UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
Commission File Number: 0-30031
MAIN STREET TRUST, INC.
----------------------------
(Exact name of Registrant as specified in its charter)
Illinois 37-1338484
---------------- -------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
100 West University, Champaign, Illinois 61820
----------------------------------------------
(Address of principal executive offices) (Zip Code)
(217) 351-6500
---------------
(Registrant's telephone number, including area code)
Indicate by "X" whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
-----
Indicate the number of shares outstanding of the registrant's common stock, as
of August 4, 2000:
Main Street Trust, Inc. Common Stock 10,036,744
<PAGE>
3
Table of Contents
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 2. Changes in Securities 32
Item 3. Defaults Upon Senior Securities 32
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 33
SIGNATURES 34
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
(Unaudited in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 53,651 $ 48,328
Federal funds sold and interest earning deposits 663 39,022
Investments in debt and equity securities:
Available-for-sale, at fair value 211,000 206,844
Held-to-maturity, at cost (fair value of $85,583 and
$87,780 at June 30, 2000 and December 31, 1999, respectively) 87,721 89,935
Non-marketable equity securities 3,816 3,261
Loans, net of allowance for loan losses of $9,031 and $8,682 at June 30, 2000
and December 31, 1999, respectively 623,644 601,888
Mortgage loans held for sale 833 1,393
Premises and equipment 21,832 22,505
Accrued interest receivable 9,247 9,182
Other assets 13,007 13,388
------------- -------------
Total assets $ 1,025,414 $ 1,035,746
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 89,063 $ 82,955
Demand, interest bearing 205,693 230,394
Savings 132,154 143,133
Time, $100 and over 92,751 92,382
Other time 248,545 246,211
------------- -------------
Total deposits 768,206 795,075
Federal funds purchased, repurchase agreements, and notes payable 82,210 79,140
Federal Home Loan Bank advances and other borrowings 42,007 32,058
Accrued interest payable 3,917 4,019
Other liabilities 10,799 9,373
------------- -------------
Total liabilities 907,139 919,665
------------- -------------
Stockholders' equity:
Preferred stock, no par value; 2,000,000 shares authorized - -
Common stock, $0.01 par value; 15,000,000 shares authorized;
10,078,894 and 10,075,021 shares issued at June 30, 2000 and
December 31, 1999, respectively 101 101
Paid in capital 35,406 35,370
Retained earnings 86,485 83,972
Accumulated other comprehensive income (loss) (3,128) (3,362)
-------------- --------------
118,864 116,081
Less: treasury stock, at cost, 28,564 and 0 shares
At June 30, 2000 and December 31, 1999 respectively (589) -
-------------- --------------
Total stockholders' equity 118,275 116,081
-------------- --------------
Total liabilities and stockholders' equity $ 1,025,414 $ 1,035,746
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Six Months Ended June 30, 2000 and 1999
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
Interest income: 2000 1999
---- ----
<S> <C> <C>
Loans and fees on loans $ 26,214 $ 22,179
Investments in debt and equity securities
Taxable 7,852 8,899
Tax-exempt 976 962
Federal funds sold and interest earning deposits 862 590
------------- ------------
Total interest income 35,904 32,630
Interest expense:
Demand, savings, and other time deposits 11,859 11,028
Time deposits $100 and over 2,371 2,104
Federal funds purchased, repurchase agreements, and notes payable 1,980 1,510
Federal Home Loan Bank advances and other borrowings 919 772
------------- ------------
Total interest expense 17,129 15,414
------------- ------------
Net interest income 18,775 17,216
Provision for loan losses 267 282
------------- ------------
Net interest income after provision for loan losses 18,508 16,934
Non-interest income:
Remittance processing 3,535 4,073
Trust and brokerage fees 2,782 2,430
Service charges on deposit accounts 825 769
Securities transactions, net (14) 43
Gain on sales of mortgage loans, net 59 366
Other 1,196 1,368
------------- ------------
Total non-interest income 8,383 9,049
Non-interest expenses:
Salaries and employee benefits 9,769 9,099
Merger related professional fees 2,452 0
Occupancy 1,117 1,184
Equipment 1,477 1,565
Data processing 775 675
Office supplies 590 556
Service charges from correspondent banks 575 712
Other 1,986 2,189
------------- -------------
Total non-interest expenses 18,741 15,980
Income before income taxes 8,150 10,003
Income taxes 3,239 3,119
------------- -------------
Net income $ 4,911 $ 6,884
============= =============
Per share data:
Basic earnings per share $ 0.49 $ 0.68
Weighted average shares of common stock outstanding 10,070,726 10,101,573
Diluted earnings per share $ 0.48 $ 0.67
Weighted average shares of common stock and dilutive potential
common shares outstanding 10,282,892 10,329,908
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2000 and 1999
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net Income $ 4,911 $ 6,884
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period, net of tax of
$116 and ($1,710), for June 30, 2000 and 1999, respectively 225 (3,321)
Less: reclassification adjustment for gains (losses) included in net income, net of
tax of ($5) and $14 for June 30, 2000 and 1999, respectively 9 (28)
------------- --------------
Other comprehensive income (loss), net of tax 234 (3,349)
------------- --------------
Comprehensive Income $ 5,145 $ 3,535
============== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Three Months Ended June 30, 2000 and 1999
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
Interest income: 2000 1999
---- ----
<S> <C> <C>
Loans and fees on loans $ 13,323 $ 11,412
Investments in debt and equity securities
Taxable 3,891 4,430
Tax-exempt 502 483
Federal funds sold and interest earning deposits 314 189
------------- ------------
Total interest income 18,030 16,514
Interest expense:
Demand, savings, and other time deposits 5,998 5,501
Time deposits $100 and over 1,156 1,082
Federal funds purchased, repurchase agreements, and notes payable 975 845
Federal Home Loan Bank advances and other borrowings 460 388
------------- ------------
Total interest expense 8,589 7,816
------------- ------------
Net interest income 9,441 8,698
Provision for loan losses 131 131
------------- ------------
Net interest income after provision for loan losses 9,310 8,567
Non-interest income:
Remittance processing 1,660 2,032
Trust and brokerage fees 1,409 1,261
Service charges on deposit accounts 432 401
Securities transactions, net (16) 32
Gain on sales of mortgage loans, net 25 108
Other 554 761
------------- ------------
Total non-interest income 4,064 4,595
Non-interest expenses:
Salaries and employee benefits 4,639 4,411
Occupancy 556 588
Equipment 734 796
Data processing 390 386
Office supplies 298 288
Service charges from correspondent banks 276 421
Other 750 1,209
------------- -------------
Total non-interest expenses 7,643 8,099
Income before income taxes 5,731 5,063
Income taxes 1,814 1,587
------------- -------------
Net income $ 3,917 $ 3,476
============= =============
Per share data:
Basic earnings per share $ 0.39 $ 0.34
Weighted average shares of common stock outstanding 10,067,003 10,087,381
Diluted earnings per share $ 0.38 $ 0.34
Weighted average shares of common stock and dilutive potential
common shares outstanding 10,276,231 10,315,417
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Three Months Ended June 30, 2000 and 1999
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net Income $ 3,917 $ 3,476
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period, net of tax of
$178 and ($1,195), for June 30, 2000 and 1999, respectively 344 (2,322)
Less: reclassification adjustment for gains (losses) included in net income, net of
tax of ($6) and $10, for June 30, 2000 and 1999, respectively 10 (21)
------------- --------------
Other comprehensive income (loss), net of tax 354 (2,343)
------------- --------------
Comprehensive Income $ 4,271 $ 1,133
============== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ending June 30, 2000 and 1999
(Unaudited, in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,911 $ 6,884
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,409 1,294
Amortization of bond premiums, net 156 480
Provision for loan losses 267 282
Securities transactions, net 14 (43)
Gain on sales of mortgage loans, net (59) (366)
Other, net 554 (207)
Proceeds from sales of mortgage loans originated for sale 8,036 42,960
Mortgage loans originated for sale (7,417) (31,313)
-------------- --------------
Net cash provided by operating activities 7,871 19,971
-------------- -------------
Cash flows from investing activities:
Net increase in loans (22,108) (47,001)
Proceeds from maturities and calls of investments in debt securities:
Held-to-maturity 2,162 14,513
Available-for-sale 16,184 66,119
Proceeds from sales of investments:
Available-for-sale 3,001 7,999
Purchases of investments in debt and equity securities:
Held-to-maturity (1,964) (21,608)
Available-for-sale (24,774) (60,975)
Non-marketable (555) (41)
Principal paydowns from mortgage-backed securities:
Held-to-maturity 1,985 1,731
Available-for-sale 1,650 2,568
Purchases of premises and equipment (723) (1,400)
-------------- --------------
Net cash used in investing activities (25,142) (38,095)
-------------- --------------
Cash flows from financing activities:
Net decrease in deposits (26,869) (86)
Net increase in federal funds purchased,
repurchase agreements and notes payable 3,070 24,162
Net increase (decrease) in Federal Home Loan Bank advances
and other borrowings 9,949 (819)
Cash dividends paid (1,367) (1,571)
MSTI stock transactions, net (548) (1,262)
-------------- --------------
Net cash (used in) provided by financing activities (15,765) 20,424
-------------- -------------
Net (decrease) increase in cash and cash equivalents (33,036) 2,300
Cash and cash equivalents at beginning of year 87,350 68,954
-------------- -------------
Cash and cash equivalents at end of period $ 54,314 $ 71,254
============== =============
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 17,231 $ 15,696
Income taxes 3,245 3,328
Real estate acquired through or in lieu of foreclosure 85 410
Dividends declared not paid 1,005 444
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
<PAGE>
MAIN STREET TRUST, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements for Main
Street Trust, Inc. have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all information and footnotes necessary
for fair presentation of financial position, results of operations, and cash
flows in conformity with generally accepted accounting principles. These
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes as of and for the year ended December 31,
1999, and schedules included in BankIllinois Financial Corporation's Form 10-K
filed on March 22, 2000, and in Main Street Trust's Form 8-K filed on May 9,
2000 with respect to First Decatur Bancshares Inc., audited financial
statements.
