UNITED STATES
                      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 June 30, 1998

                                      OR

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

                      For the transition period from   to

                     Commission file number [            ]



                            FIRST DECATUR BANCSHARES, INC.
            (Exact name of registrant as specified in its charter)




            DELAWARE                    33-80333                37-1085161
  (State or other jurisdiction      (Commission File         (I.R.S. Employer
        of incorporation)               Number)             Identification No.)



            130 NORTH WATER STREET, DECATUR, IL                       62523
            (Address of principal executive offices)                (Zip Code)



Registrant's telephone number, including area code    217-424-1111


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 twelve 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 ninety days.

                        Yes      X      No           


2,883,175 shares of the Registrant's common stock, par value $.01 per share,
were outstanding at June 30, 1998.
<PAGE>

                        FIRST DECATUR BANCSHARES, INC.

            FORM 10-Q FOR THREE AND SIX MONTHS ENDED JUNE 30, 1998

                                     INDEX

                                                                        PAGE

PART I - FINANCIAL INFORMATION                                           1

      Item 1.     Condensed Consolidated Financial Statements            1
      Item 2.     Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                   11
      Item 3.     Quantitative and Qualitative Disclosures about 
                  Market Risk                                           15


PART II - OTHER INFORMATION                                             18

      Item 1.     Legal Proceedings                                     18
      Item 2.     Changes in Securities                                 18
      Item 3.     Defaults upon Senior Securities                       18
      Item 4.     Submission of Matters to a Vote of Security Holders   18
      Item 5.     Other Information                                     18
      Item 6.     Exhibits and Reports on Form 8-K                      18


SIGNATURES                                                              19

EXIBITS

      Exhibit 11. Computation of Earnings per Share                     

<PAGE>
PART 1 - FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        FIRST DECATUR BANCSHARES, INC.
                          CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             June  30,                December 31,
                                                                               1998                       1997
                                                                    ----------------------     ----------------------
                                                                               (Unaudited)
<S>                                                                 <C>                        <C>
Assets
     Cash and due from banks                                        $              29,067      $              22,880
     Federal funds sold                                                            21,685                     17,145
                                                                    ----------------------     ----------------------
          Cash and cash equivalents                                                50,752                     40,025
     Securities available for sale                                                124,428                    106,600
     Securities held to maturity                                                   27,619                     31,759
     Loans, net                                                                   203,753                    196,522
     Premises and equipment                                                         8,902                      9,271
     Other assets                                                                   9,900                      8,060
                                                                    ----------------------     ----------------------
               Total assets                                         $             425,354      $             392,237
                                                                    ======================     ======================
Liabilities
     Deposits
        Noninterest bearing                                         $              56,822      $              53,436
        Interest bearing                                                          278,351                    267,692
                                                                    ----------------------     ----------------------
          Total Deposits                                                          335,173                    321,128
     Federal funds purchased and securities sold under
        repurchase agreements                                                      10,848                      8,448
     Federal Home Loan Bank loans                                                  17,929                      2,954
     U.S. Treasury demand notes                                                     3,129                      3,151
     Other liabilities                                                              3,890                      4,257
                                                                    ----------------------     ----------------------
               Total liabilities                                                  370,969                    339,938

Stockholders' Equity
     Preferred stock, no par value.  Authorized 200,000 shares,
        none issued or outstanding
     Common stock, $.01 par value.  Authorized 5,000,000 shares;
        Issued 2,909,397 shares of which 26,222 shares and 
        30,910 shares were held as treasury stock                                      29                         29
     Surplus                                                                        7,874                      7,858
     Paid-in-capital - phantom stock                                                  192                        167
     Retained earnings                                                             46,550                     44,506
     Net unrealized gain on securities available for sale                             310                        380
                                                                    ----------------------     ----------------------
                                                                                   54,955                     52,940
     Treasury stock, at cost                                                        (570)                      (641)
                                                                    ----------------------     ----------------------
               Total stockholders' equity                                          54,385                     52,299
                                                                    ----------------------     ----------------------
                    Total liabilities and stockholders' equity      $             425,354      $             392,237
                                                                    ======================     ======================
</TABLE>

                                        Page 1

<PAGE>
                        FIRST DECATUR BANCSHARES, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 Three Months Ended                         Six Months Ended
                                                           June 30               June 30              June 30              June 30
                                                             1998                  1997               1998                   1997
                                                         (Unaudited)           (Unaudited)          (Unaudited)          (Unaudited)
                                                         -----------           -----------          -----------          -----------
<S>                                                      <C>                   <C>                  <C>                  <C>
Interest Income
     Interest on loans                                      $ 4,307               $ 4,490              $ 8,514              $ 8,909
     Interest on investments                                  2,200                 1,938                4,354                3,952
     Interest on federal funds sold                             231                   106                  447                  177
     Other interest income                                       17                    19                   27                   33
                                                         -----------           -----------          -----------          -----------
          Total interest income                               6,755                 6,553               13,342               13,071
                                                         -----------           -----------          -----------          -----------
Interest Expense
     Interest on deposits                                     2,873                 2,754                5,651                5,403
     Interest on borrowings                                     286                   147                  499                  305
                                                         -----------           -----------          -----------          -----------
          Total interest expense                              3,159                 2,901                6,150                5,708
                                                         -----------           -----------          -----------          -----------
Net Interest Income                                           3,596                 3,652                7,192                7,363
     Provision for loan losses                                   81                   136                  162                  232
                                                         -----------           -----------          -----------          -----------
Net Interest Income After Provision for
   Loan Losses                                                3,515                 3,516                7,030                7,131
                                                         -----------           -----------          -----------          -----------
Other Income
     Trust fees                                                 424                   379                  824                  748
     Loan fee income                                            130                   108                  312                  186
     Remittance processing fees                               1,121                   974                2,314                2,091
     Service charges on deposit accounts                        248                   278                  497                  534
     Security transactions, net                                   4                    14                   24                   29
     Other                                                      281                   213                  537                  512
                                                         -----------           -----------          -----------          -----------
          Total other income                                  2,208                 1,966                4,508                4,100
                                                         -----------           -----------          -----------          -----------
Other Expenses
     Salaries and employee benefits                           1,999                 1,964                4,064                3,926
     Net occupancy                                              275                   280                  544                  561
     Equipment expenses                                         490                   497                  964                1,181
     Professional fees                                           96                    96                  185                  189
     Data processing fees                                        52                    83                   89                  144
     Supplies                                                   105                    96                  215                  197
     Service charges from corresponding banks                   187                   134                  355                  265
     Other operating expenses                                   593                   586                1,124                1,171
                                                         -----------           -----------          -----------          -----------
          Total other expenses                                3,797                 3,736                7,540                7,634
                                                         -----------           -----------          -----------          -----------
Income Before Income Tax                                      1,926                 1,746                3,998                3,597
     Income tax expense                                         572                   544                1,204                1,128
                                                         -----------           -----------          -----------          -----------
          Net Income                                        $ 1,354               $ 1,202              $ 2,794              $ 2,469
                                                         ===========           ===========          ===========          ===========
Dividends Per Share                                         $  0.13               $  0.11              $  0.26              $  0.22
Basic Earnings Per Share                                    $  0.47               $  0.42              $  0.97              $  0.85
Average Shares Outstanding                                2,885,300             2,892,943            2,883,079            2,890,390
Diluted Earnings Per Share                                  $  0.47               $  0.41              $  0.97              $  0.85
Average Shares Outstanding                                2,899,997             2,903,270            2,896,306            2,900,938
</TABLE>

