ILLINI CORP, 10QSB, 2000-11-13

ILLINI CORP
10QSB, 2000-11-13
STATE COMMERCIAL BANKS

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U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-QSB

/x/	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2000

/ /	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission file number 0-13343

Illini Corporation
(Exact name of small business issuer as specified in its charter)

Illinois
(State or other jurisdiction of
incorporation or organization)

37-1135429
(I.R.S. Employer
Identification No.)

3200 West Iles Avenue, Springfield, Illinois 62707
(Address of principal executive offices)

(217) 787-5111
(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 571,789 shares of $10 par value common stock as of October 31, 2000

Transitional Small Business Disclosure Format: Yes / / No /x/

ILLINI CORPORATION

INDEX TO FORM 10-QSB
September 30, 2000

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets September 30, 2000 and December 31, 1999	3
		Condensed Consolidated Statements of Income Three Months and Nine Months Ended September 30, 2000 and 1999	4
		Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2000 and 1999	5
		Notes to Interim Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Operations	9
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
PART II. OTHER INFORMATION			21
SIGNATURES			24
EXHIBIT INDEX			25

Information Concerning Forward-Looking Statements

Statements contained in this Form 10-QSB which are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve important known and unknown risks, uncertainties and other factors and can be identified by phrases using "estimate," "anticipate," "believe," "project," "expect," "intend," "predict," "potential," "future," "may," "should" and similar expressions or words. Such forward-looking statements are subject to risk and uncertainties which could cause actual results to differ materially from those projected. Such risks and uncertainties include potential change in interest rates, competitive factors in the financial services industry, general economic conditions, the effect of new legislation and other risks detailed in documents filed by Illini Corporation with the Securities and Exchange Commission from time to time.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ILLINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2000 and December 31, 1999
(Unaudited)

				September 30, 2000			December 31, 1999
				(dollars in thousands)
ASSETS
Cash and due from banks				$	5,571		$	7,383
Interest-bearing deposits in other banks					24			28
Federal funds sold					13,020			5,595

Cash and cash equivalents					18,615			13,006
Debt and marketable equity securities available for sale, at fair value					55,342			56,976
Loans, net of the allowance for loan losses and unearned income					155,617			134,020
Premises and equipment					6,932			7,534
Accrued interest receivable					2,391			1,908
Other real estate owned					426			618
Other assets					2,473			3,033

				$	241,796		$	217,095

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
	Noninterest-bearing demand deposits				29,595			29,549
	Interest-bearing deposits:
		NOW and money market accounts			54,440			50,301
		Savings deposits			17,314			18,527
		Time deposits, $100,000 and over			26,161			23,552
		Other time deposits			83,337			73,724

			Total deposits		210,847			195,653
	Short-term borrowings				4,256			1,394
	Long-term debt				6,000			—
	Accrued interest payable				1,359			1,122
	Other liabilities				1,198			1,600

			Total liabilities		223,660			199,769

Shareholders' equity:
	Common stock—$10 par value, authorized 800,000 shares; 571,789 shares issued and outstanding				5,718			5,718
	Capital surplus				3,358			3,358
	Retained earnings				9,221			8,825
	Accumulated other comprehensive loss				(161	)		(575	)

			Total shareholders' equity		18,136			17,326

				$	241,796		$	217,095

See accompanying notes to interim condensed financial statements.

ILLINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months and Nine Months Ended September 30, 2000 and 1999

(Unaudited)

					Three Months Ended September 30,					Nine Months Ended September 30,
					2000		1999			2000			1999
					(dollars in thousands, except per share data)
Interest income:
	Interest and fees on loans				$	3,447	$	2,412		$	9,525		$	6,390
	Interest on debt and marketable equity securities
		Taxable				692		578			2,201			1,879
		Tax-exempt				169		90			423			273
	Interest on short term investments					75		1			310			72

			Total interest income			4,383		3,081			12,459			8,614

Interest expense:
	Interest on deposits:
		NOW and money market accounts				554		340			1,503			1,004
		Savings deposits				90		83			275			262
		Time deposits, $100,000 and over				343		203			976			567
		Other time deposits				1,177		672			3,286			1,865
	Interest on borrowings					94		61			153			104

			Total interest expense			2,258		1,359			6,193			3,802

			Net interest income			2,125		1,722			6,266			4,812
Provision for loan losses						135		101			405			203

			Net interest income after provision for loan losses			1,990		1,621			5,861			4,609
Noninterest income:
	Service charges on deposit accounts					358		347			1,021			959
	Other fee income					73		46			214			149
	Mortgage loan servicing fees					47		53			162			169
	Gain on sale of mortgage loans					5		7			16			38
	Securities gains (losses)					0		(1	)		(13	)		7
	Other					45		43			136			128

			Total noninterest income			528		495			1,536			1,450
Noninterest expense:
	Salaries and employee benefits					937		745			2,740			2,261
	Net occupancy expense					209		224			619			621
	Equipment expense					104		94			310			302
	Data processing					173		145			543			538
	Supplies					45		38			124			143
	Communication and transportation					120		118			353			315
	Marketing and advertising					58		32			161			69
	Correspondent and processing fees					72		65			199			180
	Loan and other real estate owned expenses					15		27			50			69
	Professional fees					316		327			695			823
	Directors' and regulatory fees					61		42			186			129
	Other					84		46			275			174

			Total noninterest expense			2,194		1,903			6,255			5,624
				Income before income tax expense		324		213			1,142			435
Income tax expense						76		42			317			84

				Net income	$	248	$	171		$	825		$	351

Basic and diluted earnings per share (based on weighted average common shares outstanding of 571,789 in 2000 and 448,456 in 1999)					$	0.43	$	0.38		$	1.44		$	0.78

See accompanying notes to interim condensed financial statements.