In the opinion of management, the consolidated financial statements of
Main Street Trust, Inc. (the "Company") and its subsidiaries, as of June 30,
2000 and for the three-month and six-month periods ended June 30, 2000 and 1999,
include all adjustments necessary for a fair presentation of the results of
those periods. All such adjustments are of a normal recurring nature.
Results of operations for the three-month and six-month periods ended
June 30, 2000 are not necessarily indicative of the results which may be
expected for the year ended December 31, 2000.
For purposes of the consolidated statements of cash flows, cash and
cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods.
Certain amounts in the 1999 consolidated financial statements have been
reclassified to conform with the 2000 presentation. Such reclassifications have
no effect on previously reported net income.
Note 2. Business Combination
On August 12, 1999, BankIllinois Financial Corporation and First
Decatur Bancshares, Inc. entered into an Agreement and Plan of Merger which
provided for a "merger of equals" between the two companies, structured as a
merger of the two companies into the Company. The merger, which was completed on
March 23, 2000, has been accounted for as a pooling of interests and,
accordingly, all prior financial statements have been restated to include both
companies. As a result of the merger, former stockholders of BankIllinois
Financial Corporation and First Decatur Bancshares, Inc. received 5,550,724 and
4,526,332 shares of Company common stock, respectively.
The Company operates 19 banking centers and is the parent company of
BankIllinois, First National Bank of Decatur, First Trust Bank of Shelbyville
and FirsTech, Inc., a retail payment processing company.
Note 3. New Accounting Rules and Regulations
In June 1998, Statement on Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued,
which originally required the Statement to be adopted in years beginning after
June 15, 1999. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm
9
<PAGE>
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
Management does not anticipate that the adoption of the new Statement will have
a significant effect on the Company's earnings or financial position. In July
1999 the Statement on Financial Accounting Standards No. 137 was issued. This
Statement delayed the implementation of Statement No. 133 until fiscal years
beginning after June 15, 2000. In June 2000, the Statement on Financial
Accounting Standards No. 138 was issued to modify and clarify various provisions
of Statement No. 133. The Company expects to adopt Statement No. 133, as amended
by Statements No. 137 and 138, effective January 1, 2001.
Note 4. Income per Share
Net income per common share has been computed as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 4,911,000 $ 6,884,000 $ 3,917,000 $ 3,476,000
============= =============== ============= ==============
Shares:
Weighted average common shares outstanding 10,070,726 10,101,573 10,067,003 10,087,381
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 196,563 213,566 193,586 212,942
Dilutive effect of outstanding SARs, as determined
by the application of the treasury stock method 15,603 14,769 15,642 15,094
------------- --------------- ------------- --------------
Weighted average common shares outstanding,
as adjusted 10,282,892 10,329,908 10,276,231 10,315,417
============= =============== ============= ==============
Basic earnings per share $ 0.49 $ 0.68 $ 0.39 $ 0.34
============= =============== ============= ==============
Diluted earnings per share $ 0.48 $ 0.67 $ 0.38 $ 0.34
============= =============== ============= ==============
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
--------------------------------------------------------------------------------
Financial Condition
Assets and Liabilities
Total assets decreased $10,332,000, or 1.0%, to $1,025,000 at June 30,
2000 compared to December 31, 1999. Decreases in federal funds sold & other
interest earning deposits, investments held-to-maturity, premises and equipment,
mortgage loans held for sale and other assets were partially offset by increases
in loans, cash and due from banks, investments available-for-sale,
non-marketable equity securities and accrued interest receivable.
Federal funds sold and interest earning deposits decreased $38,359,000,
or 98.3%, from $39,022,000 at December 31, 1999 to $663,000 at June 30, 2000.
This decrease was primarily the result of excess federal funds sold being used
to fund the increase in loans and investments as well as the result of a
decrease in total deposits.
Investments in securities held-to-maturity decreased $2,214,000, or
2.5%, at June 30, 2000 compared to December 31, 1999. Investments in securities
available-for-sale increased $4,156,000, or 2.0%, at June 30, 2000 compared to
December 31, 1999. The net increase in investments in debt and equity securities
was the result of shifting funds from federal funds sold and interest earning
deposits to higher yielding investment securities.
10
<PAGE>
Premises and equipment decreased $673,000, or 3.0%, from December 31,
1999 to June 30, 2000. This decrease was primarily due to depreciation expense,
offset somewhat by purchases.
Mortgage loans held for sale decreased $560,000, or 40.2%, at June 30,
2000 compared to December 31, 1999. This decrease was primarily due to lower
demand in the mortgage loan area at June 30, 2000 than at December 31, 1999 when
lower interest rates led to more refinancing as well as origination of new
mortgage loans.
Other assets decreased $381,000, or 2.8%, from December 31, 1999 to
June 30, 2000. This decrease was primarily caused by capitalized merger costs of
$698,000 at December 31, 1999, which were expensed during March 2000 and a
decrease of $490,000 in FirsTech's accounts receivable. Somewhat offsetting this
decrease was an increase of $976,000 in accrued trust income.
Loans increased $21,756,000, or 3.6%, from December 31, 1999 to June
30, 2000. Included in this change were increases of $11,252,000, or 6.0%, in
commercial, financial and agricultural loans, $5,768,000, or 2.0%, in real
estate and $5,085,000, or 4.0%, in installment and consumer loans.
Cash and due from banks increased $5,323,000, or 11.0%, at June 30,
2000 compared to December 31, 1999. This increase was primarily attributable to
an increase in due from banks and cash items in process of collection offset
somewhat by lower cash on hand. Cash on hand had been increased at December 31,
1999, in anticipation of potential Year 2000 needs.
Non-marketable equity securities increased $555,000, or 17.0% at June
30, 2000 compared to December 31, 1999. This increase was primarily attributed
to a $503,000 investment in a venture capital fund.
Total liabilities decreased $12,526,000, or 1.4%, to $907,139,000 at
June 30, 2000 from $919,665,000 at December 31, 1999. Decreases in deposits were
somewhat offset by increases in Federal Home Loan Bank advances and other
borrowings, federal funds purchased, repurchase agreements, and notes payable,
and other liabilities.
The market for deposits has been extremely competitive in 2000. Total
deposits decreased $26,869,000, or 3.4%, from $795,075,000 at December 31, 1999
to $768,206,000 at June 30, 2000. The decrease in deposits included a decrease
of $24,701,000, or 10.7%, in interest bearing demand deposits and a decrease of
$10,979,000, or 7.7%, in savings deposits. Somewhat offsetting these decreases
were increases of $6,108,000, or 7.4%, in non-interest bearing demand deposits,
$2,334,000, or 0.9%, in other time deposits and $369,000, or 0.4%, in time
$100,000 and over.
