30
Comprehensive income                   $   1,368    $ 1,337   $ 2,810  $ 2,635
                                           -------    ------    ------   ------

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


<PAGE>



PART I -- Item 1. Financial Statements, continued.
<TABLE>
<CAPTION>

                           MAHASKA INVESTMENT COMPANY
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)                                                Six Months Ended
(dollars in thousands)                                         June 30,
                                                        1998             1997
<S>                                                    <C>              <C>
Cash flows from operating activities:
   Net income                                          $  2,804          2,605
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
     Depreciation and amortization                          607            555
     Provision for loan losses                              287            167
     Investment securities (gains) losses                   (26)             8
     Loss on sale of bank premises and equipment              0             (7)
     Amortization of investment securities premiums          77            123
     Accretion of investment securities and
        loan discounts                                     (207)          (242)
     Decrease in other assets                               154             50
     (Decrease) increase in other liabilities              (199)           465
        Total adjustments                                   693          1,119
        Net cash provided by operating activities         3,497          3,724

Cash flows from investing activities: Investment securities available for sale:
        Proceeds from sales                                 175            994
        Proceeds from maturities                          3,196          3,468
        Purchases                                        (6,772)        (5,540)
   Investment securities held to maturity:
        Proceeds from maturities                          6,348          5,008
        Purchases                                        (3,453)          (548)
   Purchases of loan pool participations                 (5,952)        (8,641)
   Principal recovery on loan pool participations        14,575         12,307
   Net increase in loans                                (14,868)       (14,886)
   Purchases of bank premises and equipment                (323)          (428)
   Proceeds from sale of bank premises
     and equipment                                            0              7
        Net cash used in investing activities            (7,074)        (8,259)

Cash flows from financing activities:
   Net increase (decrease) in deposits                    1,855         (1,293)
   Net increase in federal funds purchased                2,000              0
   Advances on note payable                                 750              0
   Principal payments on note payable                    (4,500)        (1,000)
   Federal Home Loan Bank advances                            0          5,600
   Repayment of Federal Home Loan Bank advances               0         (1,750)
   Dividends paid                                        (1,030)          (882)
   Purchases of treasury stock                             (541)        (1,376)
   Proceeds from exercise of stock options                  506            147


<PAGE>



       Net cash used in financing activities               (960)          (554)
         Net decrease in cash and cash equivalents       (4,537)        (5,089)
Cash and cash equivalents at beginning of period         19,195         16,484
Cash and cash equivalents at end of period             $ 14,658         11,395

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest                                          $  5,024          4,504

         Income taxes                                  $  1,420          1,245
                                                        --------       --------

</TABLE>


<PAGE>



PART I -- Item 1. Financial Statements, continued.


                           MAHASKA INVESTMENT COMPANY

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   Adjustments and Reclassifications

     The accompanying  consolidated financial statements (unaudited) include the
     accounts  and  transactions  of  the  Company  and  its  four  wholly-owned
     subsidiaries, Mahaska State Bank, Central Valley Bank, Pella State Bank and
     On-Site  Credit  Services,  Inc.  All  material  intercompany  balances and
     transactions have been eliminated in consolidation.

     The accompanying  consolidated  financial statements  (unaudited) have been
     prepared  by the  Company  pursuant  to the  rules and  regulations  of the
     Securities  and  Exchange  Commission.  Certain  information  and  footnote
     disclosures   normally  included  in  financial   statements   prepared  in
     accordance  with  generally  accepted   accounting   principles  have  been
     condensed  or  omitted  pursuant  to such rules and  regulations.  Although
     management   believes  that  the  disclosures  are  adequate  to  make  the
     information  presented not  misleading,  it is suggested that these interim
     consolidated  financial statements  (unaudited) be read in conjunction with
     the Company's most recent audited  financial  statements and notes thereto.
     In the  opinion of  management,  the  accompanying  consolidated  financial
     statements  (unaudited) contain all adjustments  (consisting of only normal
     recurring  accruals)  necessary to present fairly the financial position as
     of June 30, 1998,  and the results of  operations  for the three months and
     the six months ended June 30, 1998 and 1997,  and changes in cash flows for
     the six months ended June 30, 1998 and 1997.

2.   Statements of Cash Flows

     In the statements of cash flows, cash and cash equivalents include cash and
     due from banks,  interest-bearing  deposits  with banks,  and federal funds
     sold.

3.   Income Taxes

     Federal  income tax expense for the three  months and the six months  ended
     June 30,  1998  and 1997 was  computed  using  the  consolidated  effective
     federal tax rate. The Company also recognized income tax expense pertaining
     to state franchise taxes payable individually by the subsidiary banks.