ILLINI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2000 and 1999

(Unaudited)

				2000			1999
				(dollars in thousands)
Cash flows from operating activities:
	Net income			$	825		$	351
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			828			836
		Provision for loan losses			405			203
		Securities (gains) losses, net			13			(7	)
		Gain on sale of premises and equipment			(2	)		—
		Loss on sale of other real estate owned			1			21
		Increase in accrued interest receivable			(483	)		(237	)
		Increase in accrued interest payable			237			6
		Origination of mortgage loans for sale			(4,960	)		(5,851	)
		Proceeds from the sale of mortgage loans			4,850			5,901
		Other, net			(78	)		(437	)

			Net cash provided by operating activities		1,636			786

Cash flows from investing activities:
	Proceeds from sales of debt securities available for sale				4,757			7,722
	Proceeds from maturities and paydowns of debt securities available for sale				4,734			8,872
	Purchases of debt and marketable equity securities available for sale				(7,256	)		(9,003	)
	Net increase in loans				(21,907	)		(27,408	)
	Purchases of premises and equipment				(108	)		(518	)
	Proceeds from sale of premises and equipment				2			—
	Proceeds from sales of other real estate owned				124			71

			Net cash used by investing activities		(19,654	)		(20,264	)

Cash flows from financing activities:
	Net increase (decrease) in non-interest bearing demand deposits				46			(2,746	)
	Net increase in NOW, money market accounts and savings deposits				2,926			379
	Net increase in time deposits, $100,000 and over				2,609			5,043
	Net increase in other time deposits				9,613			11,587
	Net increase in short-term borrowings				2,862			735
	Net increase in long-term debt				6,000			—
	Cash dividends paid				(429	)		(337	)

			Net cash provided by financing activities		23,627			14,661

Net increase (decrease) in cash and cash equivalents					5,609			(4,817	)
Cash and cash equivalents at beginning of period					13,006			12,318

Cash and cash equivalents at end of period				$	18,615		$	7,501

Supplemental Information:
	Income taxes paid			$	448		$	182
	Interest paid			$	5,956		$	3,796

Other non-cash investing activities:
	Transfer of premises to other real estate owned			$	43			—

	Transfer of loans to other real estate owned			$	15		$	213

See accompanying notes to interim condensed consolidated financial statements.

ILLINI CORPORATION AND SUBSIDIARIES

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

September 30, 2000

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all of the information and notes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in the Illini Corporation Annual Report on Form 10-KSB for the year ended December 31, 1999.

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Illini Corporation has no potential common shares which are dilutive.

Results for the three and nine months ended September 30, 2000 may not be indicative of the annual performance of Illini Corporation (or the Banks). Management of the Corporation has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the interim condensed consolidated financial statements (unaudited) in conformity with generally accepted accounting principals. Actual results could differ from those estimates.

(2) Allowance for Loan Losses and Impaired Loans

The allowance for loan losses is increased by provisions charged to operations and is available to absorb loan losses. Illini Corporation utilizes a systematic, documented approach in determining the appropriate level of the allowance for loan losses of its subsidiary banks. Management's approach, which provides for general and specific allowances, is based on current economic conditions, past loan losses, collection experience, risk characteristics of the portfolio, assessing collateral values by obtaining independent appraisals for significant properties, and such other factors which, in management's judgment, deserve current recognition in estimating potential loan losses. The determination of the allowance for loan losses is one of the estimates made by management in the preparation of the consolidated financial statements.

		September 30,
		2000		1999
		(dollars in thousands)
Balance at beginning of period		$	1,696	$	1,368
Provision charged to expense			405		203
Charge-offs			127		174
Less: recoveries			104		51

	Net charge-offs		23		123

Balance at end of period		$	2,078	$	1,448

Loans, except large groups of smaller-balance homogeneous loans, for which the full collection of principal and interest according to the contractual terms of the loan agreement is not probable, are

evaluated for impairment. Information regarding impaired loans at September 30, 2000 and December 31, 1999 is as follows:

	September 30, 2000		December 31, 1999
	(dollars in thousands)
Nonaccrual loans	$	763	$	559
Impaired loans continuing to accrue interest		—		—

Total impaired loans	$	763	$	559

Allowance for losses on specific impaired loans	$	123	$	18
Impaired loans with no specific related allowance for loan losses		596		499
Average balance of impaired loans during the period		731		1,033

(3) New Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), which establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS 133 requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS 133 is effective for all fiscal periods beginning after June 15, 1999. Earlier application of SFAS 133 is encouraged but should not be applied retroactively to financial statements of prior periods. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133, which states SFAS 133 shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The adoption of the statement will have no material impact on the Corporation's financial condition or result of operations.

(4) Other Comprehensive Income

For the three and nine-month periods ended September 30, 2000 and 1999, unrealized gains (losses) on debt and marketable equity securities available for sale, net of tax, is the Corporation's only

other comprehensive income component. Comprehensive income for the three and nine-month periods ended September 30, 2000 and 1999 is summarized as follows:

			Three Months Ended September 30,					Nine Months Ended September 30,
			2000		1999			2000		1999
			(dollars in thousands)
Net income			$	248	$	171		$	825	$	351
Other comprehensive income:
	Net realized and unrealized gains (losses) on securities available for sale, net			471		(119	)		406		(732	)
	Less adjustment for net securities gains realized in net income, net			0		1			8		(4	)

	Other comprehensive income (loss)			471		(118	)		414		(736	)

		Total comprehensive income (loss)	$	719	$	53		$	1,239	$	(385	)

(5) Sale of Menard County Branches

On May 24, 2000, Illini Corporation signed a Branch Purchase and Assumption Agreement with Petefish Skiles & Company of Virginia, Illinois, to sell Illini Corporation branches located in Tallula, Greenview and Petersburg, Illinois. The sale includes real property, personal property, loans and deposit liabilities. Total average loan and total average deposit liabilities for these branches at September 30, 2000 were $6.1 million and $14.1 million, respectively. In August the sale was approved by regulatory authorities and closed in October of 2000.

Item 2. Management's Discussion and Analysis of Operations

This discussion should be read in conjunction with the consolidated financial statements, notes, and tables included elsewhere in this report and in the 1999 Illini Corporation Annual Report on Form 10-KSB (1999 Form 10-KSB).

SUMMARY

	Quarter ended September 30,						Nine months ended September 30,
	Quarter ended September 30,				Percent Change		Nine months ended September 30,				Percent Change
Earnings	2000		1999		Percent Change		2000		1999		Percent Change
	(dollars in thousands, except per share data)
Total revenue	$	4,911	$	3,576	37.31	%	$	13,995	$	10,064	39.05	%
Net income		248		171	44.74	%		825		351	134.95	%
Basic earnings per share	$	0.43	$	0.38	13.52	%	$	1.44	$	0.78	84.27	%

	Quarter ended September 30,						Nine months ended September 30,
	Quarter ended September 30,				Basis Point Change		Nine months ended September 30,				Basis Point Change
Key Ratios	2000		1999		Basis Point Change		2000		1999		Basis Point Change
Return on average assets(1)	0.43	%	0.40	%	0.03	%	0.49	%	0.29	%	0.20	%
Return on average equity(1)	5.55	%	4.57	%	0.98	%	6.23	%	3.10	%	3.13	%
Average equity to assets	7.66	%	8.77	%	(1.11	)%	7.84	%	9.30	%	(1.46	)%
Tier 1 leverage ratio	7.03	%	8.81	%	(1.78	)%
Tier 1 risk-based capital ratio	9.63	%	11.54	%	(1.91	)%
Total risk-based capital ratio	10.86	%	12.66	%	(1.80	)%
Dividend payout ratio	57.76	%	65.56	%	(7.80	)%	52.00	%	95.82	%	(43.82	)%
Net interest margin	4.11	%	4.55	%	(0.44	)%	4.17	%	4.47	%	(0.30	)%
Efficiency ratio	80.20	%	84.07	%	(3.87	)%	78.07	%	87.83	%	(9.76	)%

(1): Reported on an annualized basis.