                                        Page 2

<PAGE>

                        FIRST DECATUR BANCSHARES, INC.
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      Three Months Ended                        Six Months Ended
                                                         June 30, 1998                            June 30, 1998
                                                          (Unaudited)                              (Unaudited)
                                                   ------------------------                  ----------------------
<S>                                                <C>          <C>                          <C>        <C>            
Net Income                                                      $     1,354                             $     2,794
Other comprehensive income, net of tax
     Unrealized gains on securities:
        Unrealized holding gain arising
        during the period                           $ 110                                    $ (70)
          Less:  Reclassification adjustment
          for gains included in net income           (  0)                                    (  0)
                                                    ------                                   ------
Other comprehensive income                                              110                                    (70)
                                                                -----------                             ------------
Comprehensive income                                            $     1 464                             $     2,724
                                                                ===========                             ============
</TABLE>


<TABLE>
<CAPTION>
                                                      Three Months Ended                        Six Months Ended
                                                         June 30, 1997                            June 30, 1997
                                                          (Unaudited)                              (Unaudited)
<S>                                                <C>          <C>                          <C>        <C>         
Net Income                                                      $     1,202                             $     2,469
Other comprehensive income, net of tax
     Unrealized gains on securities:
        Unrealized holding gain arising
        during the period                           $  505                                   $ (33)
          Less:  Reclassification adjustment
          for gains included in net income           (  0)                                    (  0)
                                                    ------                                   ------
Other comprehensive income                                              505                                    (33)
                                                                ------------                            ------------  
Comprehensive income                                            $     1,707                             $     2,436
                                                                ============                            ============
</TABLE>

                                        Page 3

<PAGE>
                        FIRST DECATUR BANCSHARES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                               Six Months Ended
                                                                                           June 30,                     June 30,
                                                                                             1998                         1997
                                                                                          (Unaudited)                  (Unaudited)
<S>                                                                                    <C>                        <C>
Cash flows from operating activities:
     Net cash provided by operating activities                                         $        1,335             $          2,234
Cash flows from investing activities:
     Purchases of securities available for sale                                              (45,425)                     (13,399)
     Proceeds from maturities of securities available for sale                                 27,663                       10,460
     Proceeds from sales of securities available for sale                                                                    5,994
     Purchases of securities held to maturity                                                   (785)                      (2,135)
     Proceeds from maturities of securities held to maturity                                    4,891                        4,682
     Net change in loans                                                                      (7,393)                     (13,571)
     Purchases of premises and equipment                                                        (294)                        (243)
                                                                                       ---------------            ----------------
          Net cash used by investing activities                                              (21,342)                      (8,212)
                                                                                       ---------------            ----------------
Cash flows from financing activities:
     Net change in
          Noninterest-bearing, interest-bearing demand and savings deposits                    16,724                      (2,151)
          Certificates of deposit                                                             (2,679)                      (3,961)
          Federal funds purchased and securities sold under repurchase
               agreements                                                                       2,400                      (2,603)
          Federal Home Loan Bank loans                                                         14,975                          477
          U.S. Treasury demand notes                                                             (22)                          750
     Cash dividends                                                                             (750)                        (636)
     Net cash from sale of treasury stock                                                          86                           40
                                                                                       ---------------            ----------------
          Net cash used by financing activities                                                30,734                      (8,084)
                                                                                       ---------------            ----------------
Net increase (decrease) In cash and cash equivalents                                           10,727                     (14,062)
Cash and cash equivalents, beginning of period                                                 40,025                       48,588
                                                                                       ---------------            ----------------
Cash and cash equivalents, end of period                                               $       50,752             $         34,526
                                                                                       ===============            ================
Supplemental disclosures of cash flow information:
     Cash paid during the period for:
          Interest                                                                     $        5,803             $          5,652
          Income taxes                                                                 $        1,184             $          1,152
</TABLE>

                                       Page 4

<PAGE>
                        FIRST DECATUR BANCSHARES, INC.
             NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


BASIS OF PRESENTATION

     First Decatur Bancshares,  Inc. ("Bancshares"), a Delaware corporation was
organized on February 28, 1980 and  is  a registered bank holding company under
the Bank Holding Company Act of 1956, as  amended.   Bancshares owns all of the
outstanding  capital  stock  of  the First National Bank of  Decatur  ("Decatur
Bank"), FirsTech, Inc. ("FirsTech")  and  the  First  Trust Bank of Shelbyville
("Shelby Bank").  The Decatur Bank, FirsTech, and the Shelby  Bank are referred
to as the "Subsidiaries."

     The  interim  financial  statements  have  been prepared by First  Decatur
Bancshares, Inc. ("Bancshares") pursuant to the rules  and  regulations  of the
Securities and Exchange Commission applicable to quarterly reports on Form  10-
Q.  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.  These
financial  statements   should   be   read  in  conjunction  with  the  audited
consolidated financial statements and related  notes  and schedules included in
the Company's Form 10-K for 1997 filed on March 19, 1998.

     The results for the interim periods are not necessarily  indicative of the
results of operations that may be expected for the fiscal year.  In the opinion
of management, the information furnished reflects all adjustments  which are of
a  normal  recurring  nature  and  are  necessary  for  a fair presentation  of
Bancshares' financial position, results of operations and  cash  flows  for the
period presented.  Such adjustments were of a normal recurring nature.

     The  consolidated  financial statements include the accounts of Bancshares
and its wholly-owned subsidiaries.   All significant inter-company accounts and
transactions have been eliminated.