4.   Earnings Per Common Share

     Basic  earnings  per common  share  computations  are based on the weighted
     average  number of shares of common stock actually  outstanding  during the
     period.  The weighted average number of shares for the three-month  periods
     ended June 30,  1998 and 1997 was  3,680,490  and  3,650,779  (restated  to
     reflect  the  five-for-three  stock  split  effected in the form of a stock
     dividend which occurred in November 1997), respectively.  For the six-month
     periods ended June 30, 1998 and 1997, the

<PAGE>



     weighted  average  number of common  shares  outstanding  was 3,676,858 and
     3,682,246, respectively. Diluted earnings per share amounts are computed by
     dividing  net  income by the  weighted  average  number  of shares  and all
     dilutive potential shares outstanding during the period. The computation of
     diluted  earnings  per  share  used a  weighted  average  number  of shares
     outstanding  of 3,871,568 and 3,811,518 for the three months ended June 30,
     1998 and 1997, respectively, and 3,877,562 and 3,817,943 for the six months
     ended June 30, 1998 and 1997, respectively.

5.   Effect of New Financial Accounting Standards

     SFAS 130, "Reporting Comprehensive Income" became effective for the Company
     on January 1, 1998,  and  establishes  the  standards for the reporting and
     display of comprehensive income in the financial statements.  Comprehensive
     income  represents net earnings and certain  amounts  reported  directly in
     shareholders'  equity, such as net unrealized gain or loss on available for
     sale securities. The adoption of SFAS 130 did not have a material effect on
     the  financial  position  and results of  operations,  nor did the adoption
     require additional resources.

<PAGE>

Part I -- Item 2.  Management's Discussion and Analysis of
Financial Condition and Results of Operations.

                        THREE MONTHS ENDED JUNE 30, 1998

     Net income for the  Company  increased  12  percent to  $1,374,000  for the
quarter ended June 30, 1998, compared with $1,227,000 for the three months ended
June 30, 1997. Basic earnings per share for the second quarter of 1998 were $.37
versus basic earnings of $.34 per share for the second quarter of 1997.  Diluted
earnings  per share for the  second  quarter  of 1998 were $.35  versus  diluted
earnings per share of $.32 for the second  quarter of 1997.  All  historical per
share  amounts  have been  restated  to reflect the  five-for-three  stock split
effected in the form of a stock dividend which occurred in November 1997. Actual
weighted average shares  outstanding were 3,680,490 and 3,650,779 for the second
quarter of 1998 and 1997,  respectively.  The Company's return on average assets
for the quarter  ended June 30, 1998 was 2.00 percent  compared with a return of
1.95 percent for the quarter  ended June 30,  1997.  The Company had a return on
average  equity of 14.41 percent for the three months ended June 30, 1998 versus
14.17 percent for the three months ended June 30, 1997.




<PAGE>



RESULTS OF OPERATIONS

Net Interest Income

     Net interest  income may fluctuate as a result of changes in the volumes of
assets and liabilities as well as changes in interest  rates.  The Company's net
interest  income for the quarter  ended June 30,  1998  increased  $621,000  (18
percent) to $4,104,000 from $3,483,000 for the three months ended June 30, 1997.
This was mainly due to increased  interest  income earned on higher loan volumes
and interest  income and discount on loan pool  participations.  The increase in
total  interest  income was offset,  in part,  by  additional  interest  expense
related  to  increased  deposits  and  borrowed  funds.  Total  interest  income
increased  $846,000 (15 percent) in the second quarter of 1998 compared with the
same  period in 1997.  The  Company's  total  interest  expense  for the quarter
increased  $225,000  (10  percent)  compared  with the same period in 1997.  The
Company's net interest margin (on a federal tax-equivalent basis) for the second
quarter of 1998 rose to 6.48 percent from 6.07 percent in the second  quarter of
1997.  Net  interest  margin is net  return on  interest-earning  assets  and is
computed  by dividing  annualized  net  interest  income by the average of total
interest-earning  assets for the period.  The Company's overall yield on earning
assets  increased to 10.47  percent for the second  quarter of 1998  compared to
10.04  percent  for the  second  quarter of 1997.  The rate on  interest-bearing
liabilities  also  increased  in the  second  quarter  of 1998  to 4.71  percent
compared with 4.66 percent for the second quarter of 1997.

     Interest  income and fees on loans  increased  $653,000 (22 percent) in the
second  quarter of 1998  compared  to the same period in 1997 due to higher loan
volumes.  The average  yield on loans rose to 9.50  percent for the second three
months of 1998,  up from 9.38  percent for the three months ended June 30, 1997.
Average loans  outstanding were $154,154,000 for the second three months of 1998
compared  with  $128,246,000  for the second  quarter of 1997,  an  increase  of
$25,908,000 (20 percent).  Each of the Company's  subsidiaries (except for Pella
State Bank which did not open until  December  1997)  experienced an increase in
average  loan  volume  between  the  second  quarter  of 1997 and 1998.  Average
commercial  loan volumes  increased  $9,515,000 (30 percent),  real estate loans
averaged  $9,890,000  (17 percent)  higher,  and  agricultural  loans  increased
$4,578,000  (19  percent)  in  average  volume  for the  second  quarter of 1998
compared with the second quarter of 1997.

