SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended 6/30/99 Commission File No. 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 37-1078406
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
201 West Main Street
Urbana, Illinois 61801
------------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (217) 365-4556
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 each of the Registrant's classes of
common stock, as of the practicable date.
<TABLE>
<CAPTION>
Class Outstanding at August 1, 1999
- -------------------------------------------------------------------------
<S> <C>
Class A Common Stock, without par value 13,649,485
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1999 December 31, 1998
------------- -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $37,621 $35,644
Federal funds sold 2,900 -
Securities available for sale (amort. cost 1999 $194,932; 1998 $207,531) 201,477 217,991
Loans (net of unearned interest) 711,038 662,281
Allowance for loan losses (7,614) (7,101)
------------ ------------
Net loans $ 703,424 $ 655,180
Premises and equipment 24,805 24,232
Other assets 20,819 18,484
------------ ------------
Total assets $ 991,046 $ 951,531
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 104,324 $ 96,555
Interest bearing 750,822 730,149
------------ ------------
Total deposits $ 855,146 $ 826,704
Short-term borrowings 11,300 5,900
Long-term debt 31,000 25,000
Other liabilities 7,333 6,824
------------ ------------
Total liabilities $ 904,779 $ 864,428
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,455 21,283
Retained earnings 62,309 59,028
Unrealized gain (loss) on securities available for sale, net 4,220 6,799
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $ 94,275 $ 93,401
Treasury stock, at cost (7,587) (5,865)
Unearned ESOP shares and deferred compensation for stock grants (421) (433)
------------ ------------
Total stockholders' equity $ 86,267 $ 87,103
------------ ------------
Total liabilities and stockholders' equity $ 991,046 $ 951,531
============ ============
Class A Common Shares outstanding at period end 13,627,945 13,704,938
============ ============
</TABLE>
3 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1999 June 30, 1998
------------- -------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 37,621 $ 45,190
Federal funds sold 2,900 21,450
Securities available for sale (amort. cost 1999 $194,932; 1998 $214,315) 201,477 224,294
Loans (net of unearned interest) 711,038 624,886
Allowance for loan losses (7,614) (7,312)
------------ ------------
Net loans $ 703,424 $ 617,574
Premises and equipment 24,805 24,459
Other assets 20,819 19,569
------------ ------------
Total assets $ 991,046 $ 952,536
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 104,324 $ 98,742
Interest bearing 750,822 725,900
------------ ------------
Total deposits $ 855,146 $ 824,642
Short-term borrowings 11,300 15,550
Long-term debt 31,000 20,000
Other liabilities 7,333 6,947
------------ ------------
Total liabilities $ 904,779 $ 867,139
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,455 21,219
Retained earnings 62,309 56,098
Unrealized gain (loss) on securities available for sale, net 4,220 6,486
------------ ------------
Total stockholders' equity before treasury stock, unearned
ESOP shares and deferred compensation for stock grants $ 94,275 $ 90,094
Treasury stock, at cost (7,587) (4,089)
Unearned ESOP shares and deferred compensation for stock grants (421) (608)
------------ ------------
Total stockholders' equity $ 86,267 $ 85,397
------------ ------------
Total liabilities and stockholders' equity $ 991,046 $ 952,536
============ ============
Common Shares outstanding at period end 13,627,945 13,786,474
============ ============
</TABLE>
4 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
---- ----
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 27,859 $26,550
Interest and dividends on investment securities:
Taxable interest income 4,455 5,275
Non-taxable interest income 950 847
Dividends 65 69
Interest on federal funds sold 158 596
--------- --------
Total interest income $ 33,487 $33,337
--------- --------