NEW ACCOUNTING PRONOUNCEMENTS

     The   FASB  has  issued  SFAS  No.  123,   "Accounting   for   Stock-based
Compensation".   SFAS  No.  123  establishes  a  fair  value  based  method  of
accounting  for  stock-based  compensation  plans.   The  FASB  encourages  all
entities  to  adopt this method for accounting for all arrangements under which
employees receive  shares of stock or other equity instruments of the employer,
or the employer incurs  liabilities  to employees in amounts based on the price
of its stock.

     Due the extremely controversial nature  of  this  project,  SFAS  No.  123
permits  a  company  to  continue  the  accounting for stock-based compensation
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees".  If a company elects  that  option, pro forma disclosures
of  net  income  (and  EPS, if presented) are required  in  the  notes  to  the
financial statements as  if  the  provisions  of  SFAS No. 123 had been used to
measure stock-based compensation.  The disclosure requirements  of  Opinion No.
25 have been superseded by the disclosure requirements of this Statement.  Once
an  entity  adopts  the  fair  value  based  method  of  accounting  for  these
transactions, that election cannot be reversed.

                                        Page 5

<PAGE>

     Equity  instruments  granted  or  otherwise  transferred  directly  to  an
employee by a principal stockholder are stock-based employee compensation to be
accounted  for  in accordance with either Opinion No. 25 or SFAS No. 123 unless
the transfer clearly  is for a purpose other than compensation.  The accounting
requirements of SFAS No.  123 became effective for transactions entered into in
fiscal years beginning after December 31, 1995, and the disclosure requirements
became effective for financial  statements  for  fiscal  years  beginning after
December 15, 1995.  Pro forma disclosures required for entities that  elect  to
continue  to  measure  compensation  cost using Opinion No. 25 must include the
effects of all awards granted in fiscal  years  beginning  after  December  15,
1994.   During  the  initial  phase-in  period,  the  effects  of applying this
Statement  are not likely to be representative of the effects on  reported  net
income for future  years because options vest over several years and additional
awards generally are made each year.

     Bancshares elected to continue to measure compensation costs using Opinion
No. 25.  There were  no pro forma disclosures required pursuant to SFAS No. 123
as no awards were granted in the first half of 1998 or during 1997.

     SFAS No. 125, "Accounting  for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities",  breaks  new  ground  in  resolving  long-
standing  questions  about  whether  transactions  should  be  accounted for as
secured borrowing or as sales.  The Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are considered secured borrowings.

     A transfer of financial assets in which the transferor surrenders  control
over  those  assets is accounted for as a sale to the extent that consideration
other than beneficial  interests  in  the  transferred  assets  is  received in
exchange.  The transferor has surrendered control over transferred assets  only
if all of the following conditions are met:

-  The  transferred  assets have been isolated from the transferor - put
   presumptively beyond the reach  of the transferor and its creditors, even in
   bankruptcy or other receivership.

-  Each transferee obtains the  right - free of conditions that constrain
   it  from  taking  advantage  of that right  -  to  pledge  or  exchange  the
   transferred assets, or the transferee is a qualifying special-purpose entity
   and the holders of beneficial  interest in that entity have the right - free
   of conditions that constrain them  from  taking advantage of that right - to
   pledge or exchange those interests.

-  The  transferor  does  not  maintain  effective   control   over  the
   transferred assets through an agreement that both entities and obligates the
   transferor  to  repurchase  or  redeem  them  before  their  maturity, or an
   agreement  that entitles the transferor to repurchase or redeem  transferred
   assets are not readily obtainable.

     This Statement  provides  detailed  measurement  standards  for assets and
liabilities  included  in  these transactions.  It also includes implementation
guidance for assessing isolation  of  transferred assets and for accounting for
transfers of partial interest, servicing  of  financial assets, securitization,
transfers  or  sales  type and direct financing lease  receivables,  securities
lending transactions, repurchase  agreements,  "wash  sales," loan syndications
and  participation,  risk  participation  in  banker's  acceptances,  factoring
arrangements,  transfers  of  receivables with recourse and  extinguishment  of
liabilities.

                                        Page 6

<PAGE>

     The Statement supersedes FASB  Statements No. 76, "Extinguishment of Debt"
and  No.  77,  "Reporting by Transferors  for  Transfers  of  Receivables  with
Recourse" and No.  122,  "Accounting for Mortgage Servicing Rights", and amends
FASB Statement No. 115, "Accounting  for Certain Investments in Debt and Equity
Securities", in addition to clarifying or amending a number of other statements
and  technical  bulletins.   Except  as amended  by  Statement  No.  127,  this
Statement is effective for transfers and  servicing  of  financial  assets  and
extinguishments  of  liabilities occurring after December 31, 1996 and is to be
applied prospectively.  Earlier or retroactive application is not permitted.

     The FASB was made  aware  that  the volume of certain transactions and the
related  changes  to information systems  and  accounting  processes  that  are
necessary to comply  with  the  requirements of Statement No. 125 would make it
extremely difficult, if not impossible,  for some affected enterprises to apply
the  transfer  and  collateral  provisions  of   Statement  No.  125  to  those
transactions as soon as January 1, 1997.  As a result,  SFAS No. 127 defers for
one year the effective date (a) of paragraph 15 of Statement  No.  125  and (b)
for   repurchase   agreement,  dollar-roll,  securities  lending,  and  similar
transactions, of paragraphs 9-12 and 237(b) of Statement No. 125.

     Statement  No.  127   provides   additional   guidance  on  the  types  of
transactions  for  which  the  effective date of Statement  No.  125  has  been
deferred.  It also requires that  if  it is not possible to determine whether a
transfer occurring during calendar-year 1997 is part of a repurchase agreement,
dollar-roll, securities lending, or similar  transaction,  then paragraphs 9-12
of  Statement  No. 125 should be applied to that transfer.  All  provisions  of
Statement No. 125  should  continue to be applied prospectively, and earlier or
retroactive application is not permitted.

     The FASB has issued SFAS  No.  128,  "Earnings  per  Share".  SFAS No. 128
establishes standards for computing and presenting earnings  per  share.   SFAS
No.  128  simplifies the current standards for computing earnings per share and
makes them  comparable  to  international  earnings per share standards.  Under
SFAS No. 128 the presentation of primary earnings  per share is replaced with a
presentation  of basic earnings per share.  SFAS No.  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 the
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.   SFAS No. 128 is effective for financial  statements  issued  for
periods ending after  December  15,  1997,  including interim periods and early
application is not permitted.  SFAS No. 128 will require the restatement of all
prior period earnings per share data presented.    Refer  to  the "Consolidated
Statement of Income" and Exhibit 11 - Computation of Per Share  Income for this
calculation.