     Loan pool investments provided the Company with $214,000 additional revenue
in the second  quarter of 1998  compared  to the same  period in 1997.  Interest
income and  discount  collected  on the loan pools  increased  11 percent in the
second  quarter of 1998 to  $2,191,000  compared with  $1,977,000  earned in the
second quarter of 1997. The yield on loan pool investments rose to 19.26 percent
for the second quarter of 1998 compared with 15.81 percent for the quarter ended
June 30,  1997.  The  average  loan pool  participation  investment  balance was
$4,531,000 (9 percent) lower in the second quarter of


<PAGE>



1998 than in the second quarter of 1997.  These loan pool  investments are pools
of  distressed  and  nonperforming  loans that the  Company has  purchased  at a
discount  from the  aggregate  outstanding  principal  amount of the  underlying
loans.  Income is derived from this investment in the form of interest collected
and the  repayment  of the  principal  in excess of the  purchase  cost which is
herein referred to as "discount" recovery. Interest income and discount recovery
on the loan pools is recognized on a "cash" basis by the Company.

     The increase in interest  expense for the second  quarter of 1998  compared
with 1997 was mainly  attributable  to growth in  deposits  and an  increase  in
borrowed funds.  Interest expense on deposits  increased $125,000 (6 percent) in
the second quarter of 1998 as average  interest-bearing  deposits for the period
were  $7,901,000  (5 percent)  greater than in the same period in 1997.  Federal
Home Loan Bank advances  during the second  quarter of 1998 averaged  $3,304,000
greater in the second  quarter of 1998 compared with the second  quarter of 1997
resulting in an additional $42,000 in interest expense.  Interest expense on the
Company's commercial bank line of credit borrowed funds increased $66,000 as the
amount  borrowed  averaged  $3,145,000  higher  in the  second  quarter  of 1998
compared with the second quarter of 1997. The Company  utilized these borrowings
to provide  operating funds to On-Site Credit Services,  Inc. and capital to the
newly-chartered Pella State Bank.


Provision for Loan Losses

     The  Company's  provision  for loan loss  expense of $177,000 in the second
quarter  of 1998  was  $138,000  greater  than in the  second  quarter  of 1997.
Management  determines an appropriate  provision  based on its evaluation of the
adequacy of the allowance for loan losses in relationship to a continuing review
of problem loans,  the current economic  conditions,  actual loss experience and
industry trends. During the second quarter of 1998, management deemed it prudent
to charge off a loan that has been on a  nonaccrual  status  since  August 1996.
This loan has been in  litigation  for an  extended  period of time and is still
unresolved.  In view of the  charge-off  of this  credit  and the  growth of the
Company's  overall loan portfolio,  management  increased the amount of the loan
loss provision charged to expense in the second quarter of 1998.


Other Income

     Other  income  results  from the charges and fees  collected by the Company
from its  customers  for various  services  performed,  data  processing  income
received  from  nonaffiliated  banks,  miscellaneous  other income and gains (or
losses) from the sale of  investment  securities  held in the available for sale
category. Total other income increased $19,000 (5 percent) in the second quarter
of 1998  compared  with 1997,  mainly due to higher  service  charge income from
overdraft fees at the bank subsidiaries.


<PAGE>




Other Expense

     Total  other  noninterest  expense  for the  quarter  ended  June 30,  1998
increased  $273,000 (14 percent) compared to noninterest  expense for the second
quarter of 1997.  Other expense  includes all the costs  incurred to operate the
Company except for interest  expense,  the loan loss provision and income taxes.
Salaries and benefits expense for the second quarter of 1998 increased  $187,000
(19  percent)  over the  second  quarter of 1997,  primarily  as a result of the
additional  employees  at the  newly-chartered  Pella State Bank and also due to
increased staffing at other subsidiaries.  Net occupancy expenses for the second
quarter of 1998  increased  $44,000  (15  percent) in  comparison  to the second
quarter of 1997 with most of the increase due to the  additional  facilities  of
Pella State  Bank.  Professional  fees  increased  $71,000 for the second  three
months of 1998 over the same  period in 1997 due to  increased  legal  expenses.
Other  miscellaneous  operating  expense decreased by $23,000 (5 percent) in the
second  quarter of 1998  compared  with the three  months  ended June 30,  1997.
Goodwill amortization expense decreased $5,000 (3 percent) in the second quarter
of  1998  versus  1997  in  accordance   with  the  effective  yield  method  of
amortization.


Income Tax Expense

     Income tax  expense for the three  months  ended June 30,  1998,  increased
$82,000  compared  to the  amount  for the three  months  ended  June 30,  1997,
primarily  due to the  overall  increase in taxable  income for the period.  The
effective  income  tax rate in the  second  quarter  of 1998 was  35.84  percent
compared  with  35.83  percent  in the second  quarter  of 1997.  The  Company's
effective  income tax rate varies from the  statutory  rate  principally  due to
interest income from tax-exempt  securities and loans.  Changes in the effective
rate for one period in comparison to another are primarily due to changes in the
amount of tax-exempt income.