INTEREST EXPENSE:
Deposits $ 14,342 $15,081
Short-term borrowings 331 574
Long-term debt 780 596
--------- --------
Total interest expense $ 15,453 $16,251
--------- --------
Net interest income $ 18,034 $17,086
Provision for loan losses 600 650
--------- --------
Net interest income after provision for loan losses $ 17,434 $16,436
--------- --------
OTHER INCOME:
Trust $ 2,050 $ 1,783
Commissions and brokers fees, net 719 593
Service charges on deposit accounts 1,559 1,441
Other service charges and fees 1,049 953
Security gains (losses), net 466 533
Trading security gains (losses), net (1) 0
Net commissions from travel services 594 444
Gain on sales of pooled loans 520 384
Other operating income 555 521
--------- --------
Total other income $ 7,511 $ 6,652
--------- --------
OTHER EXPENSES:
Salaries and wages $ 7,144 $ 6,758
Employee benefits 1,395 1,309
Net occupancy expense of bank premises 1,314 1,223
Furniture and equipment expenses 1,569 1,013
Data processing 353 961
Stationery, supplies and printing 464 350
Amortization expense 587 686
Other operating expenses 2,972 2,522
--------- --------
Total other expenses $ 15,798 $14,822
--------- --------
Income before income taxes $ 9,147 $ 8,266
Income taxes 2,850 2,554
--------- --------
NET INCOME $ 6,297 $ 5,712
========= ========
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains(losses) arising during period ($3,503) $ 1,587
Less reclassification adjustment for gains included in net income (466) (533)
--------- --------
Other comprehensive income, before tax ($3,969) 1,054
Income tax expense related to items of other comprehensive income 1,389 (369)
--------- --------
Other comprehensive income, net of tax ($2,580) $ 685
--------- --------
COMPREHENSIVE INCOME $ 3,717 $ 6,397
========= ========
BASIC EARNINGS PER SHARE $ 0.46 $ 0.41
========= ========
DILUTED EARNINGS PER SHARE $ 0.45 $ 0.41
========= ========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.2200 $0.1900
========= ========
</TABLE>
5 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
---- ----
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 14,186 $13,231
Interest and dividends on investment securities:
Taxable interest income 2,149 2,629
Non-taxable interest income 486 430
Dividends 31 34
Interest on federal funds sold 37 316
--------- --------
Total interest income $ 16,889 $16,640
--------- --------
INTEREST EXPENSE:
Deposits $ 7,127 $ 7,489
Short-term borrowings 226 290
Long-term debt 412 330
--------- --------
Total interest expense $ 7,765 $ 8,109
--------- --------
Net interest income $ 9,124 $ 8,531
Provision for loan losses 300 0
--------- --------
Net interest income after provision for loan losses $ 8,824 $ 8,531
--------- --------
OTHER INCOME:
Trust $ 1,062 $ 899
Commissions and brokers fees, net 364 310
Service charges on deposit accounts 827 738
Other service charges and fees 569 504
Security gains (losses), net 287 233
Trading security gains (losses), net 0 1
Net commissions from travel services 315 249
Gain on sales of pooled loans 306 198
Other operating income 221 218
--------- --------
Total other income $ 3,951 $ 3,350
--------- --------
OTHER EXPENSES:
Salaries and wages $ 3,564 $ 3,372
Employee benefits 684 644
Net occupancy expense of bank premises 667 602
Furniture and equipment expenses 839 526
Data processing 185 475
Stationery, supplies and printing 213 201
Amortization expense 246 343
Other operating expenses 1,475 1,351
--------- --------
Total other expenses $ 7,873 $ 7,514
--------- --------
Income before income taxes $ 4,902 $ 4,367
Income taxes 1,544 1,366
--------- --------
NET INCOME $ 3,358 $ 3,001
========= ========
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains(losses) arising during period ($1,726) $ 422
Less reclassification adjustment for gains included in net income (306) (233)
--------- --------
Other comprehensive income, before tax ($2,032) $ 189
Income tax expense related to items of other comprehensive income 711 (66)
--------- --------
Other comprehensive income, net of tax ($1,321) $ 123
--------- --------
COMPREHENSIVE INCOME $ 2,037 $ 3,124
========= ========