RESULTS OF OPERATION

Earning Assets

Management is pleased with the results of our efforts to grow earning assets. Average earning assets of the Corporation for the first nine months of 2000 increased 39.65% or $58.8 million to $207.1 million from $148.3 million at September 30, 1999.

As discussed in the asset quality section of this Form 10-QSB, management has actively pursued the improvement of the asset quality of all earning assets, loans, and investment securities.

Average net loans increased to $153.1 million for the three months ended September 30, 2000 compared to $108.6 million for the same period in 1999. The increase of $44.5 million for the three months ended September 30, 2000 as compared to the same period for 1999 was primarily due to an increase of $26.2 million in commercial loans, including commercial real estate loans, $7.9 million in residential loans, $9.1 million in agriculture loans, including agriculture real estate, and $1.8 million in consumer loans. The acquisition of Farmers State Bank of Camp Point ("Camp Point") contributed $15.1 million to the total increase of $44.5 million in average net loans. The average yield on the loan portfolio, net of the allowance for loan losses, increased 11 basis points to 8.95% for the three months ended September 30, 2000, compared to the three months ended September 30, 1999.

Average net loans increased to $143.6 million for the nine months ended September 30, 2000 compared to $96.3 million for the same period in 1999. The increase of $47.3 million for the nine

months ended September 30, 2000 as compared to the same period in 1999 was primarily due to an increase of $29.2 million in commercial loans, including commercial real estate loans, $8.5 million in residential loans, $8.6 million in agriculture loans, including agriculture real estate, and $1.5 million in consumer loans. The acquisition of Camp Point contributed $14.7 million to the total increase of $47.3 million in average net loans. The average yield on the loan portfolio, net of the allowance for loan losses, decreased 5 basis points to 8.85%.

Average investment securities increased $9.9 million and $7.1 million for the three and nine months ended September 30, 2000, respectively, as compared to the same periods in 1999. The average yield of the investment securities portfolio was 6.73% and 6.59% for the three and nine months ended September 30, 2000, respectively, an increase of 53 and 50 basis points as compared to the same periods in 1999. The acquisition of Camp Point contributed $14.6 million to the total average investments at September 30, 2000. Investments decreased from December 31, 1999 to September 30, 2000, and is a result of the increase in loans. Management intends to maintain a balance in the investment portfolio to support basic surplus.

Funding

The most important and stable source of funding is core deposits, considered by management to include non-interest bearing demand deposits, NOW and money market accounts, savings deposits and time deposits under $100,000. Average core deposits for the nine months ended September 30, 2000 increased 38.54% or $49.5 million to $178.0 million from $128.5 million for the nine months ended September 30, 1999. The acquisition of Camp Point contributed $24.1 million to the total increase of $49.5 million in average core deposits. The average rate paid on total interest bearing liabilities for the nine months ended September 30, 2000 increased 57 basis points when compared to the nine months ended September 30, 1999.

The increase in average core deposits, including noninterest bearing demand deposits, for the nine months ended September 30, 2000 as compared to the same period in 1999 has provided a low cost funding source for the growth in the loan portfolio. In addition to federal funds purchased, Illini Bank and Camp Point maintain an overnight federal funds line of credit with an unaffiliated financial institution and a line of credit with the Federal Home Loan Bank of Chicago.

Net Interest Income/Net Interest Margin

The operating results of the Corporation are highly dependent on net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on assets and rates paid on liabilities and the relative amounts of interest-earning assets and interest-bearing liabilities.

Interest income, on a fully taxable equivalent basis, was $4.5 million and $12.7 million for the three and nine months ended September 30, 2000, respectively, compared to $3.1 million and $8.8 million for same periods in 1999, respectively. Interest expense was $2.3 million and $6.2 million for the three and nine months ended September 30, 2000, respectively, compared to $1.4 million and $3.8 million for the same periods in 1999, respectively. An increase in interest income and interest expense resulted in a $1.5 million increase in net interest income for the nine months ended September 30, 2000.

Net interest margin for the nine months ended September 30, 2000 of 4.17% was down from 4.47% reported for the same period in 1999. The decrease in the net interest margin is primarily due to increases in rates of core time deposits. Management will continue to closely monitor its funding costs to maintain an acceptable spread given the increased demand in commercial lending. Management will continue to structure the balance sheet to provide insulation for extreme interest rate

changes. Management is focused on increasing the loan portfolio without jeopardizing the enhanced liquidity that has been gained in prior periods.

Net interest income is affected by the growth, pricing, mix, and maturity of interest earning-assets and interest-bearing liabilities, as well as other factors, including loan quality. Also, the Corporation's interest-rate spread is affected by regulatory, economic, and competitive factors that influence interest rates, loan demand, and deposit flow. Individual components of net interest income and net interest margin are presented in the consolidated average balances, interest income/expense and yield/rates table on page 12 and 13 and a net interest income-rate/volume variance analysis on page 14 and 15.