     The FASB has issued SFAS No. 130, "Reporting Comprehensive Income".   SFAS
No.  130 requires all items that are required to be recognized under accounting
standards  as  components of comprehensive income to be reported in a financial
statement that is  displayed  in  equal  prominence  with  the  other financial
statements.   It  does  not  require  a  specific  format  for  that  financial
statement, but requires that an enterprise display an amount representing total
comprehensive  income  for the period in that financial statement.  Enterprises
are required to classify  items of "other comprehensive income" by their nature
in the financial statement  and  display  the  balance  of  other comprehensive
income separately in the equity section of a statement of financial position.

                                       Page 7

<PAGE>

     SFAS  No.  130 is effective for both interim and annual periods  beginning
after  December 15,  1997.   Earlier  application  is  permitted.   Comparative
financial   statements   provided  for  earlier  periods  are  required  to  be
reclassified to reflect the  provisions  of  this  statement.   Publicly traded
enterprises that issue condensed financial statements for interim  periods  are
required  to  report  a  total  for  comprehensive  income  in  those financial
statements.  Bancshares has provided a "Consolidated Statement of Comprehensive
Income" in the financial statement section of this report.  SFAS  No.  130 also
requires footnote disclosure of accumulated other comprehensive income balances
and  footnote disclosure of related tax effects allocated to each component  of
other comprehensive income.  Both footnote disclosures are presented below.


<TABLE>
<CAPTION>
                                DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCES
                                                       (in thousands)
                                         Three Months Ended                                    Six Months Ended
                               --------------------------------------                 --------------------------------------
                                                      Accumulated                                            Accumulated
                               Unrealized Gains   Other Comprehensive                 Unrealized Gains   Other Comprehensive
        June 30, 1998            on Securities          Income                          on Securities          Income
----------------------         -----------------  -------------------                 -----------------  -------------------      
<S>                           <C>                <C>                                 <C>                <C>
Beginning balance                   $        200      $        200                         $        380      $        380
Current period change                        110               110                                 (70)              (70)
                                    ------------      ------------                         ------------      -------------
Ending balance                      $        310      $        310                         $        310      $        310
                                    ============      ============                         ============      =============

        JUNE 30, 1997
----------------------

Beginning balance                   $      (405)      $      (405)                         $        133      $        133
Current period change                        505               505                                 (33)              (33)
                                    ------------      ------------                         ------------      -------------
Ending balance                      $        100      $        100                         $        100      $        100
                                    ============      ============                         ============      =============
</TABLE>

                                        Page 8

<PAGE>

<TABLE>
<CAPTION>
                                  Disclosure of Related Tax Effects Allocated to Each
                                        COMPONENT OF OTHER COMPREHENSIVE INCOME
                                                    (in thousands)

                                                                                Tax (Expense) or
    Three Months Ended June 30, 1998                      Before-Tax Amount         Benefit            Net-of-Tax Amount
-------------------------------------------              ------------------     ----------------       ----------------- 
<S>                                                      <C>
Unrealized gains on securities:
   Unrealized holding gains rising during
       Period                                              $         167        $          (57)          $         110
   Less:  reclassification adjustment for
       Gains realized in income                                        0                      0                      0
                                                           --------------       ----------------         -------------- 
Other comprehensive income                                 $         167        $          (57)          $         110
                                                           ==============       ================         ==============

     Six Months Ended June 30, 1998
------------------------------------------
Unrealized gains on securities:
   Unrealized holding gains rising during
       Period                                              $       (106)        $            36         $         (70)
   Less:  reclassification adjustment for
       Gains realized in income                                        0                      0                      0
                                                           --------------       ----------------        ---------------
Other comprehensive income                                 $       (106)        $            36         $         (70)
                                                           ==============       ================        ===============
</TABLE>


<TABLE>
<CAPTION>
                                  Disclosure of Related Tax Effects Allocated to Each
                                        COMPONENT OF OTHER COMPREHENSIVE INCOME
                                                    (in thousands)

                                                                              Tax (Expense) or
        Three Months Ended June 30, 1997             Before-Tax Amount            Benefit              Net-of-Tax Amount   
------------------------------------------           -----------------        -----------------        -----------------
<S>                                                  <C>                      <C>                      <C>  
Unrealized gains on securities:
   Unrealized holding gains rising during
       Period                                              $         765      $           (260)        $           505
   Less:  reclassification adjustment for
       Gains realized in income                                        0                      0                      0
                                                           --------------     ------------------       ----------------
Other comprehensive income                                 $         765      $           (260)        $           505
                                                           ==============     ==================       ================

         Six Months Ended June 30, 1997
------------------------------------------
Unrealized gains on securities:
   Unrealized holding gains rising during
       Period                                              $        (50)     $               17       $           (33)
   Less:  reclassification adjustment for
       Gains realized in income                                        0                      0                      0
                                                           --------------    -------------------      -----------------
Other comprehensive income                                 $        (50)     $               17       $           (33)
                                                           ==============    ===================      =================
</TABLE>


     The  FASB  has  issued  SFAS  No.  131,  "Disclosures about Segments of an
Enterprise  and Related Information".  SFAS No.  131  requires  that  a  public
business enterprise  report  financial  and  descriptive  information about its
reportable  operating  segments.   Operating  segments  are  components  of  an
enterprise  about  which  separate  financial information is available  and  is
evaluated regularly by the chief operating  decision  maker  in deciding how to
allocate resources and in assessing performance.

                                        Page 9

<PAGE>

     SFAS No. 131 requires that a public business enterprise report  a  measure
of  segment  profit  or  loss,  certain  specific revenue and expense items and
segment assets.  It requires a reconciliation  of total segment revenues, total
segment profit or loss, total segment assets, and  other  amounts disclosed for
segments to corresponding amounts in the enterprise's general purpose financial
statements.  SFAS No. 131 also requires a public business enterprise  to report
descriptive  information  about  the  way  that  the  operating  segments  were
determined,  the  products  and  services  provided  by the operating segments,
differences between the measurements used in reporting  segment information and
those used in the enterprise's general purpose financial statements and changes
in the measurement of segment amounts from period to period.