BASIC EARNINGS PER SHARE $ 0.25 $ 0.22
========= ========
DILUTED EARNINGS PER SHARE $ 0.24 $ 0.22
========= ========
DIVIDENDS DECLARED PER SHARE:
Common Stock $ 0.1100 $0.0950
========= ========
</TABLE>
6 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
---- ----
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,297 $ 5,712
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,228 1,876
Provision for loan losses 600 650
(Decrease) in deferred income taxes (748) (743)
Amortization of investment security discounts (46) (76)
Gain on sales of investment securities, net (466) (533)
Proceeds from sales of pooled loans 56,271 38,360
Loans originated for sale (51,664) (40,571)
Gain on sale of pooled loans (520) (384)
Loss (Gain) on sales and dispositions of premises and equipment 8 (12)
Change in assets and liabilities:
(Decrease) Increase in other assets (785) 199
Increase (decrease) in accrued expenses 81 224
(Decrease) in interest payable (161) (275)
Increase in income taxes payable 589 507
---------- ----------
Net cash provided by operating activities $ 11,684 $ 4,934
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 4,651 $ 19,365
Proceeds from maturities of securities classified available for sale 70,032 60,025
Purchase of securities classified available for sale (61,625) (86,507)
(Increase) in federal funds sold (2,900) (2,650)
Increase in loans (52,931) (19,783)
Purchases of premises and equipment (2,231) (2,782)
Proceeds from sales of premises and equipment 21 23
Cash acquired in acquisition of Busey Travel, Inc. - 204
---------- ----------
Net cash (used in) investing activities ($44,983) ($32,105)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in certificates of deposit $ 12,903 ($23,743)
Net increase in demand, money market and saving deposits 15,539 36,932
Cash dividends paid (3,016) (2,625)
Purchase of treasury stock (1,928) (893)
Proceeds from sale of treasury stock 378 391
Proceeds from short-term borrowings 400 10,000
Principal payments on short-term borrowings - (1,000)
Proceeds from long-term borrowings 6,000 15,000
Principal payments on long-term borrowings - (5,000)
Net increase (decrease) in federal funds purchased,
repurchase agreements and Federal Reserve discount borrowings 5,000 -
---------- ----------
Net cash provided by (used in) financing activities $ 35,276 $ 29,062
---------- ----------
Net increase (decrease) in cash and cash equivalents $ 1,977 $ 1,891
Cash and due from banks, beginning $ 35,644 $ 43,299
---------- ----------
Cash and due from banks, ending $ 37,621 $ 45,190
========== ==========
</TABLE>
7 of 24
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: RECENT EVENTS
The Boards of Directors of First Busey Corporation (Nasdaq: BUSE) and Eagle
BancGroup, Inc. (Nasdaq: EGLB) announce that they have entered into an
agreement providing for the acquisition of Eagle by First Busey. First Busey
has agreed to purchase all of the issued and outstanding stock of Eagle for an
aggregate cash consideration of approximately $26.6 million, or $25.74 per
share. The agreement is subject to approval by the shareholders of Eagle
BancGroup, Inc. and the receipt of required regulatory approvals. The
acquisition will increase First Busey's share of the McLean County market to
approximately 12%. Following the acquisition, First Federal will continue to
operate under its existing name as a "community-oriented" financial institution
as this is the primary focus of the Busey Organization with all of its
subsidiaries. It is expected that a special Eagle shareholder meeting will be
held in the fourth quarter of 1999 and that the transaction will close prior to
year-end.
NOTE 2: INTERIM FINANCIAL STATEMENTS
The consolidated interim financial statements of First Busey Corporation and
Subsidiaries are unaudited, but in the opinion of management reflect all
necessary adjustments, consisting only of normal recurring accruals, for a fair
presentation of results as of the dates and for the periods covered by the
financial statements. The results for the interim periods are not necessarily
indicative of the results of operations that may be expected for the fiscal
year.