Federal Home Loan Bank advances and other borrowings increased
$9,949,000, or 31.0%, from $32,058,000 at December 31, 1999 to $42,007,000 at
June 30, 2000. This increase consisted of two $5,000,000 borrowings (one
maturing in 30 days and the other maturing in 90 days), which became necessary
due to the combination of loan growth and the decrease in deposits.
Federal funds purchased, repurchase agreements, and notes payable
increased $3,070,000, or 3.9%, from $79,140,000 at December 31, 1999 to
$82,210,000 at June 30, 2000. Included in this change were increases in federal
funds purchased of $9,690,000 and notes payable of $30,000 offset by a decrease
of $6,650,000 in repurchase agreements.
Other liabilities increased $1,426,000, or 15.2% from $9,373,000 at
December 31, 1999 to $10,799,000 at June 30, 2000. Included in this increase
were $561,000 of additional dividends payable due to timing differences between
the new merged organization and the prior separate companies as well as an
increase in accrued expenses of $317,000 related to the restructuring of the new
organization.
11
<PAGE>
Investment Securities
The carrying value of investments in debt and equity securities was as
follows for June 30, 2000 and December 31, 1999:
Carrying Value of Securities
(in thousands)
-------------------------------------------------------------------------------
June 30, 2000 December 31, 1999
-------------------------------------------------------------------------------
Available-for-sale:
U.S. Treasury $26,673 $37,601
Federal agencies 152,333 139,812
Mortgage-backed securities 12,685 14,870
State and municipal 12,734 10,220
Corporate and other obligations 318 320
Marketable equity securities 6,257 4,021
-------------------------------------------------------------------------------
Total available-for-sale $211,000 $206,844
===============================================================================
Held-to-maturity:
Federal agencies $28,995 $28,994
Mortgage-backed securities 25,184 27,193
State and municipal 33,542 33,748
-------------------------------------------------------------------------------
Total held-to-maturity $87,721 $89,935
===============================================================================
Non-marketable equity securities $3,816 $3,261
-------------------------------------------------------------------------------
Total securities $302,537 $300,040
===============================================================================
12
<PAGE>
The following table shows the maturities and weighted-average yields of
investment securities at June 30, 2000. Mortgage-backed securities are placed in
maturity categories based on expected payments. All other securities are shown
at their contractual maturity.
Maturities and Weighted Average Yields of Debt Securities
(dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
June 30, 2000
-----------------------------------------------------------------------------------------------------------------------------------
1 year 1 to 5 5 to 10 Over
or less years years 10 years Total
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available-for-sale
U.S. Treasury $18,206 5.65% $ 8,467 6.03% $ - - $ - - $ 26,673 5.77%
Federal agencies 18,997 5.48% 90,875 6.01% 38,508 6.31% 3,953 6.96% 152,333 6.04%
Mortgage-backed securities 2,215 6.58% 7,657 6.82% 1,819 6.76% 994 6.72% 12,685 6.77%
State and municipal 50 3.55% 1,532 5.27% 5,534 4.86% 5,618 4.97% 12,734 4.95%
Other securities 25 7.50% 293 7.85% - - - - 318 7.82%
Marketable equity securities1 - - - - - - - - 6,257 -
-----------------------------------------------------------------------------------------------------------------------------------
Total $39,493 $108,824 $ 45,861 $10,565 $211,000
-----------------------------------------------------------------------------------------------------------------------------------
Average Yield 5.62% 6.06% 6.15% 5.88% 5.99%
===================================================================================================================================
Securities held-to-maturity
Federal agencies $ - - $26,995 5.72% $ 2,000 6.40% $ - - $28,995 5.77%
Mortgage-backed securities 5,457 5.70% 17,747 5.68% 1,460 5.84% 520 6.13% 25,184 5.71%
State and municipal 1,886 4.72% 17,395 4.28% 13,027 4.93% 1,234 5.63% 33,542 4.61%
-----------------------------------------------------------------------------------------------------------------------------------
Total $7,343 $62,137 $16,487 $1,754 $87,721
===================================================================================================================================
Average Yield 5.45% 5.31% 5.19% 5.78% 5.31%
===================================================================================================================================
Non-marketable equity securities1 - - - - - - - - $ 3,816 -
===================================================================================================================================
</TABLE>
1 Due to the nature of these securities, they do not have a stated maturity date
or rate.
13
<PAGE>
Loans
The following tables present the amounts and percentages of loans for
June 30, 2000 and December 31, 1999 according to the categories of commercial,
financial and agricultural; real estate; and installment and consumer loans.
Amount of Loans Outstanding
(dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
June 30, 2000 December 31, 1999
-----------------------------------------------------------------------------------------------------------------
Amount Percentage Amount Percentage
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $199,682 31.56% $188,430 30.86%
Real estate 299,823 47.39% 294,055 48.16%
Installment and consumer1 133,170 21.05% 128,085 20.98%
-----------------------------------------------------------------------------------------------------------------
Total loans $632,675 100.00% $610,570 100.00%
=================================================================================================================
</TABLE>
1Net of unearned discount
The balance of loans outstanding as of June 30, 2000 by maturity is
shown in the following table:
Maturity of Loans Outstanding
(dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
June 30, 2000
----------------------------------------------------------------------------------------------------------------------------
1 year 1-5 Over 5
or less years years Total
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $102,095 $71,946 $25,641 $199,682
Real estate 44,488 131,302 124,033 299,823
Installment and consumer1 30,281 98,425 4,464 133,170
----------------------------------------------------------------------------------------------------------------------------
Total $176,864 $301,673 $154,138 $632,675
============================================================================================================================
Percentage of total loans outstanding 27.96% 47.68% 24.36% 100.00%
============================================================================================================================
</TABLE>
1 Net of unearned discount
14
<PAGE>
Capital
Total stockholders' equity increased $2,194,000 from December 31, 1999
to June 30, 2000. The change is summarized as follows:
(in thousands)
--------------
Stockholders' equity, December 31, 1999 $116,081
Net income 4,911
Issuance of common stock 31
Treasury stock transactions, net (575)
Stock appreciation rights (31)
Purchase of fractional shares related to merger (4)
Cash dividends declared (2,372)
Other comprehensive income 234
------------------
Stockholders' equity, June 30, 2000 $118,275
==================
On June 21, 2000, the board of directors of the Company declared a cash
dividend of $0.10 per share of the Company's common stock. The dividend of
$1,005,000 was paid on July 20, 2000 to holders of record on July 7, 2000.
The Company and its subsidiary banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's and its subsidiary banks' financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, banks must meet specific capital guidelines that
involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Company's and its subsidiary banks' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and its subsidiary banks to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier I capital
(as defined in the regulations) to risk-weighted assets (as defined), and of
Tier I capital (as defined) to average assets (as defined). Management believes,
as of June 30, 2000, that the Company and its subsidiary banks exceeded all
capital adequacy requirements to which they are subject.
As of June 30, 2000, the most recent notifications from primary
regulatory agencies categorized all the Company's subsidiary banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, banks must maintain minimum total capital to
risk-weighted assets, Tier I capital to risk-weighted assets, and Tier I capital
to average assets ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed any of the
Company's subsidiary banks' categories.
15
<PAGE>
The Company's, BankIllinois' and First National Bank of Decatur's actual capital
amounts and ratios are presented in the following table (in thousands):
<TABLE>
<CAPTION>
To be well
Capitalized under
For capital prompt corrective
Actual Adequacy purposes: action provisions:
-------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 2000:
Total capital
(to risk-weighted assets)
Consolidated $129,750 18.9% $54,859 8.0% N/A
BankIllinois $62,498 16.1% $31,031 8.0% $38,788 10.0%
First National Bank of Decatur $40,854 16.1% $20,323 8.0% $25,404 10.0%
Tier I capital
(to risk-weighted assets)
Consolidated $121,173 17.7% $27,430 4.0% N/A
BankIllinois $57,615 14.9% $15,515 4.0% $23,273 6.0%
First National Bank of Decatur $37,675 14.8% $10,161 4.0% $15,242 6.0%
Tier I capital
(to average assets)
Consolidated $121,173 11.7% $41,471 4.0% N/A
BankIllinois $57,615 10.5% $21,956 4.0% $27,445 5.0%
First National Bank of Decatur $37,675 9.4% $16,043 4.0% $20,054 5.0%
</TABLE>
Interest Rate Sensitivity
The concept of interest rate sensitivity attempts to gauge exposure of
the Company's net interest income to adverse changes in market driven interest
rates by measuring the amount of interest-sensitive assets and
interest-sensitive liabilities maturing or subject to repricing within a
specified time period. Liquidity represents the ability of the Company to meet
the day-to-day demands of deposit customers balanced by its investments of these
deposits. The Company must also be prepared to fulfill the needs of credit
customers for loans with various types of maturities and other financing
arrangements. The Company monitors its interest rate sensitivity and liquidity
through the use of static gap reports which measure the difference between
assets and liabilities maturing or repricing within specified time periods as
well as financial forecasting/budgeting/reporting software packages.