Consolidated Average Balances, Interest Income/Expense and Yield/Rates

					Quarter ended September 30,
					2000									1999
					Average Balance			Percent of Total Assets		Interest Income/Expense		Average Yield/Rate		Average Balance			Percent of Total Assets		Interest Income/Expense		Average Yield/ Rate
					(dollars in thousands)
ASSETS
Interest-earning assets:
	Short-term investments				$	4,384		1.9	%	$	75	6.83	%	$	18		0.0	%	$	0.3	5.66	%
	Investment securities(3)
		Taxable				43,571		18.9			692	6.35			38,768		22.9			578	5.97
		Tax-exempt(1)				12,100		5.2			245	8.08			7,029		4.2			132	7.48

			Total securities			55,671		24.1			937	6.73			45,797		27.1			710	6.20
	Loans
		Commercial(1)				24,751		10.7			573	9.19			13,969		8.2			301	8.54
		Agriculture				14,138		6.1			291	8.16			8,915		5.3			186	8.27
		Real estate:
			Commercial			61,900		26.8			1,386	8.88			46,465		27.4			1,028	8.78
			Agriculture			7,836		3.4			183	9.27			3,941		2.3			83	8.41
			Residential			34,114		14.8			716	8.32			26,253		15.5			563	8.50
		Consumer, net				11,642		5.0			269	9.16			9,793		5.8			230	9.32
		Credit card				711		0.3			35	19.34			619		0.4			27	17.19

			Total loans			155,092		67.1			3,453	8.83			109,955		64.9			2,418	8.72
	Allowance for loan losses					(1,997	)	(0.9	)						(1,409	)	(0.8	)

	Net loans(1)(2)					153,095		66.2			3,453	8.95			108,546		64.1			2,418	8.84

			Total interest-earning assets			213,150		92.2		$	4,465	8.31	%		154,361		91.2		$	3,128	8.04	%

Cash and due from banks						6,185		2.7							5,252		3.1
Premises and equipment						7,088		3.1							7,201		4.3
Other real estate owned						420		0.2							507		0.3
Other assets(3)						4,140		1.8							1,897		1.1

				Total assets	$	230,983		100.0	%					$	169,218		100.0	%

LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits:
		Noninterest-bearing demand			$	29,119		12.6	%					$	23,588		13.9	%
		Interest-bearing demand				53,531		23.2		$	554	4.10	%		42,138		24.9		$	340	3.20	%
		Savings				17,721		7.7			90	2.00			16,807		10.0			83	1.97
		Time deposits, less than $100,000				80,734		34.9			1,177	5.78			49,934		29.5			672	5.34

			Total core deposits			181,105		78.4			1,821	3.99			132,467		78.3			1,095	3.28
		Time deposits, $100,000 and over				24,764		10.7			343	5.50			15,570		9.2			203	5.19

			Total deposits			205,869		89.1			2,164	4.17			148,037		87.5			1,298	3.48
	Short-term borrowings					2,248		1.0			43	7.63			4,478		2.6			61	5.38
	Long-term debt					2,957		1.3			51	6.78			—		—			—	—
	Total interest-bearing liabilities					181,955		78.8			2,258	4.92			128,927		76.2			1,359	4.18
Other liabilities						2,216		0.9							1,866		1.1

	Total liabilities					213,290		92.3							154,381		91.2
Shareholders' equity						17,693		7.7							14,837		8.8

	Total liabilities and shareholders' equity				$	230,983		100.0	%					$	169,218		100.0	%

Net interest margin										$	2,207	4.11	%						$	1,769	4.55	%

(1): Income amounts are presented on a fully taxable equivalent basis (FTE), which is defined as income on earning assets that is subject to either a reduced rate or zero rate of income tax, adjusted to give effect to the appropriate incremental federal income tax rate and adjusted for non-deductible carrying costs, where applicable. Where appropriate, yield calculations include these adjustments. The federal statutory rate was 34% for all periods presented.
(2): Nonaccrual loans are included in the loan balances. Interest income includes related fee income of $94,000 in 2000 and $18,000 in 1999.
(3): Average securities balances are based on amortized historical cost, excluding SFAS 115 adjustments to fair value, which are included in other assets.

Consolidated Average Balances, Interest Income/Expense and Yield/Rates

					Nine months ended September 30,
					2000									1999
					Average Balance			Percent of Total Assets		Interest Income/Expense		Average Yield/Rate		Average Balance			Percent of Total Assets		Interest Income/Expense		Average Yield/ Rate
					(dollars in thousands)
ASSETS
Interest-earning assets:
	Short-term investments				$	6,601		2.9	%	$	310	6.26	%	$	2,187		1.3	%	$	72	4.38	%
	Investment securities(3)
		Taxable				46,348		20.6			2,201	6.33			42,788		26.3			1,879	5.86
		Tax-exempt(1)				10,566		4.7			613	7.73			7,048		4.3			396	7.49

			Total securities			56,914		25.3			2,814	6.59			49,836		30.6			2,275	6.09
	Loans
		Commercial(1)				23,048		10.3			1,586	9.17			12,658		7.8			847	8.95
		Agriculture				12,885		5.7			816	8.44			8,147		5.0			514	8.43
		Real estate:
			Commercial			58,005		25.8			3,796	8.72			39,194		24.0			2,538	8.66
			Agriculture			7,398		3.3			486	8.75			3,570		2.2			232	8.70
			Residential			32,539		14.5			2,016	8.25			24,046		14.7			1,526	8.49
		Consumer, net				10,933		4.9			753	9.18			9,398		5.8			672	9.56
		Credit card				685		0.3			92	17.87			620		0.4			80	17.27

			Total loans			145,493		64.8			9,545	8.74			97,633		59.9			6,409	8.78
	Allowance for loan losses					(1,879	)	(0.8	)						(1,376	)	(0.8	)

	Net loans(1)(2)					143,614		64.0			9,545	8.85			96,257		59.1			6,409	8.90

			Total interest-earning assets			207,129		92.2		$	12,669	8.15	%		148,280		91.0		$	8,756	7.89	%

Cash and due from banks						6,100		2.7							4,883		3.0
Premises and equipment						7,278		3.2							7,287		4.5
Other real estate owned						548		0.2							417		0.3
Other assets(3)						3,778		1.7							2,049		1.2

				Total assets	$	224,833		100.0	%					$	162,916		100.0	%

LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits
		Noninterest-bearing deposits			$	29,382		13.1	%					$	22,910		14.1	%
		Interest-bearing demand				52,340		23.3		$	1,503	3.82	%		41,483		25.4		$	1,004	3.24	%
		Savings				18,330		8.2			275	2.00			17,248		10.6			262	2.03
		Time deposits, less than $100,000				77,992		34.7			3,286	5.61			46,874		28.8			1,865	5.32

			Total core deposits			178,044		79.3			5,064	3.79			128,515		78.9			3,131	3.26
		Time deposits, $100,000 and over				24,059		10.7			976	5.40			14,575		8.9			567	5.21

			Total deposits			202,103		90.0			6,040	3.98			143,090		87.8			3,698	3.46
	Short-term borrowings					1,765		0.8			102	7.73			2,774		1.7			104	5.01
	Long-term debt					993		0.4			51	6.78			—		—			—	—
	Total interest-bearing liabilities					175,479		78.1			6,193	4.70			122,954		75.4			3,802	4.13
Other liabilities						2,345		1.0							1,905		1.2

	Total liabilities					207,206		92.2							147,769		90.7
Shareholders' equity						17,627		7.8							15,147		9.3

	Total liabilities and shareholders' equity				$	224,833		100.0	%					$	162,916		100.0	%

Net interest margin										$	6,476	4.17	%						$	4,954	4.47	%

(1): Income amounts are presented on a fully taxable equivalent basis (FTE), which is defined as income on earning assets that is subject to either a reduced rate or zero rate of income tax, adjusted to give effect to the appropriate incremental federal income tax rate and adjusted for non-deductible carrying costs, where applicable. Where appropriate, yield calculations include these adjustments. The federal statutory rate was 34% for all periods presented.
(2): Nonaccrual loans are included in the loan balances. Interest income includes related fee income of $266,000 in 2000 and $137,000 in 1999.
(3): Average securities balances are based on amortized historical cost, excluding SFAS 115 adjustments to fair value, which are included in other assets.