     SFAS  No. 131 is effective for both interim and annual  periods  beginning
after December  15,  1997.   Bancshares  currently  operates  in  two  industry
segments.   The  primary  business  involves  a  providing  banking services to
Central Illinois.  The Decatur Bank and the Shelby Bank offer  a  full range of
financial  services to commercial, industrial and individual customers.   These
services include  demand,  savings,  and  time  deposit  accounts  and programs
including individual retirement accounts and interest and non-interest  bearing
checking  accounts; commercial, consumer, agricultural, and real estate lending
including installment  loans  and  personal  lines  of credit; safe deposit and
night depository services; farm management; full service trust departments; and
discount  brokerage  services.   The  other  industry segment  involves  retail
payment  processing.   FirsTech provides the following  services  to  electric,
water and gas utilities,  telecommunication  companies,  cable television firms
and charitable organizations: retail lockbox processing of  payments  delivered
by  mail  to  the  biller; processing of payments delivered by customer to  pay
agents such as grocery  stores,  convenience  stores  and  check  cashers;  and
concentration  of  payments  delivered by the Automated Clearing House netowrk,
money management software such  as QUICKEN and through networks such as Visa e-
Pay and Mastercard RPS.  The following  is  a  summary of selected data for the
various business segments:

<TABLE>
<CAPTION>
                                      BANKING           REMITTANCE
                                     SERVICES            SERVICES           COMPANY{1)   ELIMINATIONS            TOTAL
                                --------------  -------------------      -------------  ---------------     ---------------
<S>                             <C>                 <C>                 <C>                 <C>                 <C>
   JUNE 30, 1998

   TOTAL INTEREST INCOME         $   13,342     $           61              $           $         (61)      $        13,342
   TOTAL NON-INTEREST INCOME          2,168              2,617                  70               (347)                4,508
   TOTAL INTEREST EXPENSE             6,211                                                       (61)                6,150
   TOTAL NON-INTEREST EXPENSE         5,487              2,350                  50               (347)                7,540
   INCOME BEFORE INCOME TAX           3,650                328                  20                                    3,998
   INCOME TAX EXPENSE                 1,082                115                   7                                    1,204
   TOTAL ASSETS                     422,933              5,405              54,383            (57,367)              425,354
   CAPITAL EXPENDITURES
   DEPRECIATION AND                     494                171                  12                                      677
   AMORTIZATION

     JUNE 30, 1997

   Total interest income         $   13,071    $            34              $           $         (34)      $        13,071
   Total non-interest income          1,893              2,404                  70               (267)                4,100
   Total interest expense             5,742                                                       (34)                5,708
   Total non-interest expense         5,726              2,128                  47               (267)                7,634
   Income before income tax           3,263                310                  24                                    3,597
   Income tax expense                 1,009                111                   8                                    1,128
   Total assets                     385,096              5,045              50,343            (52,484)              388,000
   Capital expenditures
   Depreciation and                     543                210                  12                                      775
   amortization

(1) Excludes dividend income received from subsidiaries.
</TABLE>

Information related to services or transfers between  business  segments is not
reflected because such items are immaterial.

                                        Page 10

<PAGE>

COMMON SHARES

     During  the  third  quarter  of  1996,  the  Company's  Board of Directors
approved a stock repurchase program which authorizes the repurchase  of  common
shares to be used for the issuance of shares under the Company's employee stock
option  plan.   The  shares  will  be repurchased from time to time in the open
market or in private transactions.   At  June  30, 1998, 19,966 shares had been
repurchased.


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

     The following discussion represents  management's  analysis of Bancshares'
results of operations for the three and six month periods  ended  June 30, 1998
and 1997 and its consolidated financial condition at June 30, 1998  as compared
to  December  31,  1997.   This  discussion should be read in conjunction  with
Bancshares' unaudited condensed consolidated  financial  statements  and  notes
thereto.

     On  April  1,  1996,  Bancshares completed the acquisition of First Shelby
Financial Group, Inc. ("First Shelby") and the Shelby Bank.  As a result of the
merger, First Shelby and the  Shelby  Bank  became wholly owned subsidiaries of
Bancshares.  The acquisition was accounted for  as  a pooling of interests and,
accordingly, the financial condition and results of operations  of  Bancshares,
First  Shelby and the Shelby Bank have been combined.  Effective May 13,  1997,
First Shelby was dissolved, with the net assets transferred to Bancshares.


RESULTS OF OPERATIONS

SUMMARY OF OPERATIONS

     Net  income  in the second quarter of 1998 increased to $1,354,000, up 13%
from $1,202,000 earned  in  the same quarter of 1997.  Basic earnings per share
for the quarterly period increased  to 47 cents per share, up 12% from 42 cents
per share earned in the second quarter  of 1997. Diluted earnings per share for
the quarterly period increased to 47 cents  per share, up 15% from 41 cents per
share earned in the second quarter of 1997. For  the  six months ended June 30,
1998, net income was $2,794,000, up 13% compared to $2,469,000  for  the  first
half  of  1997.   Basic and diluted earnings per share for the six-month period
were 97 cents, up 14% compared to 85 

                                        Page 11

<PAGE>

cents for the same period in 1997.  Higher earnings for the three-month  
period were primarily due to an increase in other income offset by an 
increase in  other  expenses  and taxes.  For the six-month period, higher 
earnings are attributed to an increase  in  other  income  and a decrease  
in  other expenses offset by a reduction in net interest income after loan 
losses.

NET INTEREST INCOME

     Second quarter  net  interest income was $3,596,000, a decrease of $56,000
or 2% compared with the second  quarter of 1997.  For the six months ended June
30, 1998, net interest income decreased  $171,000  or 2% compared to 1997.  The
reduction in net interest income for both periods was  mainly due to a decrease
in interest income on loans and an increase in interest expense on deposits and
borrowings  offset by increases in interest income on investments  and  Federal
Funds sold.

ALLOWANCE AND PROVISION FOR LOAN LOSSES

     Asset quality, particularly in the loan area, continues to be an important
concern of Bancshares'  management.   Both the Decatur Bank and the Shelby Bank
maintain a separate loan review department  that  continuously  reviews problem
and  significant  loans  and  the  adequacy  of the allowance for loan  losses.
Separate loan committees of the board of directors  at  the  Decatur  Bank  and
Shelby  Bank  meet  at  least  quarterly  to  review past due loans and problem
credits,  lending  policies  and  practices  and results  of  the  loan  review
department's analyses. The allowance for loan  losses  is maintained at a level
management  believes to be adequate to provide for known  and  potential  risks
inherent in the loan portfolios.