16
<PAGE>
The following table presents the Company's interest rate
sensitivity at various intervals at June 30, 2000:
<TABLE>
<CAPTION>
Rate Sensitivity of Earning Assets and Interest Bearing Liabilities
(dollars in thousands)
1-30 31-90 91-180 181-365 Over
Days Days Days Days 1-year Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold
and interest earning deposits $ 663 $ $ - $ - $ - $ 663
Debt and equity securities * 8,452 9,850 15,162 20,406 248,667 302,537
Loans ** 85,101 72,519 31,369 45,156 399,363 633,508
------------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets $ 94,216 $ 82,369 $ 46,531 $ 65,562 $ 648,030 $ 936,708
------------------------------------------------------------------------------------------------------------------------------------
Interest bearing liabilities:
Savings and interest-bearing
demand deposits*** $ 2,171 $ 1,360 $ 2,014 $ 3,985 $ 153,327 $ 162,857
Money market savings deposits 130,972 - - - - 130,972
Time deposits 28,437 46,213 48,569 107,445 110,632 341,296
Federal funds purchased,
repurchase agreements, and notes
payables 77,011 2,558 187 654 1,800 82,210
FHLB advances and
other borrowings 5,005 6,009 15 215 30,763 42,007
------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities $ 243,596 $ 56,140 $ 50,785 $ 112,299 $ 296,522 $ 759,342
------------------------------------------------------------------------------------------------------------------------------------
Net asset (liability) funding gap ($149,380) 26,229 ($4,254) ($46,737) $ 351,508 $ 177,366
------------------------------------------------------------------------------------------------------------------------------------
Repricing gap 0.39 1.47 0.92 0.58 2.19 1.23
Cumulative repricing gap 0.39 0.59 0.64 0.62 1.23 1.23
====================================================================================================================================
</TABLE>
* Debt and equity securities include securities available-for-sale,
securities held to maturity, and non-marketable equity securities.
** Loans are gross and include mortgage loans held-for-sale.
*** The total of savings and interest-bearing demand deposits does not include
$44,018,000 of non-transactional accounts which are savings accounts that
are non-interest bearing.
Included in the 1-30 day category of savings and interest-bearing demand
deposits are non-core deposits plus a percentage, based upon
industry-accepted assumptions and Company analysis, of the core deposits.
"Core deposits" are the lowest average balance of the prior twelve months
for each product type included in this category. "Non-core deposits" are
the difference between the current balance and core deposits. The time
frames include a percentage, based upon industry-accepted assumptions and
Company analysis, of the core deposits, as follows:
<TABLE>
<CAPTION>
1-30 Days 31-90 Days 91-180 Days 181-365 Days Over 1 Year
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Savings and interest-bearing
demand deposits 0.45% 0.85% 1.25% 2.45% 95.0%
</TABLE>
17
<PAGE>
At June 30, 2000, the Company was liability-sensitive due to the levels
of savings and interest bearing demand deposits, short-term time deposits, and
short-term borrowings. As such, the effect of a decrease in the interest rate
for all interest earning assets and interest bearing liabilities of 100 basis
points would increase annualized net interest income by approximately $1,493,800
in the 1-30 days category and $1,231,510 in the 1-90 days category assuming no
management intervention. An increase in interest rates would have the opposite
effect for the same time periods.
In addition to managing interest rate sensitivity and liquidity through
the use of gap reports, the Company has provided for emergency liquidity
situations with informal agreements with correspondent banks which permit the
Company to borrow federal funds on an unsecured basis. Additionally, the Company
can borrow approximately $19,829,000 from the Federal Home Loan Bank on a
secured basis.
The Company uses financial forecasting/budgeting/reporting software
packages to perform interest rate sensitivity analysis for all product
categories. The Company's primary focus of its analysis is on the effect of
interest rate increases and decreases on net interest income. Management
believes that this analysis reflects the potential effects on current earnings
of interest rate changes. Call criteria and prepayment assumptions are taken
into consideration for investments in debt and equity securities. All of the
Company's financial instruments are analyzed by a software database which
includes each of the different product categories which are tied to key rates
such as prime, Treasury Bills, or the federal funds rate. The relationships of
each of the different products to the key rate that the product is tied to is
proportional. The software reprices the products based on current offering
rates. The software performs interest rate sensitivity analysis by performing
rate shocks of plus or minus 200 basis points in 100 basis point increments.
The following table shows projected results at June 30, 2000 and
December 31, 1999 of the impact on net interest income from an immediate change
in interest rates. The results are shown as a percentage change in net interest
income over the next twelve months.
Basis Point Change
------------------
+200 +100 -100 -200
June 30, 2000 (1.3%) (0.6%) 0.6% 1.3%
December 31, 1999 (0.7%) (0.4%) 0.4% 0.7%
As shown in the above table, there was only a slight change on the
impact of interest rate changes on net interest income at June 30, 2000 compared
to December 31, 1999. The Company continues to remain liability sensitive,
causing a projected decrease in net interest income from an increase in interest
rates, and having an opposite affect from a decrease in interest rates.
The foregoing computations are based on numerous assumptions, including
relative levels of market interest rates, prepayments and deposit mix. The
computed estimates should not be relied upon as a projection of actual results.
Despite the limitations on preciseness inherent in these computations,
management believes that the information provided is reasonably indicative of
the effect of changes in interest rate levels on the net earning capacity of the
Company's current mix of interest earning assets and interest bearing
liabilities. Management continues to use the results of these computations,
along with the results of its computer model projections, in order to maximize
current earnings while positioning the Company to minimize the effect of a
prolonged shift in interest rates that would adversely affect future results of
operations.
At the present time, the most significant market risk affecting the
Company is interest rate risk. Other market risks such as foreign currency
exchange risk and commodity price risk do not
18
<PAGE>
occur in the normal business of the Company. The Company also is not currently
using trading activities or derivative instruments to control interest rate
risk.
Liquidity and Cash Flows
The Company was able to meet liquidity needs during the first six
months of 2000. A review of the consolidated statements of cash flows included
in the accompanying financial statements shows that the Company's cash and cash
equivalents decreased $33,036,000 from December 31, 1999 to June 30, 2000. This
decrease came from net cash used in investing and financing activities offset by
net cash provided by operating activities.
There were differences in sources and uses of cash during the first
six months of 2000 compared to the first six months of 1999. Less cash was used
in the area of investing activities during the first six months of 2000 compared
to the first six months of 1999 due to funding larger loan growth during 1999
compared to 2000. More cash was used for purchases of investment securities
compared to maturities, calls and sales during 2000 than 1999 when cash was used
to fund the growth in loans. Cash was used in the area of financing activities
during the first six months of 2000 compared to cash provided by financing
during the first six months of 1999. This was primarily due to the decrease in
demand and savings deposits in 2000 compared to 1999 as well as a smaller
increase in area of federal funds purchased, repurchase agreements and other
notes during 2000 compared to 1999. Somewhat offsetting this was the increase in
Federal Home Loan Bank advances and other borrowings during 2000 compared to a
slight decrease during 1999. Less cash was provided by operating activities
during the first six months of 2000 compared to the first six months of 1999,
primarily due to lower volume of loans originated for sale.