NOTE 3: LOANS
The major classifications of loans at June 30, 1999 and December 31, 1998 were
as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-----------------------------------
(Dollars in thousands)
<S> <C> <C>
Commercial $ 98,985 $ 80,958
Real estate construction 62,020 44,713
Real estate - farmland 15,940 14,184
Real estate - 1-4 family residential mortgage 251,878 246,599
Real estate - multifamily mortgage 46,405 51,888
Real estate - non-farm nonresidential mortgage 180,996 168,948
Installment 36,306 35,919
Agricultural 18,508 19,072
-----------------------------------
$711,038 $662,281
-----------------------------------
Less:
Allowance for loan losses 7,614 7,101
-----------------------------------
Net loans $703,424 $655,180
===================================
</TABLE>
The real estate-mortgage category includes loans held for sale with carrying
values of $6,039,000 at June 30, 1999 and $11,266,000 at December 31, 1998;
these loans had fair market values of $6,106,000 and $11,373,000, respectively.
8 of 24
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: INCOME PER SHARE
Net income per common share has been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 3,358,000 $ 3,001,000 $ 6,297,000 $ 5,712,000
Shares:
Weighted average common shares outstanding 13,628,514 13,766,578 13,658,804 13,773,814
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 358,454 279,719 328,710 257,638
----------- ----------- ----------- -----------
Weighted average common shares outstanding,
as adjusted 13,986,968 14,046,297 13,987,514 14,031,452
=========== =========== =========== ===========
Basic earnings per share $ 0.25 $ 0.22 $ 0.46 $ 0.41
=========== =========== =========== ===========
Diluted earnings per share $ 0.24 $ 0.22 $ 0.45 $ 0.41
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 15,614 $16,526
========= ========
Income taxes $ 2,956 $ 2,047
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $ - $ 231
========= ========
Change in unrealized gain (loss) on securities available for sale ($3,969) $ 1,054
========= ========
(Decrease) increase in deferred income taxes attributable to the unrealized
(gain) loss on investment securities available for sale $ 1,389 ($369)
========= ========
Acquisition of Busey Travel, Inc.:
Working capital including cash $ - $ 561
Premises and equipment - 23
Intangibles and other assets - 241
--------- --------
Common stock issued from treasury to acquire Busey Carter Travel, Inc. $ - $ 825
========= ========
</TABLE>
9 of 24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the financial condition
of First Busey Corporation and Subsidiaries ("Corporation") at June 30, 1999
(unaudited) when compared with December 31, 1998 and the results of operations
for the six months ended June 30, 1999 and 1998 (unaudited) and the results of
operations for the three months ended June 30, 1999 and 1998 (unaudited). This
discussion and analysis should be read in conjunction with the Corporation's
consolidated financial statements and notes thereto appearing elsewhere in this
quarterly report.
FINANCIAL CONDITION AT JUNE 30, 1999 AS COMPARED TO DECEMBER 31, 1998
Total assets increased $39,515,000 or 4.2%, to $991,046,000 at June 30, 1999
from $915,531,000 at December 31, 1998.
Securities available for sale decreased $16,514,00, or 7.6%, to $201,477,000 at
June 30, 1999 from $217,991,000 at December 31, 1998.
Loans increased $48,757,000, or 7.4%, to $711,038,000 at June 30, 1999 from
$662,281,000 at December 31, 1998, primarily due to increases in commercial,
real estate construction and mortgage loans.
Total deposits increased $28,442,000, or 3.4%, to $855,146,000 at June 30, 1999
from $826,704,000 at December 31, 1998. Non-interest bearing deposits increased
8.0% to $104,324,000 at June 30, 1999 from $96,555,000 at December 31, 1998.
Interest-bearing deposits increased 2.8% to $750,822,000 at June 30, 1999 from
$730,149,000 at December 31, 1998.
Short-term borrowings increased $5,400,000 to $11,300,000 at June 30, 1999 as
compared to $5,900,000 at December 31, 1998.
In the first six months of 1999, the Corporation repurchased 102,543 shares of
its Class A common stock at an aggregate cost of $1,929,000. The Corporation is
purchasing shares for the treasury as they become available in order to meet
future issuance requirements of previously granted non-qualified stock options.