                         SIX MONTHS ENDED JUNE 30, 1998

     The Company's net income for the six months ended June 30, 1998 increased 8
percent to  $2,804,000,  compared  with  $2,605,000  for the first half of 1997.
Basic  earnings  per  share for the first  half of 1998 were $.76  versus  basic
earnings  of $.71 per  share for 1997.  Diluted  earnings  per share for the six
months ended June 30, 1998 were $.72 versus  diluted  earnings per share of $.68
in 1997.  All  historical  per share  amounts have been  restated to reflect the
five-for-three  stock  split  effected  in the  form of a stock  dividend  which
occurred in November  1997.  Actual  weighted  average shares  outstanding  were
3,676,858 and 3,682,246 for the first six months of 1998 and 1997, respectively.
The Company's return on average assets for the half-year ended June 30, 1998 was
2.06 percent  compared with a return of 2.09 percent for the first half of 1997.
The Company had a return on average equity of 14.95 percent for the six months


<PAGE>



ended June 30, 1998 versus 15.05  percent for the six months ended June 30,
1997.


RESULTS OF OPERATIONS

Net Interest Income

     The  Company's  net interest  income for the six months ended June 30, 1998
increased $899,000 (12 percent) to $8,226,000 from $7,328,000 for the six months
ended June 30, 1997. This was mainly due to increased  interest income earned on
higher  loan   volumes   and   interest   income  and   discount  on  loan  pool
participations.  The increase in total interest  income was offset,  in part, by
additional  interest  expense related to increased  deposits and borrowed funds.
Total  interest  income  increased  $1,442,000 (12 percent) in the first half of
1998 compared with the same period in 1997. The Company's total interest expense
for the six months ended June 30, 1998 increased  $544,000 (12 percent) compared
with the same period in 1997.  The Company's  net interest  margin (on a federal
tax-equivalent  basis) for the six months of 1998 rose to 6.61 percent from 6.47
percent in 1997.  The  Company's  overall yield on earning  assets  increased to
10.63  percent  in  1998  compared  to  10.40  percent  in  1997.  The  rate  on
interest-bearing  liabilities  also  increased in 1998 to 4.75 percent  compared
with 4.62 percent for 1997.

     Interest income and fees on loans increased  $1,332,000 (23 percent) in the
first  half of 1998  compared  to the same  period  in 1997 due to  higher  loan
volumes.  Average loans outstanding were $149,822,000 for the first half of 1998
compared with  $123,914,000  for the six months ended June 30, 1997, an increase
of $25,908,000 (21 percent). The average yield on loans rose to 9.49 percent for
the first half of 1998,  up from 9.31  percent for the six months ended June 30,
1997.

     Interest  income  and  discount  collected  on the loan pools  increased  5
percent in the first half of 1998 to $4,655,000  compared with $4,417,000 earned
in the first  half of 1997.  The yield on loan  pool  investments  rose to 19.25
percent in the 1998 period  compared with 18.01 percent for the six months ended
June 30, 1997. The average loan pool  participation  investment  balance for the
first half of 1998 was  $48,774,000  compared with  $49,459,000 in the first six
months of 1997.

     The  increase  in interest  expense for the six months  ended June 30, 1998
compared with 1997 was mainly attributable to growth in deposits and an increase
in borrowed funds. Average interest-bearing  deposits for the first half of 1998
were $9,873,000 (5 percent) greater than in the same period in 1997 resulting in
an increase in interest  expense on deposits of  $264,000.  Interest  expense on
Federal  Home Loan Bank  advances  increased  by  $128,000  during the first six
months of 1998 compared with 1997 as the average  balance of these advances rose
$4,554,000 in comparison with the first half of 1997. Borrowings on the


<PAGE>



Company's commercial bank line of credit which averaged $3,657,000 higher in the
first half of 1998  compared  with 1997  produced  an  increase  of  $162,000 in
interest expense for the current period.


Provision for Loan Losses

     The Company's provision for loan loss expense of $287,000 in the first half
of 1998 was $120,000 greater than in 1997.  Management determines an appropriate
provision  based on its  evaluation  of the adequacy of the  allowance  for loan
losses in  relationship  to a continuing  review of problem  loans,  the current
economic  conditions,  actual loss  experience and industry  trends.  During the
second quarter of 1998,  management  deemed it prudent to charge off a loan that
has  been on a  nonaccrual  status  since  August  1996.  This  loan has been in
litigation for an extended  period of time and is still  unresolved.  In view of
the  charge-off  of this  credit and the growth of the  Company's  overall  loan
portfolio, management increased the amount of the loan loss provision charged to
expense in 1998.


Other Income

     Total other income  increased  $32,000 (4 percent) in the second quarter of
1998  compared  with  1997,  mainly due to higher  service  charge  income  from
overdraft fees at the bank  subsidiaries  and  investment  security  gains.  The
additional  income was offset,  in part, by reduced data processing  income from
nonaffiliated banks and lower miscellaneous income.