Provision and Allowance for Loan Losses
The provision for loan losses is based on management's evaluation of
the loan portfolio in light of national and local economic conditions, changes
in the composition and volume of the loan portfolio, changes in the volume of
past due and nonaccrual loans, and other relevant factors. The allowance for
loan losses, which is reported as a deduction from loans, is available for loan
charge-offs. The allowance is increased by the provision charged to expense and
is reduced by loan charge-offs net of loan recoveries. The balance of the
allowance for loan losses was $9,031,000 at June 30, 2000 compared to $8,682,000
at December 31, 1999, as net recoveries were $82,000 and provisions totaled
$267,000 during the first six months of 2000. The allowance for loan losses as a
percentage of total loans rose slightly to 1.43% at June 30, 2000, compared to
1.42% at December 31, 1999 as gross loans, including loans held-for-sale,
increased from $611,963,000 to 633,508,000. Net recoveries during the first six
months of 2000 stemmed primarily from a $300,000 recovery associated with a
commercial credit.
The allowance for loan losses as a percentage of non-performing loans
was 1,523% at June 30, 2000. Non-performing loans, while increasing from
$552,000 at December 31, 1999, remained at an acceptable level of $593,000. The
$40,000 increase in non-performing loans during the first six months resulted
from an $80,000 increase in loans over 90 days past due and still accruing,
which was partially offset by a $39,000 decrease in non-accruals. Although
unforeseen market conditions could result in significant adjustments in the
future, management believes that problem assets have been effectively identified
and that the allowance for loan losses is adequate to absorb possible losses in
the portfolio which are reasonably anticipated.
19
<PAGE>
The following table summarizes changes in the allowance for loan losses
by loan categories for each period and additions to the allowance for loan
losses which have been charged to operations.
Allowance for Loan Losses
(dollars in thousands)
-------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
-------------------------------------------------------------------------------
Allowance for loan losses at
beginning of year $8,682 $8,852
-------------------------------------------------------------------------------
Charge-offs during period:
Commercial, financial and agricultural ($10) ($451)
Residential real estate (18) -
Installment and consumer (361) (233)
-------------------------------------------------------------------------------
Total ($389) ($684)
-------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural $383 $92
Residential real estate 1 2
Installment and consumer 87 116
-------------------------------------------------------------------------------
Total $471 $210
-------------------------------------------------------------------------------
Net (charge-offs) recoveries $82 ($474)
Provision for loan losses 267 282
-------------------------------------------------------------------------------
Allowance for loan losses at end of quarter $9,031 $8,660
===============================================================================
Ratio of net (charge-offs) recoveries to
average net loans 0.01% (0.09)%
===============================================================================
The following table shows the allocation of the allowance for loan
losses allocated to each category.
Allocation of the Allowance for Loan Losses
-------------------------------------------------------------------------------
June 30, 2000 December 31, 1999
-------------------------------------------------------------------------------
Allocated:
Commercial, financial and agricultural $3,223 $3,476
Residential real estate 806 790
Installment and consumer 556 452
Installment and consumer 1,308 1,258
-------------------------------------------------------------------------------
Total allocated allowance $5,337 $5,524
Unallocated allowances 3,694 3,158
-------------------------------------------------------------------------------
Total $9,031 $8,682
===============================================================================
20
<PAGE>
The following table presents the aggregate amount of loans considered
to be nonperforming for the periods indicated. Nonperforming loans include loans
accounted for on a nonaccrual basis, accruing loans contractually past due 90
days or more as to interest or principal payments and loans which are troubled
debt restructurings as defined in Statement of Financial Accounting Standards
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings."
Nonperforming Loans (in thousands)
-------------------------------------------------------------------------------
June 30, 2000 December 31, 1999
===============================================================================
Nonaccrual loans 1 $73 1 $112
===============================================================================
Loans past due 90 days or more $520 $440
===============================================================================
Renegotiated loans $94 $104
===============================================================================
1Includes $52,000 at June 30, 2000 and $112,000 at December 31, 1999 of
real estate and consumer loans which management does not consider impaired
as defined by the Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (SFAS 114).
Results of Operations
Results of Operations For the Six Months Ended June 30, 2000
The merger of equals to create the Company, which occurred near the end
of the first quarter of 2000, resulted in significant merger related costs which
were expensed during the first six months. These expenses had a significant
effect on the reported net income of the combined entity. Net income for the
first six months of 2000 was $4,911,000, a $1,973,000, or 28.7%, decrease from
$6,884,000 during the first six months of 1999. Basic earnings per share
decreased $0.19, or 27.9%, to $0.49 in the first six months of 2000 from $0.68
in the same period of 1999. Diluted earnings per share decreased $0.19, or
28.4%, to $0.48 in the first six months of 2000 from $0.67 in the same period of
1999.
Operating earnings for the six months ended June 30, 2000, were
$7,927,000 compared to $6,884,000 for the same period in 1999, an increase of
$1,043,000, or 15.2%. Basic operating earnings per share increased $0.11, or
16.2%, to $0.79 in the first six months of 2000 from $0.68 during the first six
months of 1999. Diluted operating earnings per share increased $0.10, or 14.9%,
to $0.77 in the first six months of 2000 from $0.67 in the same period of 1999.
The difference between operating and net earnings was due to merger related
expenses, net of tax, of $3,016,000 affecting the first six months of 2000. The
merger related expenses consisted of $2,452,000 of professional fees and
$941,000 of early retirement and termination of employment contracts, offset by
$377,000 of tax benefit. The Company anticipates additional non-recurring merger
related expenses, which have not been quantified, during the remainder of 2000
as it positions itself for 2001 and beyond.
21
<PAGE>
The following schedule "Consolidated Average Balance Sheet and Interest
Rates" provides details of average balances, interest income or interest
expense, and the average rates for the Company's major asset and liability
categories.
Consolidated Average Balance Sheet and Interest Rates
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
Average Average
Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Taxable investment securities1 $268,056 $7,852 5.86% $307,341 $8,899 5.79%
Tax-exempt investment securities1 (TE) 40,187 1,479 7.36% 42,618 1,458 6.84%
Federal funds sold and interest earning
deposits 26,098 862 6.61% 24,294 590 4.86%
Loans2,3 (TE) 604,677 26,237 8.68% 521,305 22,205 8.52%
-------------------------------------------------------------------------------------------------------------------
Total interest earning assets
and interest income (TE) $939,018 $36,430 7.76% $895,558 $33,152 7.40%
-------------------------------------------------------------------------------------------------------------------
Cash and due from banks $51,010 $56,868
Premises and equipment 22,046 21,049
Other assets 21,904 21,329
-------------------------------------------------------------------------------------------------------------------
Total assets $1,033,978 $994,804
===================================================================================================================
Liabilities and Stockholders' Equity
Interest bearing demand deposits $225,351 $4,115 3.65% $264,332 $4,184 3.17%
Savings 90,837 959 2.11% 57,441 610 2.12%
Time deposits 337,420 9,156 5.43% 316,838 8,338 5.26%
Federal funds purchased, repurchase
agreements, and notes payable 76,696 1,980 5.16% 74,406 1,510 4.06%
FHLB advances and other borrowings 32,192 919 5.71% 27,197 772 5.68%
-------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities and interest expense $762,496 $17,129 4.49% $740,214 $15,414 4.16%
-------------------------------------------------------------------------------------------------------------------
Noninterest bearing demand deposits $84,979 $118,076
Noninterest bearing savings deposits4 55,161 9,672
Other liabilities 14,143 11,671
-------------------------------------------------------------------------------------------------------------------
Total liabilities $916,779 $879,633
Stockholders' equity 117,199 115,171
-------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,033,978 $994,804
===================================================================================================================
Interest spread (average rate earned minus
average rate paid) (TE) 3.27% 3.24%
===================================================================================================================
Net interest income (TE) $19,301 $17,738
===================================================================================================================
Net yield on interest
earning assets (TE) 4.11% 3.96%
===================================================================================================================
</TABLE>
Notes:
1Investments in debt securities are included at carrying value.
2Loans are net of allowance for loan losses. Nonaccrual loans are included
in the total.
3Loan fees of approximately $431,000 and $582,000 in 2000 and 1999,
respectively, are included in total loan income. 4See definition of deposit
accounts in the "Analysis of Volume and Rate Changes" discussion below.