Net Interest Income—Rate/Volume Variance Analysis(*)

				Quarter ended September 30, 2000 as compared to quarter ended September 30, 1999
				Changes in Income/Expense			Volume Effect			Rate Effect
				(dollars in thousands)
Short-term investments				$	75		$	62		$	13
Investment securities:
	Taxable				114			72			42
	Tax-exempt				113			96			17

			Total securities		227			168			59
Loans:
	Commercial				272			232			40
	Agriculture				105			109			(4	)
	Real Estate:
		Commercial			358			342			16
		Agriculture			100			83			17
		Residential			153			168			(15	)
	Consumer, net				39			43			(4	)
	Credit card				8			4			4

			Total loans		1,035			981			54

	Total interest income				1,337			1,211			126

Interest bearing demand					214			92			122
Savings					7			4			3
Time deposits, less than $100,000					505			415			90

			Total core deposits		726			511			215
Time deposits, $100,000 and over					140			120			20

			Total deposits		866			631			235
Short-term borrowings					(18	)		(30	)		12
Long-term debt					51			0			51

			Total borrowed funds		33			(30	)		63
	Total interest expense				899			601			298

			Net interest income (expense)	$	438		$	610		$	(172	)

(*): Fully taxable equivalent basis

NOTE: The change in interest which can not be attributed to only a change in volume or a change in rate, but instead represents a combination of the two factors, has been allocated to the rate effect.

Net Interest Income—Rate/Volume Variance Analysis(*)

					Nine months ended September 30, 2000 as compared to nine months ended September 30, 1999
					Changes in Income/Expense			Volume Effect			Rate Effect
					(dollars in thousands)
Short-term investments					$	238		$	145		$	93
Investment securities:
	Taxable					322			156			166
	Tax-exempt					217			198			19

			Total securities			539			354			185
Loans:
	Commercial					739			698			41
	Agriculture					302			300			2
	Real Estate:
		Commercial				1,258			1,223			35
		Agriculture				254			250			4
		Residential				490			541			(51	)
	Consumer, net					81			110			(29	)
	Credit card					12			9			3

			Total loans			3,136			3,131			5

	Total interest income					3,913			3,630			283

Interest bearing demand						499			264			235
Savings						13			16			(3	)
Time deposits, less than $100,000						1,421			1,243			178

			Total core deposits			1,933			1,523			410
Time deposits, $100,000 and over						409			371			38

			Total deposits			2,342			1,894			448
Short-term borrowings						(2	)		(38	)		36
Long-term debt						51			0			51

			Total borrowed funds			49			(38	)		87
	Total interest expense					2,391			1,856			535

				Net interest income (expense)	$	1,522		$	1,774		$	(252	)

(*): Fully taxable equivalent basis

Noninterest Income

	Three months ended September 30,					Percent Change		Nine months ended September 30,					Percent Change
	2000		1999			2000/1999		2000			1999		2000/1999
	(dollars in thousands)
Service charges on deposit accounts	$	358	$	347		3.2	%	$	1,021		$	959	6.5	%
Other fee income		73		46		58.7			214			149	43.6
Mortgage loan servicing fees		47		53		(11.3	)		162			169	(4.1	)
Gain on sale of mortgage loans		5		7		(28.6	)		16			38	(57.9	)
Securities gains (losses)		—		(1	)	100.0			(13	)		7	(285.7	)
Other		45		43		4.7			136			128	6.3

	$	528	$	495		6.7	%	$	1,536		$	1,450	5.9

Total noninterest income increased $33,000 and $86,000 for the three and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. The increase in noninterest income is reflective of management's decision to increase fees for services offered in 1999, and growth in transaction accounts.

The decrease in the gain on sale of mortgage loans is due to softening in the real estate market caused by higher interest rates.

Noninterest Expense

	Three months ended September 30,				Percent Change		Nine months ended September 30,				Percent Change
	2000		1999		2000/1999		2000		1999		2000/1999
	(dollars in thousands)
Salaries and employee benefits	$	937	$	745	25.8	%	$	2,740	$	2,261	21.2	%
Net occupancy expense		209		224	(6.7	)		619		621	(0.3	)
Equipment expense		104		94	10.6			310		302	2.6
Data processing		173		145	19.3			543		538	0.9
Supplies		45		38	18.4			124		143	(13.3	)
Communication and transportation		120		118	1.7			353		315	12.1
Marketing and advertising		58		32	81.3			161		69	133.3
Correspondent and processing fees		72		65	10.8			199		180	10.6
Loan and other real estate owned expenses		15		27	(44.4	)		50		69	(27.5	)
Professional fees		316		327	(3.4	)		695		823	(15.6	)
Directors' and regulatory fees		61		42	45.2			186		129	44.2
Other		84		46	82.6			275		174	58.0

	$	2,194	$	1,903	15.3	%	$	6,255	$	5,624	11.2	%

Salaries and employee benefits increased $192,000 and $479,000 for the three and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. This increase is a result of the acquisition of Camp Point, increased incentive pay, increased insurance benefits for employees, and normal cost of living increases to overall base salaries.

Net occupancy expense decreased $15,000 and $2,000 for the three and nine months ended September 30, 2000 when compared to the same periods in 1999. The decrease in occupancy expense is a result of consolidations of several older branches.

Equipment expense increased $8,000 for the nine months ended September 30, 2000. Data processing expense increased $5,000 for the nine months ended September 30, 2000 when compared to the same period in 1999. The increase is related to year 2000 compliance expenditures in 1999. Supplies decreased $19,000 for the nine months ended September 30, 2000, and is due to management's efforts in controlling noninterest expenses. Communication and transportation expense increased $2,000 and $38,000 for the three months and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. Loan and other real estate owned expenses decreased $12,000 and $19,000 for the three months and nine months ended September 30, 2000, when compared to the same periods in 1999. Marketing and advertising expenses increased $26,000 and $92,000 for the three and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. The increase is a direct result of expenses related to community enhancement activities, and increased advertising costs.