As of June 30, 1999, 65,930 of the 266,882 options which became exercisable on
January 1, 1997 (and expire December 31, 1997) have not yet been exercised,
16,800 of the 63,900 options which became exercisable on January 1, 1998 (and
expire December 31, 1999) have not yet been exercised, and all of the 2,000
options which became exercisable on January 1, 1999 (and expire on December 31,
1999) have not yet been exercised.
The following table sets forth the components of non-performing assets and past
due loans.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Non-accrual loans $ 683 $ 526
Loans 90 days past due, still accruing 1,059 1,052
Restructured loans - -
Other real estate owned 292 320
Non-performing other assets 19 14
------------- -----------------
Total non-performing assets $2,053 $1,912
============= =================
Total non-performing assets as a percentage of total assets 0.21% 0.20%
============= =================
Total non-performing assets as a percentage of loans plus non-performing assets 0.29% 0.29%
============= =================
</TABLE>
The ratio of non-performing assets as a percentage of total assets increased to
0.21% at June 30, 1999 from 0.20% at December 31, 1998. This was due primarily
to an increase in non-accrual loans. The ratio of non-performing assets to
loans plus non-performing assets remained at 0.29% on June 30, 1999.
10 of 24
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AS COMPARED TO JUNE 30, 1998
SUMMARY
- -------
Net income for the six months ended June 30, 1999 increased 10.2% to $6,297,000
as compared to $5,712,000 for the comparable period in 1998. Diluted earnings
per share increased 9.8% to $.45 at June 30, 1999 as compared to $.41 for the
same period in 1998.
Operating earnings, which exclude security gains and the related tax expense,
were $5,994,000, or $.43 per share for the six months ended June 30, 1999, as
compared to $5,365,000, or $.38 per share for the same period in 1998.
The Corporation's return on average assets was 1.32% for the six months ended
June 30, 1999, as compared to 1.25% for the comparable period in 1998. The
return on average assets from operations of 1.26% for the six months ended June
30, 1999 was 8 basis points higher than the 1.18% level achieved in the
comparable period of 1998.
Net interest margin, the Corporation's net interest income expressed as a
percentage of average earning assets stated on a fully taxable equivalent basis,
was 4.21% for the six months ended June 30, 1999, as compared to 4.18% for the
same period in 1998. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.92% for
the six months ended June 30, 1999, compared to 3.87% for the same period in
1998. The increase in the net interest margin is due primarily to the 42 basis
point decline in the average rate paid on time deposits.
During the six months ended June 30, 1999, the Corporation recognized security
gains of approximately $303,000, after income taxes, representing 4.8% of net
income. During the same period in 1998, security gains of $347,000, after
income taxes, were recognized, representing 6.1% of net income.
INTEREST INCOME
- ---------------
Interest income, on a tax equivalent basis, for the six months ended June 30,
1999 increased .5% to $33,487,000 from $33,337,000 for the comparable period in
1998. The increase in interest income resulted from an increase in average
earning assets of $39,820,000 for the period ended June 30, 1999, as compared to
the same period of 1998. The average yield on interest-earning assets decreased
from 8.02% for the six months ended June 30, 1998 to 7.70% for the same period
in 1999. This is due to declines in the yields on all categories of
interest-earning assets
INTEREST EXPENSE
- ----------------
Total interest expense decreased 4.9% for the six months ended June 30, 1999 as
compared to the prior year period. This decrease resulted primarily from
declines in the rates paid on deposits and other interest-bearing liabilities
offset partially by the growth of $25,637,000 in average interest-bearing
liabilities.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses of $600,000 for the six months ended June 30, 1999
is $50,000 less than the provision for the comparable period in 1998. The
provision and the net charge-offs for the period resulted in the reserve
representing 1.07% of total loans and 437% of non-performing loans at June 30,
1999, as compared to the reserve representing 1.07% of total loans and 450% of
non-performing loans at December 31, 1998. The adequacy of the reserve for loan
losses is consistent with management's consideration of the composition of the
portfolio, recent credit quality experience, and prevailing economic conditions.