22
<PAGE>
Net interest income, the most significant component of the Company's
earnings, is the difference between interest received or accrued on the
Company's earning assets--primarily loans and investments--and interest paid or
accrued on deposits and borrowings. In order to compare the interest generated
from different types of earning assets, the interest income on certain
tax-exempt investment securities and loans is increased for analysis purposes to
reflect the income tax savings provided by these tax-exempt assets. The
adjustment to interest income for tax-exempt investment securities and loans was
calculated based on the federal income tax statutory rate of 34%. The following
table presents, on a tax equivalent (TE) basis, an analysis of changes in net
interest income resulting from changes in average volumes of earning assets and
interest bearing liabilities and average rates earned and paid. The change in
interest due to the combined rate/volume variance has been allocated to rate and
volume changes in proportion to the absolute dollar amounts of change in each.
Analysis of Volume and Rate Changes
(in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2000
---------------------------------------------------------------------------------------------------------
Increase
(Decrease)
from
Previous Due to Due to
Year Volume Rate
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Taxable investment securities ($1,047) ($1,340) $293
Tax-exempt investment
securities (TE) 21 (180) 201
Federal funds sold and interest earning deposits 272 47 225
Loans (TE) 4,032 3,611 421
---------------------------------------------------------------------------------------------------------
Total interest income (TE) $3,278 $2,138 $1,140
---------------------------------------------------------------------------------------------------------
Interest Expense
Interest bearing demand and savings deposits1 $280 ($220) $500
Time deposits 818 553 265
Federal funds purchased,
repurchase agreements, and notes payable 470 48 422
FHLB advances and other borrowings 147 142 5
---------------------------------------------------------------------------------------------------------
Total interest expense $1,715 $523 $1,192
---------------------------------------------------------------------------------------------------------
Net Interest Income (TE) $1,563 $1,615 ($52)
=========================================================================================================
</TABLE>
Notes:
1Due to deposit reclassifications described below, interest bearing demand
and savings deposits are included in the same line for camparability.
Net interest income on a tax equivalent basis was $1,563,000, or 8.8%,
higher for the first six months of 2000 compared to 1999. Total tax-equivalent
interest income was $3,278,000, or 9.9%, higher in 2000 compared to 1999, and
interest expense increased $1,715,000, or 11.1%. The increase in interest income
was mainly due to an increase in average earning assets as well as higher
interest rates. The increase in interest expense was primarily due to higher
interest rates as well as an increase in average interest bearing liabilities.
The higher interest rates during the first half of 2000 were reflective of the
economy as the prime rate and other leading indicators increased.
23
<PAGE>
The increase in total interest income was due to increases in interest
income from loans, federal funds sold and interest earning deposits, and
tax-exempt investment securities. These increases were somewhat offset by a
decrease in taxable investment securities interest. The increase in interest
income from loans was primarily due to an increase in average loans outstanding
during the first six months of 2000 compared to the first six months of 1999.
The increase in interest from federal funds sold and interest earning deposits
was primarily due to an increase in rates. The increase in tax-exempt investment
securities was due to an increase in rates, somewhat offset by a decrease in the
balance of tax-exempt investment securities. The decrease in taxable investment
interest income was mainly due to a decrease in average taxable investments,
offset somewhat by higher yields. The decrease in the total average investment
portfolio was primarily caused by shifting assets to fund loan growth.
The increase in total interest expense was due to an increase in
interest from all interest bearing liability categories as shown in the table.
Interest expense on time deposits increased during the first six months of 2000
compared to the first six months of 1999 mainly because of higher volume as well
as higher rates. Interest expense on federal funds purchased, repurchase
agreements, and notes payable increased during 2000 compared to 1999 primarily
due to higher rates. Also contributing to the increase in total interest expense
was an increase in interest on interest bearing demand and savings deposits
which was due to an increase in rates on these accounts, offset somewhat by a
decrease in the average balances. Interest expense on FHLB advances and other
borrowings increased in the first six months of 2000 compared to the first six
months of 1999 due primarily to an increase in volume in this category. The
lower average balance of interest bearing demand deposits and the higher average
balance of savings deposits in the first six months of 2000 compared to the
first six months of 1999 as shown in the "Consolidated Average Balance Sheet and
Interest Rates" table above, was partially caused by reclassifying
non-transactional interest bearing demand deposits into the savings category
during 2000. A portion of the Company had already performed this
reclassification in June 1999. Accounts identified as transactional remained in
the demand categories, while accounts identified as non-transactional were
reclassified into the savings categories. The classification was based upon
whether the account balance was fluctuating or whether it exhibited stable
balance portions which were called non-transactional. Banks are required to hold
balances at the Federal Reserve Bank based upon transactional account balances.
By identifying these accounts as non-transactional, the Company was able to
reduce the balances required to be held at the Federal Reserve Bank in a
non-interest bearing reserve account.
The provision for loan losses recorded was $267,000 during the first
six months of 2000. This was $15,000, or 5.3%, lower than the $282,000 recorded
during the first six months of 1999. The provision during both periods was based
on management's analysis of the loan portfolio, as discussed in the provision
and allowance for loan losses section above.
Total non-interest income decreased $666,000, or 7.4%, during the first
six months of 2000 compared to the first six months of 1999. Included in this
decrease was a decrease of $538,000, or 13.2%, in remittance processing income.
Although the number of items processed is comparable between 2000 and 1999,
there was a shift from lockbox payments to mechanized payments which have both
lower revenue streams as well as lower costs. Gains on sales of mortgage loans
held-for-sale decreased $307,000, or 83.9%. This decrease reflected a
$34,621,000, or 81.3%, decrease in funded mortgage loans held-for-sale during
the first six months of 2000 compared to the first six months of 1999 when
interest rates were lower. Other non-interest income decreased $172,000, or
12.6%. This decrease was mainly due to consulting revenue of $139,000 in 1999.
Also contributing to the decrease in total non-interest income was a decrease of
$57,000, or 132.6%, in income from securities transactions. Somewhat offsetting
these decreases was a $352,000, or 14.5%, increase in trust and brokerage fees.
The majority of this increase was due to the addition of new accounts. Higher
market values during the first six months of 2000 also added to the increase in
assets under
24
<PAGE>
management upon which fees are based. An increase of $56,000, or 7.3%, in
service charges on deposit accounts also somewhat offset the overall decrease in
total non-interest income from 1999 to 2000.
Total non-interest expense increased $2,761,000, or 17.3%, during the
first six months of 2000 compared to the first six months of 1999. Of this
increase, $3,393,000 was due to merger related expenses. Salaries and employee
benefits expense increased $670,000, or 7.4%, during the first six months of
2000 compared to the first six months of 1999. Included in this increase was
$941,000 due to expense related to early retirement and termination of
employment contracts as a result of the merger. Somewhat offsetting this
increase was a decrease in salaries and employee benefits for FirsTech which
closed its Hammond processing center as well as reduced its number of employees.
Data processing expense increased $100,000, or 14.8% during the first six months
of 2000 compared to the first six months of 1999. Included in this increase was
the addition of imaging technology and upgraded teller systems during the latter
part of 1999 as well as an increase in the number of visa check transactions
processed. These increases were somewhat offset by a decrease in other
non-interest expense of $203,000, or 9.3%. This was due to an increase in other
real estate income of $418,000 from 1999 to 2000 mainly due to the sale of a
property during 2000 which had previously been written down. Service charges
from correspondent banks decreased $137,000, or 19.2%, from 1999 to 2000 mainly
due to a lower volume of lockbox processing for FirsTech as mentioned above,
therefore resulting in lower service charges from correspondent banks. There
were also decreases in equipment expense of $88,000, or 5.6%, and occupancy
expense of $67,000, or 5.7%.
Income tax expense increased $120,000, or 3.8%, during the first six
months of 2000 compared to the first six months of 1999 due to an increase of
$497,000 from higher operating income in 2000 resulting in more taxable income,
somewhat offset by $377,000 of tax benefit on expenses related to the merger.
The effective tax rate increased from 31.2% during the first six months of 1999
to 39.7% during the first six months of 2000 due to $2,452,000 of merger related
professional fees for which the Company has not recognized a tax benefit.
Results of Operations For the Three Months Ended June 30, 2000
Although the merger of equals to create the Company occurred during the
first quarter of 2000, some additional merger related costs were expensed during
the second quarter. These expenses had an effect on the reported net income of
the combined Company, although not as significant as for the first quarter. Net
income for the second quarter of 2000 was $3,917,000, a $441,000, or 12.7%,
increase from $3,476,000 during the second quarter of 1999. Basic earnings per
share increased $0.05, or 14.7%, to $0.39 in the second quarter of 2000 from
$0.34 in the same period of 1999. Diluted earnings per share increased $0.04, or
11.8%, to $0.38 in the second quarter of 2000 from $0.34 in the same period of
1999.