     The provision  for  loan  losses  during  the  second  quarter of 1998 was
$81,000 compared to $136,000 in 1997.  For the six month period  ended June 30,
1998, the provision for loan losses were $162,000 compared to $232,000  for the
same  period in 1997.  The lower provisions for loan losses were primarily  due
to  lower net charge-offs in the installment loan area.

OTHER INCOME

     Other  income for the three months ended June 30, 1998, increased $242,000
or 12% compared  to  the  same  period in 1997.  On a year-to-date basis, other
income increased $408,000 or 10% compared to the six month  period  in 1997.  
For the three month period, the  increase  is  attributed  to  increases in  
loan  fee  income,  remittance processing fees and other income.  For  the  
six-month  period, the increase is attributed to increases in loan fee income
and remittance processing fees.

     For  the  three and six months ended June 30, 1998, remittance  processing
fees generated by  FirsTech  increased  by  $147,000  (15%) and $223,000 (11%),
respectively, compared to the same periods in 1997.  The  increase  in  1998 is
the result of new clients and increased processing volume from existing clients.

     Loan  fee income for the three-month period ended June 30, 1998, increased
$22,000 or 20% over the same period in 1997.  On a year to date basis, loan fee
income increased  $126,000  or  68%  compared  to the six-month period in 1997.
This increase is mainly attributed to an increase  in  mortgage servicing right
fees associated with FASB No. 125, "Accounting for Transfers  and  Servicing of
Financial  Assets  and  Extinquishment  of Liabilities".  As a result of  lower
interest rates 

                                        Page 12

<PAGE>

during 1998, more loans were sold in the secondary market to the Federal 
National Mortgage Association.

     Other income increased $68,000 or 32%  for the three months ended June 30,
1998, compared to the same period in 1997.  This  increase is mainly attributed
to  increases  in brokerage commissions and ATM fees  for  the  second  quarter
compared to 1997.

OTHER EXPENSES

     Other expenses  increased  from $3,736,000 for the three months ended June
30,  1997,  to $3,797,000 for the three  months  ended  June  30,  1998.   This
represents a  $61,000 (2%) increase and was attributed to increases in salaries
and employee benefits and service charges from corresponding banks. For the six
months ended June  30, 1998, other expenses decreased $94,000 or 1% compared to
the same period in 1997. This decrease was attributed to decreases in equipment
expenses and data processing  fees  offset  by  an  increase  in  salaries  and
employee benefits and service charges from corresponding banks.

     Salaries  and  employee  benefits  increased $45,000 or 12% for the second
quarter of 1998 and $138,000 or 4% for the first six months of 1998 compared to
the same periods of 1997.  This increase  is mainly due to an increase in staff
at FirsTech as a result of the addition of new clients and increased processing 
volume from existing clients.

     Equipment expenses decreased $217,000 or 18% for the six months ended June
30,  1998,  compared  to  the  same period in 1997.   The  decrease  is  mainly
attributed to a decrease in depreciation  on equipment as well as a decrease in
FirsTech machine maintenance.  During April  1997,  FirsTech  signed a two-year
maintenance agreement that locked in prices at a rate lower than  that paid for
the first quarter of 1997.

     Data  processing expenses decreased $31,000 or 37% for the second  quarter
of 1998 and  $55,000  or  38%  for  the first half of 1998 compared to the same
periods in 1997.  The decrease is attributed  to a decrease in third party data
processing costs associated with the Decatur Bank's Trust Department.

     For  the  three  months  ended  June  30,  1998,   service   charges  from
corresponding  banks  increased  $53,000 or 40% compared to the same period  in
1997.  Service charges increased $90,000  or  34%  for  the  first half of 1998
compared to the first half of 1997.  The increase in both periods is attributed
to  an increased volume of checks processed by FirsTech in the  retail  lockbox
business.

INCOME TAXES

     Income  tax expense increased $28,000 or 5% for the second quarter of 1998
compared to the  second  quarter  of 1997. Income taxes increased $76,000 or 7%
for the first six months of 1998, compared  to  the  first  six months of 1997.
Higher income tax expense for both periods was principally due  to the increase
in  pre-tax  earnings.   Bancshares'  effective  tax  rate (income tax  expense
divided by income before taxes) was 30% as of June 30,  1998 and 31% as of June
30, 1997.

                                        Page 13

<PAGE>

FINANCIAL CONDITION

     Bancshares' assets increased $33,117,000 or 8.4% from December 31, 1997 to
June 30, 1998.  This increase was primarily due to increases  in  cash and cash
equivalents, securities and net loans.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents increased $10,727,000 from December  31, 1997 to
June  30,  1998.  This change occurred due to an increase in cash and due  from
banks of $6,187,000  and  an increase in federal funds sold of $4,540,000.  See
the consolidated statement  of  cash  flows  for  the six months ended June 30,
1998,  in  the  interim financial statements for the details  representing  the
increase in cash  and cash equivalents.  Federal funds sold are of a short-term
nature and provide the needed liquidity to fund loan growth.

SECURITIES

     Bancshares'  overall   investment  goal  is  to  maximize  earnings  while
maintaining liquidity in securities  having minimal credit risk.  The types and
maturities of securities purchases are  primarily  based on Bancshares' current
and  projected  liquidity and interest rate sensitivity  positions.   The  book
value of investment  securities increased by $13,688,000 from December 31, 1997
to June 30,1998.  During  the  first  six  months of 1998, Bancshares purchased
$46,210,000 ($45,425,000 classified as available-for-sale),  and had 32,554,000
($27,663,00   classified  as  available-for-sale)  mature.   The  increase   in
investments was  primarily  due to an increase in total deposits and borrowings
from the Federal Home Loan Bank ("FHLB").

LOANS

     Total loans increased by  $7,231,000  from  December  31, 1997 to June 30,
1998  due  mainly to an increase in commercial loans offset by  a  decrease  in
consumer  loans   and   real  estate  loans.   Commercial  loans  increased  by
$11,121,000 due to increases  in  construction and land development and a long-
term commercial real estate loan.   Consumer  loans decreased by $2,549,000 and
real estate and other loans decreased by $1,341,000.

DEPOSITS

      Total deposits increased $14,045,000 from  December  31, 1997 to June 30,
1998.   This  increase is attributed to the collection of $10,0000,000  in  tax
money during the  second  quarter  that  will  not  be paid out until the third
quarter and customers making large deposits at the end  of June to meet minimum
required deposits for the month.