Other Expense

     Total  other  noninterest  expense  for the six months  ended June 30, 1998
increased  $479,000 (12 percent)  compared to noninterest  expense for the first
half of 1997. Salaries and benefits expense for the first half of 1998 increased
$381,000  (20  percent)  over  1997,  primarily  as a result  of the  additional
employees  at the  newly-chartered  Pella  State Bank and also due to  increased
staffing at other  subsidiaries.  Net  occupancy  expenses for the six months of
1998  increased  $97,000  (17  percent) in  comparison  to 1997 with most of the
increase due to the additional facilities of Pella State Bank. Professional fees
increased $60,000 for the first half of 1998 over the same period in 1997 due to
increased legal expenses.  Other  miscellaneous  operating  expense decreased by
$54,000 (6 percent) in 1998  compared  with the six months  ended June 30, 1997.
Goodwill  amortization expense decreased $11,000 (3 percent) in 1998 versus 1997
in accordance with the effective yield method of amortization.



<PAGE>



Income Tax Expense

     Income tax  expense  for the six  months  ended  June 30,  1998,  increased
$133,000  compared  to the  amount  for the six  months  ended  June  30,  1997,
primarily  due to the  overall  increase in taxable  income for the period.  The
effective  income tax rate in the first half of 1998 was 36.10 percent  compared
with  35.77  percent in the first six months of 1997.  The  Company's  effective
income tax rate  varies  from the  statutory  rate  principally  due to interest
income from tax-exempt  securities and loans.  Changes in the effective rate for
one period in  comparison  to another are primarily due to changes in the amount
of tax-exempt income.


FINANCIAL CONDITION

     The  Company's  total  assets  as of June 30,  1998 were  $276,533,000,  an
increase of $1,660,000  from December 31, 1997. As of June 30, 1998, the Company
had federal funds sold of $817,000  compared with  $6,815,000 as of December 31,
1997.


Investment Securities

     Investment  securities available for sale increased $3,433,000 (15 percent)
from December 31, 1997 to the June 30, 1998 total of  $26,662,000 as a result of
the purchase of securities. Investment securities classified as held to maturity
totaled  $16,879,000  as of June 30, 1998, a decline of $2,954,000 as securities
matured or were called during the six-month period from December 31, 1997. These
proceeds were reinvested into securities available for sale.


Loans

     Overall loan volumes continued to increase, with total loans outstanding of
$159,031,000 as of June 30, 1998  reflecting  growth of $14,699,000 (10 percent)
from  December 31, 1997.  Most of the growth from  December 31, 1997 to June 30,
1998 was spread between real estate, commercial and agricultural loans. Consumer
loans outstanding as of the quarter-end declined approximately $259,000 from the
December 31, 1997 balance.  As of June 30, 1998,  the Company's  loan to deposit
ratio (excluding loan pool investments) was 73.23 percent.  This compares with a
year-end 1997 loan to deposit ratio of 67.04 percent.


Loan Pool Participations

     As  of  June  30,  1998,   the  Company  had   investments   in  loan  pool
participations  of  $45,703,000,  a decline of $8,622,000  (16 percent) from the
prior year-end  balance.  The loan pool investment  balance shown as an asset on
the Company's Balance Sheet represents the discounted  purchase cost of the loan
pool participations.  The Company actively continues to evaluate and bid on loan
pool packages. During the second quarter of 1998, the Company did invest


<PAGE>



$5,952,000  in loan pools which were  acquired  from the FDIC and from a private
seller.  The loan pool  participation  investment  as of  December  31, 1997 was
$54,326,000  with the  reduction  in  balance  from  that date  attributable  to
collections  of  principal  by the loan pool  servicer.  The  average  loan pool
participation investment of $48,774,000 for the first half of 1998 was 1 percent
less than the average balance of $49,459,000 for the first six months of 1997.


Deposits

     Total  deposits grew  $1,854,000 (1 percent)  during the first half of 1998
with the most  growth  noted in savings  and  certificate  of deposit  accounts.
Demand deposit  accounts as of June 30, 1998  decreased  $2,089,000 (10 percent)
from December 31, 1997, mostly due to seasonal fluctuation.


Borrowed Funds/Notes Payable

     The Company had Fed Funds  purchased of  $2,000,000  on June 30,  1998.  On
December 31, 1997 there were no Fed Funds  Purchased.  Fixed-rate  advances from
the Federal Home Loan Bank totaled  $6,000,000  as of June 30, 1998 and December
31,  1997.  Notes  payable  decreased  to  $10,300,000  on June  30,  1998  from
$14,050,000  on December  31, 1997 as the Company  used a dividend  from Mahaska
State Bank and cash flow from operations to reduce debt.