Professional fees decreased $11,000 and $128,000 for the three and nine months ended September 30, 2000. The decrease is a direct result of reduced costs associated with shareholder litigation, and reduced fees for accounting services. Directors' and regulatory fees increased $19,000 and $57,000 for the three and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. The increase is due to the acquisition of Camp Point.

Other operating expenses increased $38,000 and $101,000 for the three and nine months ended September 30, 2000, respectively, when compared to the same periods in 1999. The increase is a direct result of the acquisition of Camp Point.

CREDIT QUALITY

Gross loans totaled $157.7 million at September 30, 2000, an increase of $22.0 million, or 16.21%, from $135.7 million at December 31, 1999. The provision for loan losses has increased to $405,000 for the nine months ended September 30, 2000 as compared to $203,000 for the same period in 1999. At September 30, 2000 the allowance as a percent of total loans and nonperforming loans increased to 1.32% as compared to 1.25% at December 31, 1999. The increase is a result of the growth in the loan

portfolio. Management believes this percentage is adequate to support any unexpected losses, and is consistent with peer group ratios.

			Three months ended September 30,						Nine months ended September 30,
			2000			1999			2000			1999
			(dollars in thousands)
Allowance for Loan Losses:
	Balance at beginning of period		$	1,910		$	1,369		$	1,696		$	1,368
	Provision charged to expense			135			101			405			203
	Charge-offs			36			34			127			174
	Less: recoveries			69			12			104			51

		Net charge-offs		(33	)		22			23			123

	Balance at end of period		$	2,078		$	1,448		$	2,078		$	1,448

Net Charge-Off Ratios(1):
	Commercial			(0.40	)%		(0.07	)%		(0.06	)%		0.23	%
	Real Estate			(0.07	)		0.12			0.01			0.18
	Installment			0.66			0.31			0.21			0.69
	Credit Cards			2.17			(0.49	)		2.41			2.01
	Totals			(0.08	)%		0.08	%		0.02	%		0.25	%

(1): Ratios to average loans are presented on an annualized basis

Illini Corporation's primary business of making commercial, real estate, and consumer loans entails potential losses, the magnitude of which depends on a variety of economic factors affecting borrowers which are beyond the control of the Corporation. Accordingly, a significant factor in the Corporation's past and future operating results is the level of the provision for loan losses. The provision for loan losses is up 34% and 99.5% for the three and nine months ended September 30, 2000, respectively, as compared to the comparable periods in the prior year. Charge-offs increased $2,000 for the three months ended September 30, 2000, and decreased $47,000 for the nine months ended September 30, 2000. Recoveries increased $57,000 and $53,000 for the three and nine months ended September 30, 2000, respectively.

Management feels that credit quality systems and controls implemented in 1996 and 1997, along with the creation of a formalized credit administration function in 1998, have resulted in significantly improved credit quality. Illini Corporation has a 1.32% allowance to ending loans ratio as of September 30, 2000 and 1.25% and 1.27% as of December 31, 1999 and September 30, 1999, respectively. The net charge-off ratio for the three and nine months ended September 30, 2000 was (0.08)% and 0.02% compared to 0.09% and 0.16% for years ended December 31, 1999 and 1998, respectively.

At September 30, 2000, impaired loans totaled $763,000 compared to $559,000 at December 31, 1999. At September 30, 2000, allowance for loan losses on impaired loans totaled $123,000 compared to

$18,000 at December 31, 1999. Of the total impaired loans at September 30, 2000 and December 31, 1999, there were no loans still accruing interest.

Credit Quality		September 30, 2000			December 31, 1999			September 30, 1999
		(dollars in thousands)
Nonperforming assets:
	Loans delinquent over 90 days, still accruing interest	$	0		$	1		$	0
	Nonaccrual		763			559			891
	Renegotiated		32			32			0
	Other real estate owned		426			618			508

	Total nonperforming assets	$	1,221		$	1,210		$	1,399

Key ratios:
	Nonperforming loans to ending loans		0.48	%		0.41	%		0.78	%
	90 days delinquent to ending loans		0.00			0.00			0.00
	Allowance to ending loans		1.32			1.25			1.27
	Allowance to nonperforming loans		272.35			286.58			162.51

Illini Corporation's loan underwriting guidelines and credit review procedures and policies are designed to protect the Corporation from credit losses. Illini Corporation's process for monitoring loan quality includes detailed monthly trend analysis of delinquencies and nonperforming assets. Management and the board of directors monitor potential problem loans, changes to the watchlist, and extensions of credit outside of the loan policy. Management extensively monitors significant credit relationships through appraisals, assessment of the financial condition of borrowers, restrictions on out-of-area lending, and avoidance of loan concentrations.

As discussed in the Corporation's 1999 Form 10-KSB and previous Form 10-QSB reports, management has implemented several initiatives to improve credit quality. These steps included a new officer driven problem loan identification system, a revamped allowance for loan losses adequacy determination process, a new loan policy, and improved reporting systems (credit quality and production). Management is committed to continuing these initiatives and has supplemented these efforts in 2000 by engaging an outside firm to perform a comprehensive review of each bank's loan portfolio to assess its credit quality and the effectiveness of management's loan quality systems and controls.

CAPITAL RESOURCES

The current economic and regulatory environment places increased emphasis on capital strength. A strong capital position, which is vital to the continued profitability of Illini Corporation, also promotes depositor and investor confidence and provides a solid foundation for the future growth of the organization. Illini Corporation has satisfied its capital requirements principally through the retention of earnings. At September 30, 2000, Tier 1 risk-based capital, total risk-based capital and leverage capital ratios were 9.63%, 10.86% and 7.03%, respectively, as compared to 10.86%, 12.03% and 7.32% for the period ending December 31, 1999. As of September 30, 2000, the Corporation met the criteria to be classified as "well capitalized."

Earnings retention is affected by the board of director's declaration of cash dividends. The dividend payout ratio is an indicator of the level of earnings retained. The Board of Directors of the Corporation considers the capital strength of the Corporation and the banks in determining the appropriate level of cash dividends to be paid to shareholders. The dividend payout ratio for the three and nine months ended September 30, 2000 was 57.76% and 52.00%, respectively as compared to

65.56% and 95.82% for the three and nine months ended September 30, 1999. The dividend per share for the three and nine months ended September 30, 2000 is unchanged from the same period in 1999.