FHLB ADVANCES AND U.S. TREASURY DEMAND NOTES

     FHLB  advances and U.S. Treasury demand notes increased  $14,953,000  from
December 31, 1997 to June 30, 1998.  This increase is attributed to an increase
of $14,975,000  in  borrowings from the FHLB offset by a decrease of $22,000 in
U.S. Treasury demand  notes.   Two  $5,000,000  long-term  borrowings were made
during the first quarter of 1998 and one $5,000,000 borrowing  was  made during
the  second  quarter  of 1998, all with the FHLB.  Two borrowings were used to

                                        Page 14

<PAGE>

purchase higher yielding securities with the same maturities as the borrowings.
The other borrowing is being used to fund loan growth with matching maturities.

STOCKHOLDERS' EQUITY

     Total stockholders' equity rose $2,086,000 or 4% from December 31, 1997 to
June 30, 1998.  The increase  is  mainly attributed to net income of $2,794,000
less cash dividends of $750,000.

     The  capital  ratios  of  Bancshares   are  presently  in  excess  of  the
requirements  necessary  to  meet  the  "well  capitalized"   capital  category
established  by  bank regulators.  At March 31, 1998, Bancshares'  consolidated
Tier 1 and total risk-based  capital ratios were 24.0% and 25.3%, respectively.
Bancshares' leverage ratio at March 31, 1998, was 13.0%.

YEAR 2000

     Bancshares has established  a Project Team to address the Year 2000 issue.
They are following guidelines established  in  an OCC Advisory Letter dated May
16, 1997.  This letter contains guidance regarding  measures  banks  should  be
taking  to  make  certain they are ready for the year 2000 and beyond.  The OCC
describes 5 phases  in Year 2000 project management: (1) Awareness - define the
problem and develop a  strategy,  (2)  Assessment  -  identify,  inventory, and
assess,  (3) Renovation - enhancements, upgrades, repairs and replacement,  (4)
Validation - testing to ensure desired results and (5) Implementation - certify
systems and contingency plans.

     The project  team  is currently in phase 3.  Based on current assessments,
Bancshares does not expect  the  amounts to be expended over the next two years
to have a material effect on its financial  position  or results of operations.
The amount expensed in the first half of 1998 and for the  year  ended 1997 was
immaterial.


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Asset/liability management involves the funding and investment  strategies
necessary to maintain an appropriate balance between interest sensitive  assets
and   liabilities.    It  also  involves  providing  adequate  liquidity  while
sustaining stable growth  in  net interest income.  Regular review and analysis
of deposit trends, cash flows in  various categories of loans and monitoring of
interest spread relationships are vital  to  this  process.   The nature of the
banking  business  requires  Bancshares  maintain  adequate liquidity  to  meet
changes in composition and volume of assets and liabilities  due  to  seasonal,
cyclical  or  other reasons.  Liquidity describes the ability of Bancshares  to
meet financial  obligations  that  arise  during the normal course of business.
Liquidity  is  primarily needed to meet the borrowing  and  deposit  withdrawal
requirements of  the  customers  of  Bancshares, as well as meeting current and
future planned expenditures.  This liquidity is typically provided by the funds
received  through customer deposits, investment  maturities,  loan  repayments,
borrowings  and  income. Bancshares' management considers the current liquidity
position to be adequate to meet the needs of customers.

     Bancshares seeks  to  contain  the  risks  associated  with  interest rate
fluctuations  by  managing  the  balance between interest sensitive assets  and
liabilities.  Managing to mitigate interest rate risk is, however, not an exact
science.  Not only does the interval  until  repricing  of

                                        Page 15

<PAGE>

interest rates on assets and liabilities change from day to day as the assets 
and liabilities change, but for some assets and liabilities,  contractual  
maturity  and actual maturity experienced are not the same.  For example, 
mortgage-backed securities may have contractual maturities well in excess of 
five years but, depending upon the interest rate carried by the  specific 
underlying mortgages and the then currently prevailing rate of interest, these 
securities may be prepaid in a shorter time period.  Accordingly, the 
mortgage-backed  securities  and collateralized  mortgage  obligations  that  
have  average stated maturities in excess  of five years, are evaluated as 
part of the asset/liability  management process using  their  expected  average 
lives due to anticipated prepayments on the underlying loans.  NOW and savings  
accounts, by contract, may be withdrawn in their entirety upon demand.  While 
these  contracts  are extremely short, it has been Bancshare's experience that 
these accounts turn  over  at  the rate of five percent per year.  If all of 
the NOW and savings accounts were treated  as repricing  in one year or less, 
the cumulative negative gap at one year or less would be $137.7  million  or  
36.14% of interest earning assets.  Due to their very liquid nature, the entire
balance of money market accounts is assumed to be repriced within one year.

     Interest rate sensitivity is an important  factor in the management of the
composition  and  maturity  configurations of Bancshare's  earning  assets  and
funding sources.  An Asset/Liability  Committee  ("ALCO")  manages the interest
rate sensitivity position in order to maintain an appropriate  balance  between
the  maturity  and repricing characteristics of assets and liabilities that  is
consistent with  Bancshare's  liquidity  analysis, growth, and capital adequacy
goals.  Bancshares sells fixed-rate real estate loans in the secondary mortgage
market.  Bancshare's management believes that  by  selling certain loans rather
than retaining them in its portfolio, it is better able to match the maturities
of  interest  sensitive assets to interest sensitive liabilities.   It  is  the
objective of the  ALCO  to maximize net interest margins during periods of both
volatile and stable interest  rates,  to attain earnings growth and to maintain
sufficient liquidity to satisfy depositors'  requirements and meet credit needs
of customers.

     Sources  of  market  risk  include interest rate  risk,  foreign  currency
exchange rate risk, commodity price risk, and equity price risk.  Bancshares is
only  subject  to  interest  rate  risk.   Bancshares  purchased  no  financial
instruments for trading purposes during the first half of 1998 or during 1997.

     The following table summarizes,  as  of  June  30,  1998,  the anticipated
maturities   or   repricing  of  Bancshare's  interest  sensitive  assets   and
liabilities, Bancshare's interest sensitivity gap (interest-earning assets less
interest-bearing liabilities),  Bancshares cumulative interest rate sensitivity
gap  and  Bancshare's  cumulative  interest  sensitivity  repricing  gap  ratio
(cumulative  interest  rate sensitivity  gap  divided  by  total  assets).    A
negative gap for any period  means  that more interest-bearing liabilities will
reprice  or  maturing during that time  period  than  interest-earning  assets.
During periods  of  rising  interest  rates,  a  negative  gap  position  would
generally decrease earnings, and during periods of declining interest rates,  a
negative gap position would generally increase earnings.  The converse would be
true for a positive gap position.