Operating earnings for the second quarter of 2000, were $4,068,000
compared to $3,476,000 for the same period in 1999, an increase of $592,000, or
17.0%. Both basic and diluted operating earnings per share increased $0.06, or
17.6%, to $0.40 in the second quarter of 2000 from $0.34 in the second quarter
of 1999. The difference between operating and net earnings was due to merger
related expenses, net of tax, of $151,000 affecting the second quarter of 2000.
The merger related expenses consisted of $228,000 of early retirement and
termination of employment contracts, net of a $77,000 tax benefit. The Company
anticipates additional non-recurring merger related expenses, which have not
been quantified, during the remainder of 2000 as it positions itself for 2001
and beyond.
25
<PAGE>
The following schedule "Consolidated Average Balance Sheet and Interest
Rates" provides details of average balances, interest income or interest
expense, and the average rates for the Company's major asset and liability
categories.
Consolidated Average Balance Sheet and Interest Rates
(dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30,
-----------------------------------------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Taxable investment securities1 $263,132 $3,891 5.91% $304,941 $4,430 5.81%
Tax-exempt investment securities1 (TE) 43,880 761 6.94% 42,768 732 6.85%
Federal funds sold and interest earning
deposits 15,794 314 7.95% 22,378 189 3.38%
Loans2,3 (TE) 612,250 13,335 8.71% 533,689 11,424 8.56%
-----------------------------------------------------------------------------------------------------------------------
Total interest earning assets
and interest income (TE) $935,056 $18,301 7.83% $903,776 $16,775 7.42%
-----------------------------------------------------------------------------------------------------------------------
Cash and due from banks $49,836 $51,719
Premises and equipment 21,875 21,487
Other assets 22,006 20,734
-----------------------------------------------------------------------------------------------------------------------
Total assets $1,028,773 $997,716
=======================================================================================================================
Liabilities and Stockholders' Equity
Interest bearing demand deposits $216,561 $2,046 3.78% $255,067 $2,118 3.32%
Savings 90,765 497 2.19% 61,130 305 1.99%
Time deposits 340,512 4,611 5.42% 318,445 4,160 5.23%
Federal funds purchased, repurchase
agreements, and notes payable 82,698 975 4.72% 76,775 845 4.40%
FHLB advances and other borrowings 32,345 460 5.69% 27,092 388 5.73%
-----------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities and interest expense $762,881 $8,589 4.50% $738,509 $7,816 4.23%
-----------------------------------------------------------------------------------------------------------------------
Noninterest bearing demand deposits $85,212 $123,385
Noninterest bearing savings deposits4 49,049 9,702
Other liabilities 14,186 11,100
-----------------------------------------------------------------------------------------------------------------------
Total liabilities $911,328 $882,696
Stockholders' equity 117,445 115,020
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,028,773 $997,716
=======================================================================================================================
Interest spread (average
rate earned minus
average rate paid) (TE) 3.33% 3.19%
=======================================================================================================================
Net interest income (TE) $9,712 $8,959
=======================================================================================================================
Net yield on interest
earning assets (TE) 4.15% 3.97%
=======================================================================================================================
</TABLE>
Notes:
1Investments in debt securities are included at carrying value.
2Loans are net of allowance for loan losses. Nonaccrual loans are included
in the total.
3Loan fees of approximately $196,000 and $291,000 in 2000 and 1999,
respectively, are included in total loan income. 4See definition of deposit
accounts in the "Analysis of Volume and Rate Changes" discussion below.
26
<PAGE>
The following table presents, on a tax equivalent basis, an analysis of
changes in net interest income resulting from changes in average volumes of
earning assets and interest bearing liabilities and average rates earned and
paid. The change in interest due to the combined rate/volume variance has been
allocated to rate and volume changes in proportion to the absolute dollar
amounts of change in each.
Analysis of Volume and Rate Changes
(in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 2000
-----------------------------------------------------------------------------------------------------------
Increase
(Decrease)
from
Previous Due to Due to
Year Volume Rate
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Taxable investment securities ($539) ($1,038) $499
Tax-exempt investment
securities (TE) 29 19 10
Federal funds sold and interest earning deposits 125 (343) 468
Loans (TE) 1,911 1,708 203
-----------------------------------------------------------------------------------------------------------
Total interest income (TE) $1,526 $346 $1,180
-----------------------------------------------------------------------------------------------------------
Interest Expense
Interest bearing demand and savings deposits1 $120 ($371) $491
Time deposits 451 295 156
Federal funds purchased,
repurchase agreements, and notes payable 130 68 62
FHLB advances and other borrowings 72 91 (19)
-----------------------------------------------------------------------------------------------------------
Total interest expense $773 $83 $690
-----------------------------------------------------------------------------------------------------------
Net Interest Income (TE) $753 $263 $490
===========================================================================================================
</TABLE>
Notes:
1Due to deposit reclassifications described below, interest bearing demand
and savings deposits are included in the same line for comparability.
Net interest income on a tax equivalent basis was $753,000, or 8.4%,
higher for the second quarter of 2000 compared to the second quarter of 1999.
Total tax-equivalent interest income was $1,526,000, or 9.1%, higher in 2000
compared to 1999, and interest expense increased $773,000, or 9.9%. The increase
in both interest income and interest expense was primarily due to an increase in
interest rates.
The increase in total interest income was due to increases in interest
income from loans, federal funds sold and interest earning deposits, and
tax-exempt investment securities. These increases were somewhat offset by a
decrease in taxable investment securities interest. The increase in interest
income from loans was primarily due to an increase in average loans outstanding
during the second quarter of 2000 compared to the second quarter of 1999. The
increase in interest from federal funds sold and interest earning deposits was
due to an increase in rates, somewhat offset by a decrease in average balances
during the period. The increase in tax-exempt investment interest income was due
to both an increase in average tax-exempt investments as well as higher yields.
The decrease in interest from taxable investments was caused by a decrease in
average taxable investments, somewhat offset by higher yields. The decrease in
the total average investment portfolio was primarily caused by shifting assets
to fund loan growth.
27
<PAGE>
The increase in total interest expense was due to an increase in
interest from all interest bearing liability categories as shown in the table.
Interest expense on time deposits increased during the second quarter of 2000
compared to the second quarter of 1999 mainly because of increased volume as
well as higher rates. Interest expense on federal funds purchased, repurchase
agreements, and notes payable increased during the second quarter of 2000
compared to the same period of 1999 due to both higher volume and higher rates.
Interest expense on FHLB advances and other borrowings increased in the second
quarter of 2000 compared to the second quarter of 1999 mainly due to an increase
in volume in this category. Also contributing to the increase in total interest
expense was an increase in interest on interest bearing demand and savings
deposits which was due to an increase in the overall rates on these accounts,
somewhat offset by a decrease in the average balances. The lower average balance
of interest bearing demand deposits and the higher average balance of savings
deposits in the second quarter of 2000 compared to the second quarter of 1999 as
shown in the "Consolidated Average Balance Sheet and Interest Rates" table
above, was partially caused by reclassifying non-transactional interest bearing
demand deposits into the savings category during 2000. A portion of the Company
had already performed this reclassification in June 1999. Accounts identified as
transactional remained in the demand categories, while accounts identified as
non-transactional were reclassified into the savings categories. The
classification was based upon whether the account balance was fluctuating or
whether it exhibited stable balance portions which were called
non-transactional. Banks are required to hold balances at the Federal Reserve
Bank based upon transactional account balances. By identifying these accounts as
non-transactional, the Company was able to reduce the balances required to be
held at the Federal Reserve Bank in a non-interest bearing reserve account.
The provision for loan losses recorded was $131,000 during both the
second quarter of 1999 and 2000. The provision during both periods was based on
management's analysis of the loan portfolio, as discussed in the provision and
allowance for loan losses section above.