Nonperforming Loans

     The Company's  nonperforming loans totaled $1,561,000 (.98 percent of total
loans) as of June 30, 1998, compared to $1,848,000 (1.28 percent of total loans)
as of December  31,  1997.  All  nonperforming  loan  totals and related  ratios
exclude the loan pool  investments.  The following table presents the categories
of nonperforming loans as of June 30, 1998:

<TABLE>
<CAPTION>

                               Nonperforming Loans
                             (dollars in thousands)
                                  June 30, 1998
             <S>                                         <C>
             Nonaccrual                                  $  533
             Loans 90 days past due                         856
             Renegotiated loans                             160
             Other real estate owned                         12
                                                         $1,561

</TABLE>

     From  December  31,  1997 to June  30,  1998,  nonaccrual  loans  decreased
$394,000,  loans ninety days past due  increased  $334,000,  restructured  loans
decreased $228,000 and other real estate owned remained unchanged. The Company's
allowance for loan losses as of June 30, 1998 was $1,736,000, which was 1.09


<PAGE>



percent of total loans as of that date. This compares with an allowance for loan
losses of  $1,816,000  as of December 31, 1997,  which was 1.26 percent of total
loans.  As of June 30, 1998, the allowance for loan losses was 111.22 percent of
nonperforming  loans  compared  with 98.24  percent  as of  December  31,  1997.
Management  believes  that as of June 30, 1998 the  allowance for loan losses is
adequate. For the three months ended June 30, 1998, the Company recognized a net
loan charge-off of $313,000 compared with a recovery of loans previously charged
off of $2,000 during the quarter  ended June 30, 1997.  For the first six months
of 1998, the Company  experienced net charge- offs of loans totalling  $366,000,
or .49 percent of average loans  outstanding for the period.  This compares with
net loan charge-offs of $38,000 during the first six months of 1997.


Capital Resources

     As of June 30, 1998,  total  shareholders'  equity as a percentage of total
assets was 13.92  percent  compared  with 13.31 percent as of December 31, 1997.
Cash dividends paid to shareholders  during the second quarter of 1998 were $.14
per share.

     The Company held 125,905  shares of treasury  stock at a cost of $1,777,000
as of June 30, 1998.  These shares were  repurchased to satisfy  options granted
under the Company's Stock Incentive Plans. During the second quarter of 1998 the
Company  reissued  29,786 shares of treasury  stock as options were exercised by
employees,  officers and directors.  On January 22, 1998, the Board of Directors
voted to continue the  Company's  stock  repurchase  plan that  provides for the
repurchase  of up to 200,000  shares  through  January  31,  1999.  The  Company
repurchased  24,900  shares of its stock during the second  quarter of 1998 at a
cost of $541,000.

     Under  risk-based  capital  rules,  the Company's  tier 1 capital ratio was
15.57 percent of risk-weighted assets as of June 30, 1998, and was 14.74 percent
of  risk-weighted  assets as of December  31,  1997,  compared to a 4.00 percent
requirement.  Risk-based capital guidelines require the classification of assets
and some off-  balance  sheet  items in terms of  credit-risk  exposure  and the
measuring of capital as a percentage of the risk-adjusted  asset totals.  Tier 1
capital is the Company's total common shareholders' equity reduced by goodwill.

     The Company  continues to pursue  acquisition  and expansion  opportunities
that fit the  organization's  strategic  business and financial plans. There are
currently  no pending  acquisitions  that would  require  the  Company to secure
capital from public or private markets.


Liquidity

     Liquidity  management  involves  meeting  the  cash  flow  requirements  of
depositors and borrowers.  The Company conducts  liquidity  management on both a
daily and long-term basis; and it adjusts its investments in liquid assets


<PAGE>



based on expected loan demand, projected loan maturities and payments, estimated
cash flows from the loan pool  participations,  expected  deposit flows,  yields
available   on   interest-bearing   deposits,   and   the   objectives   of  its
asset/liability management program. The Company had liquid assets (cash and cash
equivalents) of $14,658,000 as of June 30, 1998, compared with $19,195,000 as of
December 31,  1997.  Some of this  decrease is  attributable  to the  additional
funding of loans.  Investment  securities classified as available for sale could
be  sold  to  meet  liquidity  needs,  if  necessary.   Additionally,  the  bank
subsidiaries  maintain lines of credit with correspondent  banks and the Federal
Home Loan Bank that would  allow them to borrow  federal  funds on a  short-term
basis if  necessary.  The  Company  also  maintains a line of credit with Harris
Trust & Savings  Bank of  Chicago,  Illinois  that  provides  liquidity  for the
purchase  of loan pool  participation  investments  and other  corporate  needs.
Management  believes  that the Company has  sufficient  liquidity as of June 30,
1998 to meet the needs of borrowers and depositors.


Market Risk Management

     Market risk is the risk of earnings  volatility  that  results from adverse
changes in  interest  rates and market  prices.  The  Company's  market  risk is
primarily  comprised  of  interest  rate  risk  arising  from its  core  banking
activities  of lending and deposit  taking.  Interest rate risk is the risk that
changes in market interest rates may adversely affect the Company's net interest
income.  Management continually develops and applies strategies to mitigate this
risk.  Management  does not  believe  that the  Company's  primary  market  risk
exposures and how those exposures were managed in the first half of 1998 changed
when compared to 1997.