                                        Page 16

<PAGE>

TABLE 14   GAP TABLE

<TABLE>
<CAPTION>
                                                                                                   After                   Fair
                                  Year 1       Year 2       Year 3       Year 4       Year 5      Year 5       Total       Value
                               ------------  -----------  -----------  -----------  -----------
<S>                            <C>          <C>          <C>          <C>          <C>          <C>         <C>         <C>
Loans (1)
   Fixed rate                     $  27,265    $  12,716    $  22,643    $  28,123    $  27,096   $  16,458    $134,301    $141,758
   Average interest rate              7.74%        8.85%        8.87%        8.75%        8.73%       7.58%       8.44%
   Variable rate                     48,451        7,400        2,429        7,227        4,301       3,242      73,050      77,106
    Average interest rate             8.64%        7.05%        7.90%        7.72%        7.79%       6.76%       8.31%
Securities (2)
   Fixed rate                        33,321       21,737       23,096       17,866       13,008      39,741     148,769     149,145
   Average interest rate              5.59%        6.13%        5.57%        6.70%        6.02%       6.52%       5.78%
   Variable rate                                                               308                    2,970       3.278       3,307
    Average interest rate                                                    6.65%                    6.89%       6.87%
Federal funds sold                   21,685                                                                      21,685      21,685
    Average interest rate             5.59%                                                                       5.59%
                                  ---------    ---------    ---------    ---------    ----------  ---------    ---------   ---------
   Total interest-earning assets    130,722       41,853       48,168       53,524       44,405      62,411     381,083     393,001
                                  ---------    ---------    ---------    ---------    ----------  ---------    ---------   ---------

NOW and savings accounts              5,150        5,150        5,150        5,150        5,150      77,249     102,999     102,999
    Average interest rate             2.90%        2.90%        2.90%        2.90%        2.90%       2.90%       2.90%
Money market accounts                30,560                                                                      30,560      30,560
    Average interest rate             3.93%                                                                       3.93%
Time deposits
   Fixed rate                       119,862       18,754        3,244          826          646                 143,332     146,670
    Average interest rate             5.41%        5.89%        5.78%        5.86%        6.48%                   5.48%
   Variable rate                      1,000          460                                                          1,460       1,493
    Average interest rate             4.77%        5.85%                                                          5.11%
Federal funds purchased and
securities sold under
repurchase agreements                10,848                                                                      10,848      10,848
    Average interest rate             5.17%                                                                       5.17%
FHLB advances                            52           55           59           63           68      17,632      17,929      18,117
    Average interest rate             5.49%        5.49%        5.49%        5.49%        5.49%       5.49%       5.49%
U.S. Treasury demand notes            3,129                                                                       3,129       3,129
    Average interest rate             5.81%                                                                       5.81%
                                  ---------   ----------   ----------   ----------   ----------   ---------   ---------   ----------
   Total interest-bearing 
   liabilities                      170,601       24,419        8,453        6,039        5,864      94,881     310,257     313,772
                                  ---------   ----------   ----------   ----------   ----------   ---------   ---------   ----------
Interest-earning assets less
 interest- bearing liabilities
 ("Gap")                          $(39,879)   $   17,434    $  39,715    $  47,485   $   38,541   $(32,470)   $  70,826   $  79,229
                                  =========   ===========   =========    =========   ==========   =========   ==========  ==========
Cumulative gap                    $(39,879)   $ (22,445)    $  17,270    $  64,755    $ 103,296   $  70,826   $  70,826   $  79,229
                                  =========   ===========   =========    =========   ==========   =========   ==========  ==========
Cumulative Gap as a percentage
of total  interest earning assets  (10.46%)      (5.89%)        4.53%       16.99%       27.11%      18.59%      18.59%      20.79%
                                  =========   ===========   =========    =========   ===========  ==========  ==========  ==========
</TABLE>

(1) Includes consumer loans net of unearned income, and excludes nonaccrual and 
    impaired loans.
(2) Reflects fair value adjustments for securities available for sale.

At June 30, 1998, the table above reflects that Bancshares has a negative 
liability gap due to the level of interest bearing demand deposits and savings 
that are generally subject to immediate withdrawal and are repriceable at any 
time.  As such, the effect of an increase in the prime rate of 100 basis points 
would decrease net interest income by approximately $398,800 in one year and 
$224,500  in  two  years  assuming  no  management intervention.  A fall in 
the interest rates would have the opposite effect  for the   same   period.   
In  analyzing  interest  rate  sensitivity,  Bancshares' management considers  
these  differences and incorporates other assumptions and factors,  such as 
balance sheet growth and prepayments, to better measure interest rate risk.

     While   the   gap   analysis  provides  an  indication  of  interest  rate
sensitivity, experience has  shown  that  it  does  not  fully capture the true
dynamics of interest rate changes.  Essentially, the analysis  presents  only a
static  measurement  of  asset  and  liability  volumes  based  on  contractual
maturity,  cash  flow estimates or repricing opportunity.  It fails to  reflect
the differences in the timing 

                                        Page 17

<PAGE>

and degree of repricing of assets and liabilities due  to  interest  rate  
changes.   In  analyzing  interest  rate  sensitivity, management considers  
these  differences and incorporates other assumptions and factors,  such as 
balance sheet  growth  and  prepayments,  to  better  measure interest rate 
risk.


PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

     Bancshares  is involved from time to time in routine litigation incidental
to its business.   However,  Bancshares'  management  believes that it is not a
party  to  any  material  pending  litigation, which, if decided  adversely  to
Bancshares, would have a significant  negative  impact on the business, income,
assets or operation of Bancshares.  Bancshares' management  is not aware of any
other material threatened litigation that might involve Bancshares.

ITEM 2.    CHANGES IN SECURITIES

     Not Applicable

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

     Not Applicable

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

     Not Applicable

ITEM 5.    OTHER INFORMATION

     Not Applicable

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)   Exhibits

           Exhibit
           Number        Description of Exhibit

               11     Computation of Per Share Income

               27     Financial Data Schedule

     (b)   Reports on Form 8-K

           Not applicable

                                        Page 18

<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.

FIRST DECATUR BANCSHARES, INC.


August 5, 1998             By:  /s/ John W. Luttrell 
                                -------------------------------------------
                                John W. Luttrell
                                President and Chief Executive Officer



August 5, 1998             By:  /s/ Craig A. Wells
                                -------------------------------------------
                                Craig A. Wells
                                Vice  President and Chief Financial Officer




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