Total non-interest income decreased $531,000, or 11.6%, during the
second quarter of 2000 compared to the second quarter of 1999. Included in this
decrease was a decrease of $372,000, or 18.3%, in remittance processing income
due to a shift from lockbox payments to mechanized payments which have both
lower revenue streams as well as lower costs. Other non-interest income
decreased $207,000, or 27.2%. This was primarily due to consulting revenue of
$139,000 in the second quarter of 1999. Also contributing to the decrease in
total non-interest income was a decrease of $83,000, or 76.9% in gains on sales
of mortgage loans held-for-sale. This decrease reflected a $9,302,000, or 69.4%,
decrease in funded mortgage loans held-for-sale during the second quarter of
2000 compared to the second quarter of 1999 when interest rates were lower. A
decrease of $48,000, or 150.0% occurred in income from securities transactions
during the second quarter of 2000 compared to the second quarter of 1999.
Somewhat offsetting these decreases was a $148,000, or 11.7%, increase in trust
and brokerage fees. The majority of this increase was due to higher market
values during the second quarter of 2000 compared to 1999 which has added to the
increase in assets under management upon which fees are based. An increase of
$31,000, or 7.7%, in service charges on deposit accounts also somewhat offset
the overall decrease in total non-interest income in the second quarter of 2000
compared to the second quarter of 1999.
Total non-interest expense decreased $456,000, or 5.6%, during the
second quarter of 2000 compared to the second quarter of 1999. Other
non-interest expense contributed $459,000, or 38.0%, to this decrease. This was
mainly due to the sale of a property in other real estate during the second
quarter of 2000 for $461,000 that had been previously written down. A decrease
also occurred in service charges from correspondent banks of $145,000, or 34.4%,
due mainly to a lower volume of lockbox processing for FirsTech as mentioned
above, therefore resulting in lower service charges from correspondent banks.
Decreases in equipment expense of $62,000, or 7.8%, and occupancy expense of
$32,000, or 5.4%, also contributed to the overall decrease in non-interest
expense. Somewhat offsetting these decreases was an increase of $228,000, or
5.2%, in salaries and employee benefits during the second quarter of 2000
compared to the second quarter of 1999.
28
<PAGE>
This increase was due to $228,000 of expense related to early retirement and
termination of employment contracts as a result of the merger.
Income tax expense increased $227,000, or 14.3%, during the second
quarter of 2000 compared to the second quarter of 1999 due to an increase of
$304,000 from higher operating income in 2000 resulting in more taxable income,
somewhat offset by $77,000 of tax benefit on expenses related to the merger. The
effective tax rate remained stable at 31.3% during the second quarter of 1999
and 31.7% during the second quarter of 2000.
Business Segment Information
The Company currently operates in two industry segments. The primary
business involves providing banking services to central Illinois. BankIllinois,
First National Bank of Decatur and First Trust Bank of Shelbyville offer a full
range of financial services to business and individual customers. These services
include demand, savings, time and individual retirement accounts; commercial,
consumer (including automobile loans and personal lines of credit),
agricultural, and real estate lending; safe deposit and night depository
services; farm management; full service trust departments; discount brokerage
services and purchases of installment obligations from retailers, primarily
without recourse. 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 currency exchanges; and concentration of
payments delivered by the Automated Clearing House network, 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 as of and for the six months ending June 30:
<TABLE>
<CAPTION>
Banking Remittance
Services Services Company Eliminations Total
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
Total interest income $ 35,909 $ 63 $ 111 $ (179) $ 35,904
Total interest expense 17,308 - - (179) 17,129
Provision for loan losses 267 - - - 267
Total non-interest income 4,948 3,984 68 (617) 8,383
Total non-interest expense 12,527 3,179 3,652 (617) 18,741
Income before income tax 10,755 868 (3,473) - 8,150
Income tax expense 3,347 302 (410) - 3,239
Net income 7,408 566 (3,063) - 4,911
Total assets 1,015,876 6,463 123,013 (119,938) 1,025,414
Depreciation and amortization 1,135 262 12 - 1,409
1999
Total interest income $ 32,638 $ 47 $ 83 $ (138) $ 32,630
Total interest expense 15,552 - - (138) 15,414
Provision for loan losses 282 - - - 282
Total non-interest income 5,077 4,330 69 (427) 9,049
Total non-interest expense 12,308 3,843 256 (427) 15,980
Income before income tax 9,573 534 (104) - 10,003
Income tax expense 2,971 183 (35) - 3,119
Net income 6,602 351 (69) - 6,884
Total assets 993,709 6,141 115,346 (113,312) 1,001,884
Depreciation and amortization 1,098 184 12 - 1,294
</TABLE>
29
<PAGE>
Recent Regulatory Developments
The Gramm-Leach-Bliley Act (the "Act"), which was enacted in November,
1999, allows eligible bank holding companies to engage in a wider range of
nonbanking activities, including greater authority to engage in securities and
insurance activities. Under the Act, an eligible bank holding company that
elects to become a financial holding company may engage in any activity that the
Board of Governors of the Federal Reserve System (the "Federal Reserve"), in
consultation with the Secretary of the Treasury, determines by regulation or
order is financial in nature, incidental to any such financial activity, or
complementary to any such financial activity and does not pose a substantial
risk to the safety or soundness of depository institutions or the financial
system generally. National banks are also authorized by the Act to engage,
through "financial subsidiaries," in certain activity that is permissible for
financial holding companies (as described above) and certain activity that the
Secretary of the Treasury, in consultation with the Federal Reserve, determines
is financial in nature or incidental to any such financial activity.
Various bank regulatory agencies have begun issuing regulations as
mandated by the Act. During June, 2000, all of the federal bank regulatory
agencies jointly issued regulations implementing the privacy provisions of the
Act. In addition, the Federal Reserve issued interim regulations establishing
procedures for bank holding companies to elect to become financial holding
companies and listing the financial activities permissible for financial holding
companies, as well as describing the extent to which financial holding companies
may engage in securities and merchant banking activities. The Federal Deposit
Insurance Corporation has issued an interim regulation regarding the parameters
under which state nonmember banks may conduct activities through subsidiaries
that national banks may conduct only in financial subsidiaries. At this time, it
is not possible to predict the impact the Act and its implementing regulations
may have on the Company. As of the date of this filing, the Company has not
applied for or received approval to operate as a financial holding company. In
addition, the Company's subsidiary banks have not applied for or received
approval to establish financial subsidiaries.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
--------------------------------------------------------------------------------
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse affect on the
operations and future prospects of the Company and its subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area, our implementation of new technologies, our ability
to develop and maintain secure and reliable electronic systems, and accounting
principles, policies and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the
Securities and Exchange Commission.
30
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See the "Interest Rate Sensitivity" section above.
31
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The are no material pending legal proceedings to which the Company or its
subsidiaries is a party other than ordinary routine litigation incidental to
their respective businesses.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
On June 20, 2000, the Company's annual meeting of stockholders was held. At the
meeting, Frederic L. Kenney, Gregory B. Lykins, August C. Meyer, Jr., and
Phillip C. Wise were elected to serve as Class I directors with terms expiring
in 2003. Continuing as Class III directors until 2002 are David J. Downey, Van
A. Dukeman, Larry D. Haab, John W. Luttrell, and Gene A. Salmon. Contiuning as
Class II directors until 2001 are George T. Shapland, Thomas G. Sloan, Roy V.
VanBuskirk, and H. Gale Zacheis. The stockholders also voted to approve the Main
Street Trust, Inc. 2000 Stock Incentive Plan.
There were 10,078,894 issued and outstanding shares of Common Stock entitled to
vote at the annual meeting. The voting on each item presented at the annual
meeting was as follows:
Elections of Directors:
For Withheld
--------- --------
Frederic L. Kenney 9,510,385 120,972
Gregory B. Lykins 9,443,542 187,815
August C. Meyer, Jr. 9,441,081 190,276
Phillip C. Wise 9,510,876 120,481
Vote for 2000 Stock Incentive Plan:
For Against Abstain Broker Non-Votes
--------- ------- ------- ----------------
8,557,601 508,693 215,116 None
Item 5. Other Information
None
32
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports
On May 10, 2000, the Company filed a Form 8-K which disclosed, under Item 5,
First Decatur Bancshares, Inc.'s consolidated balance sheet as of December 31,
1998 and 1999, and the related consolidated financial statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. First Decatur Bancshares and BankIllinois
Financial Corporation merged with and into the Company, effective March 23,
2000.
33
<PAGE>
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.
MAIN STREET TRUST, INC.
Date: August 9, 2000
By: /s/ David B. White
Executive Vice President
and Chief Financial Officer
34