     The Company  uses a  third-party  computer  software  simulation  modelling
program to measure its exposure to potential interest rate changes.  For various
assumed   hypothetical   changes  in  market  interest  rates,   numerous  other
assumptions are made such as prepayment speeds on loans and securities backed by
mortgages,  the slope of the Treasury yield curve,  the rates and volumes of the
Company's  deposits and the rates and the volumes of the Company's  loans.  This
analysis  measures the estimated  change in net interest  income in the event of
hypothetical  changes in  interest  rates.  The  following  table  presents  the
Company's estimated changes in projected net interest income for the next twelve
months for the various rate shock levels at June 30, 1998.



<PAGE>


<TABLE>
       <S>                                <C>              <C>
       Interest Rate Movement             $ Change          %Change

       +300 basis points                  $(674,000)          -4%
       +200 bp                             (456,000)          -3%
       +100 bp                             (229,000)          -2%
       Base                                       0            0%
       -100 bp                              227,000           +2%
       -200 bp                              394,000           +3%
       -300 bp                              576,000           +4%

       (Note: 100 basis points (bp) = 1.00%)
</TABLE>

As shown above,  at June 30, 1998,  the effect of an immediate and sustained 300
basis point increase in interest rates would reduce the Company's  projected net
interest  income  in the  next  twelve  months  by 4  percent  or  approximately
$674,000.  The effect of an immediate and sustained 300 basis point  decrease in
rates  would   increase  the  Company's   projected   net  interest   income  by
approximately $576,000 or 4 percent.

     Computations  of the  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions.  Actual values may differ from those
projections set forth above.  Further,  the  computations do not contemplate any
actions  the  Company may  undertake  in  response to changes in rates.  Current
interest  rates on  certain  liabilities  are at a level that does not allow for
significant repricing should market interest rates decline significantly.


YEAR 2000 Compliance

     A critical  issue has emerged in the banking  industry  and for the economy
overall regarding how existing computer application software programs, operating
systems and  hardware  can  accommodate  the date value for the year 2000.  This
issue is an area of major  emphasis as management  is actively  working with its
software  and  hardware  vendors to assure  that the Company is  compliant.  The
Company has  established  Year 2000  Committees and Plans at its bank and thrift
subsidiaries,  and formal project plans have been developed and adopted. Testing
and  contingency  plans have also been  developed.  The Company  purchased a new
main-frame  computer  system that is year 2000 compliant in 1997.  This computer
system became fully operational in the first quarter of 1998.

     The Company  anticipates  that it will incur internal staff costs and other
expenses  related to the  enhancements  necessary to become year 2000 compliant.
Based on the  Company's  current  knowledge,  the  expense  related to year 2000
compliance is not expected to have a material effect on the Company's  financial
position or results of operations.



<PAGE>



   "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT

     With the exception of the historical  information contained in this report,
the matters  described  herein contain  forward-looking  statements that involve
risk and  uncertainties  that individually or mutually impact the matters herein
described,  including but not limited to financial  projections,  product demand
and  market  acceptance,  the  effect  of  economic  conditions,  the  impact of
competitive  products  and  pricing,   governmental   regulations,   results  of
litigation,  technological difficulties and/or other factors outside the control
of the  Company,  which  are  detailed  from time to time in the  Company's  SEC
reports.  The  Company  disclaims  any  intent or  obligation  to  update  these
forward-looking statements.


PART II -- Item 4. Submission of Matters to a Vote of Security
Holders.


     The Company's  annual meeting of  shareholders  was held on April 30, 1998.
The  record  date for  determination  of  shareholders  entitled  to vote at the
meeting was March 2, 1998.  There were 3,673,816  shares  outstanding as of that
date, each such share being entitled to one vote. At the  shareholders'  meeting
the holders of 3,413,621 shares of stock were represented in person or by proxy,
which  constituted  a  quorum.  The  following  proposals  were  voted on at the
meeting:

Proposal 1 - Election of Directors:

     The following  members of the Company's  board of directors were elected to
serve for the specified term or until their  successors  shall have been elected
and  qualified.  Such persons  received  the number of votes set opposite  their
names:

<TABLE>
                                                                                          VOTE
                                        FOR                    WITHHELD
<S>                                 <C>                        <C>
Three-year term (2001):
      Robert K. Clements             3,396,860                  16,761
      John P. Pothoven               3,399,159                  14,462
      John W. N. Steddom             3,393,191                  20,430

</TABLE>


<PAGE>



Proposal 2 - Amendment to Articles of Incorporation:

     The  proposal  to  approve  an  amendment  to  the  Company's  Articles  of
Incorporation  to increase to  20,000,000  the  aggregate  number of  authorized
shares  which the Company  shall have the  authority to issue was adopted by the
following vote:

<TABLE>
           FOR                    AGAINST                ABSTAIN
<S>    <C>                       <C>                    <C>
        3,169,655                 214,216                 29,750

</TABLE>

Proposal 3 - Approval of 1998 Stock Incentive Plan:

     The  proposal to approve the 1998 Stock  Incentive  Plan was adopted by the
following vote of shareholders:

<TABLE>
                                                                DEALER
       FOR              AGAINST             ABSTAIN             NON-VOTES
<S><C>                 <C>                 <C>                 <C>
    2,878,647           230,892              74,335             229,747
</TABLE>

Proposal 4 - Ratification of Appointment of KPMG Peat Marwick LLP as independent
auditor:

     A vote was also taken on the  ratification  of the appointment of KPMG Peat
Marwick  LLP as  independent  auditors of the Company for the fiscal year ending
December 31, 1998. The results of the vote were as follows:

<TABLE>
                                                                          DEALER
       FOR              AGAINST             ABSTAIN             NON-VOTES
<S> <C>                <C>                 <C>                 <C>
    3,375,154           21,194              17,273                   0
</TABLE>


PART II -- Item 5.  Other Information

     On June 30, 1998,  the Company and Harris Trust & Savings Bank entered into
a Fourth  Amendment to the Revolving Loan Agreement dated January 31, 1996. This
amendment  to the loan  agreement  is  included  as Exhibit  10.5.2 to this 10-Q
filing.

Part II -- Item 6. Exhibits and Reports on Form 8-K.

     (a) The following  exhibits are filed with this Report or, if so indicated,
incorporated by reference:

         Exhibits

          3.1              Articles of Incorporation of Mahaska Investment
                           Company. (d)

          3.2              Bylaws of Mahaska Investment Company. (d)



<PAGE>



         10.1              Mahaska Investment Company Employee Stock Ownership
                           Plan & Trust as restated and amended. (b)

         10.2.1            1993 Stock Incentive Plan. (a)

         10.2.2            1996 Stock Incentive Plan. (d)

         10.2.3            1998 Stock Incentive Plan. (e)

         10.3.1            Midstates Resources Corp. Loan Participation and
                           Servicing Agreement dated December 9, 1992 between
                           Midstates Resources Corp., Mahaska Investment
                           Company, and Mahaska State Bank. (a)

         10.3.2            Central States Resources Corp. Liquidation
                           Agreement dated April 18, 1988 between Central
                           States Resources Corp., Mahaska State Bank,
                           National Bank & Trust Co., and Randal Vardaman. (a)

         10.3.3            All States Resources Corp. Loan Participation and
                           Servicing Agreement dated September 13, 1993
                           between All States Resources Corp., Mahaska
                           Investment Company, and West Gate Bank. (a)

         10.5.1            Revolving Loan Agreement dated January 31, 1996
                           between Mahaska Investment Company and Harris Trust
                           & Savings Bank. (c)

         10.5.2            Fourth Amendment to Revolving Loan Agreement and
                           Revolving Loan Note between Mahaska Investment
                           Company and Harris Trust & Savings Bank dated
                           June 30, 1998.

         11                Computation of Per Share Earnings.

         27                Financial Data Schedule.


         (a)               Incorporated by reference to the Form S-1
                           Registration Number 33-81922 of Mahaska Investment
                           Company.

         (b)               Incorporated  by  reference  to the Form 10-K for the
                           year  ended   December  31,  1994  filed  by  Mahaska
                           Investment Company.

         (c)               Incorporated  by  reference  to the Form 8-K filed by
                           Mahaska Investment Company on February 29, 1996.

         (d)               Incorporated  by  reference  to the Form 10-K for the
                           year  ended   December  31,  1996  filed  by  Mahaska
                           Investment Company.

         (e)               Incorporated  by  reference  to the Form 10-K for the
                           year  ended   December  31,  1997  filed  by  Mahaska
                           Investment Company.



<PAGE>



     (b)  Reports on Form 8-K -- No  reports  on Form 8-K were filed  during the
three months ended June 30, 1998.


                                   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.


                                          MAHASKA INVESTMENT COMPANY
                                          (Registrant)


August 10, 1998                           /s/ Charles S. Howard
Dated                                     Charles S. Howard
                                          President


August 10, 1998                           /s/ David A. Meinert
Dated                                     David A. Meinert
                                          Executive Vice President and
                                          Chief Financial Officer
                                          (Principal Accounting Officer)



<PAGE>


                                   Exhibit 11
<TABLE>
<CAPTION>

                           MAHASKA INVESTMENT COMPANY
                                AND SUBSIDIARIES
                 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

                                    Three Months Ended      Six Months Ended
                                         June 30,                June 30,
                                     1998        1997        1998        1997
<S>                                 <C>         <C>         <C>         <C>
Earnings per Share
information:

Weighted average number
of shares outstanding
during the year                    3,680,490  3,650,779   3,676,858   3,682,246

Weighted average number
of shares outstanding
during the year including
all dilutive potential
shares                             3,871,568  3,811,518   3,877,562   3,817,943

Net earnings                      $1,374,130  1,227,241   2,803,677   2,605,473

Earnings per share-basic          $     0.37       0.34        0.76        0.71

Earnings per share-diluted        $     0.35       0.32        0.72        0.68

</TABLE>