11 of 24
<PAGE>
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security gains, increased 15.1% for the six months
ended June 30, 1999 as compared to the same period in 1998. This was a
combination of increases in trust revenue, commissions and brokers fees, service
charges, net commissions from travel services and gains on the sales of pooled
loans for the six months ended June 30, 1999 as compared to the same period in
1998. As of June 30, 1999, the trust company of the Corporation had
$879,000,000 in assets under care, an increase of 21.5% from $723,656,000 at
June 30, 1999. Gains of $520,000 were recognized on the sale of $55,750,000 of
pooled loans for the six months ended June 30, 1999 as compared to gains of
$384,000 on the sale of $37,976,000 of pooled loans in the prior year period.
Management anticipates continued sales from the current mortgage loan production
of the Corporation if mortgage loan originations allow and the sales of the
loans are necessary to maintain the asset/liability structure that the
Corporation is trying to effect. The Corporation may realize gains and/or
losses on these sales dependent upon interest rate movements and upon how
receptive the debt markets are to mortgage backed securities.
Total other expense increased 6.6% or $976,000 for the six months ended June 30,
1999 as compared to the same period in 1998.
Salaries and wages expense increased $386,000 or 5.7% and employee benefits
expense increased $86,000 for the six months ended June 30, 1999, as compared to
the same period last year. The Corporation had 433 full time equivalent
employees as of June 30, 1999 as compared to 425 as of June 30, 1998. Occupancy
and furniture and equipment expenses increased 28.9% to $2,883,000 for the six
months ended June 30, 1999 from $2,236,000 in the prior year period. Data
processing expense decreased $608,000 to $353,000 for the six months ended June
30, 1999 from the prior year period.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, decreased to 1.84% for the six
months ended June 30, 1999 from 1.91% in the prior year period as a result of
the income and expense items described above.
The Corporation's efficiency ratio is defined as operating expenses divided by
net revenue. (More specifically it is defined as non interest expense
expressed as a percentage of the sum of tax equivalent net interest income and
non interest income, excluding security gains). The consolidated efficiency
ratio for the six months ended June 30, 1999 was 61.5%, an improvement from
62.3% for the same period in 1998. When the gains on the sales of pooled loans
are excluded these ratios are 62.7% and 63.3% for the six month periods ending
June 30, 1999 and June 30, 1998 respectively.
Income taxes for the six months ended June 30, 1999 increased to $2,850,000 as
compared to $2,554,000 for the
comparable period in 1998. As a percent of income before taxes, the provision
for income taxes increased to 31.2% for the six months ended June 30, 1999 from
30.9% for the same period in 1998 .
12 of 24
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AS COMPARED TO JUNE 30, 1998
SUMMARY
- -------
Net income for the three months ended June 30, 1999 increased 11.9% to
$3,358,000 as compared to $3,001,000 for the comparable period in 1998. Diluted
earnings per share increased 9.1% to $.24 at June 30, 1999 as compared to $.22
for the same period in 1998.
Operating earnings, which exclude security gains and the related tax expense,
were $3,171,000, or $.23 per share for the three months ended June 30, 1999, as
compared to $2,849,000, or $.20 per share for the same period in 1998.
The Corporation's return on average assets was 1.39% for the three months ended
June 30, 1999, as compared to 1.31% achieved for the comparable period in 1998.
The return on average assets from operations for the three months ended June 30,
1999 of 1.32% was eight basis points more than the 1.24% level achieved in the
comparable period of 1998.
The net interest margin expressed as a percentage of average earning assets was
4.20% for the three months ended June 30, 1999, an increase of 6 basis points
from the level achieved for the like period in 1998. The net interest margin
expressed as a percentage of average total assets was 3.92% for the three months
ended June 30, 1999, compared to 3.84% for the same period in 1998.
