FOR IMMEDIATE RELEASE DATE: February 2, 1999

CONTACT:   Midwest Bancshares, Inc.
           William D. Hassel, President
             Robert D. Maschmann, Exec. VP & Treas.
           (319) 754-6526


                         MAHASKA INVESTMENT COMPANY AND
                            MIDWEST BANCSHARES, INC.
                           ANNOUNCE AGREEMENT TO MERGE


     Oskaloosa,  Iowa -- Mahaska Investment  Company (NASDAQ:  OSKY) and Midwest
Bancshares,  Inc. (NASDAQ: MWBI) of Burlington,  Iowa have executed a definitive
merger agreement in which Midwest  Bancshares,  Inc. will be acquired by Mahaska
Investment Company.  Midwest  Bancshares,  Inc. is the parent of Midwest Federal
Savings  and Loan  Association  of Eastern  Iowa.  Pursuant  to the terms of the
merger  agreement,  Midwest  Federal  Savings  will  continue  to  operate as an
independent banking subsidiary, with its own board of directors.
 
     "We're very  excited to welcome  Midwest  Federal to the  Mahaska  family,"
Charles S. Howard, President of Mahaska Investment Company, said. "Together, our
organizations  will be in a position  to offer our  customers  a wider  range of
products  and  services,   continuing  both   companies'   commitment  to  their
communities.  This  acquisition  fits into our expansion plans and our desire to
grow our  franchise  in  markets  where we can add value  for our  shareholders,
customers and the community."

     "Midwest's  customers can look forward to the same outstanding and friendly
service  that we have always  provided,  from our existing  personnel,  while we
expand  the  products  we offer by joining  with  Mahaska,"  William D.  Hassel,
President of Midwest Bancshares, Inc., said. "Mahaska is the independent banking
leader  in  the  Oskaloosa  area,  and  we  are  extremely   pleased  with  this
transaction.  Our similar operating philosophies and dedication to providing the
highest  quality of customer  service make us a perfect  match." Mr. Hassel will
serve as a director on the board of Mahaska  Investment  Company and will remain
president and chief executive officer of Midwest Federal Savings.

     Midwest  Federal Savings and Loan  Association of Eastern Iowa,  founded in
1919,  will add  approximately  $163  million in assets and  approximately  $106
million in  deposits to  Mahaska's  $298  million in assets and $233  million in
deposits as of December 31, 1998. Midwest Federal Savings has three locations in
Burlington,  Iowa, its newest in the Wal-Mart  Supercenter,  plus offices in Ft.
Madison and Wapello, Iowa.

     The merger will be  accomplished  through a tax-free  fixed exchange of one
(1)  share  of  Mahaska  Investment  Company  common  stock  for  each  share of
outstanding common stock of Midwest Bancshares, Inc. The transaction is intended
to qualify as a tax-free  reorganization  and be  accounted  for as a pooling of
interests.  The  transaction is expected to be completed in the third quarter of
1999, after customary  regulatory and shareholder  approvals have been received.
Based on Mahaska  Investment  Company's  closing  price of $17.00 on February 2,
1999, the transaction will be valued at appproximately  $19.0 million.  Based on
Midwest's total shares  outstanding,  as of February 2, 1999,  Mahaska will have
approximately 4.7 million shares outstanding after the merger.

     Mahaska  anticipates  that the merger with Midwest will be accretive to its
1999 earnings per share (excluding  merger-related expenses) by approximately 2%
through the recognition of operational and organizational efficiencies.  Revenue
enhancement   opportunities   and  additional   operational   efficiencies   are
anticipated to enhance earnings per share in subsequent  periods.  Additionally,
the transaction is expected to be accretive to Mahaska's tangible book value per
share by approximately 3 to 5%, excluding various merger-related  expenses which
are currently  estimated at $875 thousand,  on an after-tax basis.  These merger
charges will be recorded in the quarter in which the transaction closes.

     Mahaska,  headquartered in Oskaloosa,  Iowa,  offers banking and commercial
finance services in six south central Iowa communities.  Mahaska's  subsidiaries
are Mahaska State Bank and On-Site Credit Services,  Inc. of Oskaloosa,  Central
Valley Bank of Ottumwa and Pella State Bank in Pella. The combination of Mahaska
and Midwest will form a financial  organization  with $461 million in assets and
14 branches throughout central and southeast Iowa.






     This press release includes forward-looking  statements that are subject to
risks and  uncertainties.  Actual  results  might differ  materially  from those
projected in the forward-looking  statements.  Additional information concerning
factors that could cause actual  results to materially  differ from those in the
forward-looking   statements  is  contained  in  the   Securities  and  Exchange
Commission  filings of both companies.  This announcement is neither an offer to
sell nor a  solicitation  for an  offer to buy  securities.  The  offering  with
respect to the proposed  merger will be made only by the  proxy/prospectus  that
will be distributed to shareholders in connection with the  consideration of the
transaction.