LIQUIDITY

Illini Corporation's policy is to manage interest rate risk to a level which places limits on the sensitivity of its earnings to changes in market interest rates. An explanation of the asset/liability management process is found in the Corporation's 1999 Form 10-KSB, beginning on page 15. Interest rate risk management at Illini Corporation is executed through the use of on-balance sheet investment products.

The assets portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities, and sales of investment securities available for sale. The liability side of the balance sheet provides liquidity through various customers' interest-bearing and noninterest-bearing deposit accounts. Short-term borrowings are an additional source of liquidity and represent Illini Corporation's incremental borrowing capacity.

During the second quarter of 1998, Illini Corporation completed a comprehensive analysis of its asset/ liability function, including a review of its funds management policy and its principal measure of liquidity. The Corporation implemented a new measure of liquidity measurement, called "Basic Surplus," which redefines liquid assets as the total assets held by the Corporation which can be converted to cash in thirty days or less, reduced by short term liabilities. As of September 30, 2000, the most recent calculation, Illini Corporation's core liquidity was $18.8 million, or 8.1% of total average assets.

Management believes the new formula provides an accurate measurement of liquidity and provides management with a comprehensible and consistent tool to develop pricing and profitability strategies. Based on the new measurement and as compared to peer banks, management believes the liquidity position of the banks is strong.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Derivative financial instruments include futures, forwards, interest rate swaps, option contracts, and other financial instruments with similar characteristics. The bank subsidiaries currently do not enter into futures, forwards, swaps, or options. However, they are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Commitments generally have fixed expiration dates and require collateral from the borrower if deemed necessary by the banks. Standby letters of credit are conditional commitments issued by the banks to guarantee the performance of a customer to a third party up to a stipulated amount and within specified terms and conditions. Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by the banks until and unless the instrument is exercised.

The bank subsidiaries exposure to market risk and interest rate risk is reviewed by their individual Asset/Liability Committees. Management realizes certain risks are inherent, such as the uncertainty of market interest rates, and that its goal is to identify and manage such risks. The primary tool management uses to monitor and manage interest rate risk is a static gap report. The bank subsidiaries have no market risk sensitive instruments held for trading purposes.

The Corporation's interest rate and market risk profile has not materially changed from the year ended December 31, 1999. Please refer to the Corporation's 1999 Form 10-KSB for further discussion of the Corporation's market and interest rate risk.

PART II. OTHER INFORMATION

Item 1 Legal Proceedings

Mary Quinn v. Illini Corporation and Illinois Stock Transfer Co.,
Sangamon County Case No. 98 CH 240

Illini Corporation adopted a Shareholder Rights Agreement on June 20, 1997, and named Illinois Stock Transfer Company ("ISTC") as its rights agent thereunder. Illini Corporation was notified in May 1998 of a threatened complaint against ISTC by an Illini Corporation shareholder. The shareholder, Mary K. Quinn ("Quinn"), who owns 21 shares of stock in Illini Corporation, filed suit against ISTC on June 9, 1998 in the Seventh Judicial Circuit Court, Sangamon County, Illinois. Quinn sought to compel ISTC to distribute rights certificates to Illini Corporation's shareholders and further sought to certify all Illini Corporation shareholders as a class. Quinn asserted that Ida R. Noll became an acquiring person under the Rights Agreement on April 16, 1998, and that the Rights Agreement was triggered. ISTC is being represented in the litigation by Howard & Howard, which vigorously contested Quinn's assertions that Ida R. Noll was an acquiring person, that the Rights Agreement had been triggered, and that ISTC had a duty to distribute rights certificates.

On June 9, 1998, Quinn filed a Motion to Certify the Class, which was granted on December 29, 1998. On January 13, 1999, Quinn filed an Amended Complaint adding Illini Corporation as a defendant to her action. Illini Corporation is represented in the litigation by Howard & Howard. Both Illini Corporation and ISTC answered the Amended Complaint and denied that Ida R. Noll was an acquiring person. Quinn asserted that she was entitled to recover her attorneys' fees from Illini Corporation and ISTC.

Quinn filed a Motion for Summary Judgment that asked the Court to determine as a matter of law that Ida R. Noll became an acquiring person on April 16, 1998, that the Rights Agreement was triggered as a result and that Illini Corporation and ISTC had a duty to distribute rights certificates to all shareholders as of April 16, 1998, except for Ida R. Noll. Illini Corporation opposed Quinn's Motion for Summary Judgment, which was heard by the Court on June 18, 1999. On June 29, 1999, the Court entered an Opinion and Order denying Quinn's Motion for Summary Judgment.

On or about May 6, 1999, counsel for Quinn advised Illini Corporation's counsel of their intent to seek an injunction that would preclude Illini Corporation from completing its acquisition of the Farmers State Bank of Camp Point (Camp Point), pending further order of the Court. Quinn subsequently filed a Motion for Preliminary Injunction and a Memorandum of Law in Support of her Motion. Quinn argued that the class (consisting of all Illini Corporation's shareholders as of April 16, 1998, except for Ida R. Noll) would be irreparably harmed if the Camp Point merger closed prior to a determination on the merits of her suit. Illini Corporation filed extensive briefs in opposition to the Motion for Preliminary Injunction, and the Court heard the Motion on July 1, 1999. The Court entered a written Order on July 13, 1999, denying the Motion for Preliminary Injunction.

Quinn's counsel filed a Motion for Reconsideration of the Orders denying Quinn's Motion for Summary Judgment and Motion for Preliminary Injunction. Illini Corporation and ISTC filed a Motion for Summary Judgment on August 25, 1999. At a hearing held on October 18, 1999, the Court granted Illini Corporation and ISTC's Motion for Summary Judgment and denied Quinn's Motion for Reconsideration. An Order was subsequently entered on January 12, 2000.

Quinn's counsel announced on October 18, 1999, the intention to petition the Court for an order directing Illini Corporation and ISTC to pay Quinn's attorneys' fees pursuant to the attorney fee provision of the Rights Agreement. Quinn's fee petition was heard and denied. Quinn has filed a pending appeal as to all adverse orders. The Corporation is vigorously contesting the appeal. Oral argument was held before the Illinois Appellate Court for the Fourth District on July 18, 2000.

On July 31, 2000, the Appellate Court issued an order reversing the trial court's order granting summary judgment to Illini and remanding the case for trial. The Appellate Court found that genuine issue of material fact remained concerning whether the Illini board of directors acted in good faith (1) in determining on April 30, 1998 that Ida Noll's acquisition of shares was inadvertent and (2) in amending the agreement on June 30, 1998. The Appellate Court also reversed the trial court's order denying Quinn's request for costs, expenses and attorneys fees, finding that the fee provision of the Rights Agreement did not require one who brought an action to enforce the agreement to prevail in that action in order to recover fees. Illini currently believes the costs, expenses and attorneys fees to be approximately $250,000 to $350,000, although such amounts shall be subject to further discovery.

The case has been remanded to the trial court, and the parties will schedule a pretrial conference for the purpose of obtaining a trial date.

Ida R Noll v. Illini Corporation, et al.,
Sangamon County Case No. 98 MR 226

On or about July 17, 1998, Ida R. Noll ("Noll") filed a 14 count complaint against Illini Corporation and all members of Illini Corporation's Board of Directors serving at that time, except William Walschleger, Jr., in the Seventh Judicial Circuit, Sangamon County, Illinois. On September 28, 1998, Judge Carmody dismissed the complaint and granted Noll 21 days to file an Amended Complaint. Noll filed an Amended Complaint on October 19, 1998. The Amended Complaint was also dismissed, but Noll was granted leave to file a Second Amended Complaint. Illini Corporation and the directors answered the Second Amended Complaint.

The Second Amended Complaint arose out of Illini Corporation's adoption of a Shareholder Rights Agreement on June 20, 1997, Illini Corporation's subsequent adoption of a First Amendment to the Rights Agreement on July 1, 1998, and the Noll's assertion that she became an "acquiring person" under the Rights Agreement on April 16, 1998. Noll sought declaratory and injunctive relief from Illini Corporation and the directors regarding the alleged triggering of the Rights Agreement. Noll also challenged the enforceability and validity of the First Amendment to the Rights Agreement. Noll sought compensatory and punitive damages against the directors arising out of the directors' alleged breaches of fiduciary duty committed in connection with the Rights Agreement and the First Amendment to the Rights Agreement. Noll sought recovery of her attorneys' fees and costs in connection with her action, alleging attorneys' fees through October 23, 1998 of approximately $50,000 and expenses of approximately $5,000. Illini Corporation and the directors vigorously contested and opposed the allegations.

On July 6, 1999, Illini Corporation adopted a Second Amendment to its Shareholder Rights Agreement. Illini Corporation moved on August 31, 1999, for summary judgment as to the counts of the Second Amended Complaint directed against it. Illini Corporation's motion argued that the adoption of the Second Amendment rendered the case against it moot. The Defendant directors also filed on or about September 15, 1999, a Joint Motion for Summary Judgment as to the counts directed against them. On October 18, 1999, after denying Noll's motion to continue the hearing, the Court granted both motions. Counsel for the Defendants submitted written orders granting the Defendants' summary judgment motions, which were entered by the Court on January 12, 2000.

Noll's counsel filed a petition for payment of her attorneys' fees by Illini Corporation, which was heard on December 9, 1999. The Court denied Noll's fee petition. Noll filed a Motion for Reconsideration of the Orders granting the Defendants' Motions for Summary Judgment and denying attorneys' fees. Hearing on that Motion was held on April 11, 2000, and the Court denied the Motion. Noll has appealed. Noll filed her appellant's brief on October 13, 2000. Illini's appellee's brief is due on November 17, 2000. Oral argument is expected in January, 2001, with disposition by the appellate court within sixty days of oral argument.

Ida R. Noll v. Ernest H. Huls, Illini Corporation, et al,
Sangamon County Case No. 99 CH 196

On or about April 22, 1999, Ida R. Noll ("Noll") filed a new lawsuit against Illini Corporation, Illinois Stock Transfer Company, Ernest H. Huls and Farmers State Bank of Camp Point in the Seventh Judicial Circuit Court, Sangamon County, Illinois. The Complaint sought specific performance of the Rights Agreement alleging that Ernest Huls became an acquiring person under the Rights Agreement by reason of his right to receive shares of Illini Corporation common stock pursuant to an Agreement and Plan of Reorganization between Illini Corporation and the Farmers State Bank of Camp Point. Noll sought to compel Illini Corporation and ISTC to distribute rights certificates to all shareholders of Illini Corporation, except for Mr. Huls. Illini Corporation strongly disputes Noll's assertion that Ernest Huls has become an acquiring person under the Rights Agreement.

In June 1999, Illini Corporation and ISTC filed a joint Motion to Dismiss Noll's Complaint on the grounds that the alleged acquiring person, Ernest Huls, was not a beneficial owner of a substantial block of Illini Corporation common stock. The Motion to Dismiss was scheduled for hearing on July 20, 1999, but on July 16, 1999, Noll's counsel moved for a substitution of judges. Illini Corporation and ISTC opposed substitution, but the court granted the motion.

The case has been reassigned to Judge Tim Olson. Briefing of the Motion to Dismiss was completed, but the Court continued the hearing on the Motion to Dismiss. Judge Olson recused himself just prior to a scheduled case management conference on March 9, 2000. The case has been reassigned to Chief Judge Thomas Russell. On June 1, 2000 Judge Russell reconsidered Judge Olson's ruling granting the Plaintiff's Motion to Continue. Judge Russell set Illini's Motion to Dismiss for hearing on July 21, 2000. On that date Judge Russell heard argument on Illini's Motion to Dismiss as well as on Plaintiff's Petition for Discovery, which had been filed on July 18, 2000. On October 6, 2000, the Court granted Illini's Motion to Dismiss all pending counts with prejudice, but reserving the issue of Plaintiff's attorney's fees. On October 10, 2000, the Court entered a docket order denying Plaintiff's Petition for Discovery.

Item 2 Changes in Securities—none

Item 3 Defaults Upon Senior Securities—none

Item 4 Submission of Matters to a Vote of Security Holders—none

Item 5 Other Information—none

Item 6 Exhibits and Reports on Form 8-K

(a): Exhibits:

The Exhibits filed herewith are set forth in the Exhibit Index filed as a part of these Form 10-QSB.

(b): Reports on Form 8-K:

There were no reports on Form 8-K filed for the quarter ended September 30, 2000.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ILLINI CORPORATION (Registrant)
November 13, 2000 Date signed	By:	/s/ BURNARD K. MCHONE Burnard K. McHone President
November 13, 2000 Date signed	By:	/s/ DEANN HAGER Deann Hager Finance Manager

EXHIBIT INDEX

Number		Description
27		Financial Data Schedule

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