During the three months ended June 30, 1999, the Corporation recognized security
gains of approximately $187,000, after income taxes, representing 5.6% of net
income. During the same period in 1998, security gains of approximately
$152,000, after income taxes, were recognized, representing 5.0% of net income.
INTEREST INCOME
- ---------------
Interest income on a fully taxable equivalent basis increased $271,000, or 1.6%
for the three months ended June 30, 1999 from the same period in 1998. The
increase resulted from a higher level of interest income on greater average
volumes of loans, offset in part by lower levels of interest income on lower
yields and average balances of obligations of Fed funds sold and U. S.
Government obligations outstanding, for the three months ended June 30, 1999 as
compared to the same period of 1998. The yield on interest earning assets
decreased 28 basis points for the three months ended June 30, 1999 as compared
to the same period in 1998.
INTEREST EXPENSE
- ----------------
Total interest expense decreased 4.2% for the three months ended June 30, 1999
as compared to the prior year period. This decrease resulted in large part from
the decline in rates paid on deposits and short-term borrowings.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security transactions, increased 17.5% for the
three months ended June 30, 1999 as compared to the same period in 1998. This
was a combination of increased trust revenue, commissions and brokers fees,
service charges, net commissions from travel services and gains on sales of
pooled loans. Gains of $306,000 were recognized on the sale of $30,296,000 of
pooled loans for the three months ended June 30, 1999 as compared to gains of
$198,000 on the sale of $22,331,000 of pooled loans in the prior year period.
Total other expense increased 4.8% or $359,000 for the three months ended June
30, 1999 as compared to the same period in 1998.
Salaries and wages expense increased $192,000 or 5.7% and employee benefits
expense increased $40,000 or 6.2% for the three months ended June 30, 1999, as
compared to the same period last year. Occupancy and furniture and equipment
expenses increased 33.5% to $1,506,000 for the three months ended June 30, 1999
from $1,128,000 in the prior year period. Data processing expense decreased
$290,000 to $185,000 for the three months ended June 30, 1999 from the prior
year period.
The consolidated efficiency ratio for the three months ended June 30, 1999 was
60.1% as compared to 62.9% for the prior year period. When the gains on the
sales of pooled loans are excluded, this ratio is 61.5% for the three months
ended June 30, 1999 compared to 64.0% for the same period in 1998. The change
13 of 24
<PAGE>
in the current year efficiency ratio is due to the income and expense items
noted above.
Income taxes for the three months ended June 30, 1999 increased to $1,544,000 as
compared to $1,366,000 for the comparable period in 1998. As a percent of
income before taxes, the provision for income taxes increased to 31.5% for the
three months ended June 30, 1999 from 31.3% for the same period in 1998.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued in June 1998 by the Financial
Accounting Standards Board. The Statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Because the Corporation does
not use derivatives, management does not believe the adoption of the Statement
will have a material impact on the consolidated financial statements.
REPORTABLE SEGMENTS AND RELATED INFORMATION
- -------------------------------------------
First Busey Corporation has two reportable segments, Busey Bank and First Busey
Trust & Investment Co. Busey Bank provides a full range of banking services to
individual and corporate customers through its branch network in central
Illinois, through its branch in Indianapolis, Indiana, and through its loan
production office in Fort Myers, Florida. First Busey Trust & Investment Co.
provides trust and asset management services to individual and corporate
customers throughout central Illinois.
The Corporation's two reportable segments are strategic business units that are
separately managed as they offer different products and services and have
different marketing strategies.
The segment financial information provided below has been derived from the
internal profitability reporting system used by management to monitor and manage
the financial performance of the Corporation. The accounting policies of the
two segments are the same as those described in the summary of significant
accounting policies. The Corporation accounts for intersegment revenue and
transfers at current market value.
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------------------------------------------------------------
First Busey
Trust & Consolidated
Busey Bank Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 33,343 $ 93 $ 51 $ 33,487 $ - $ 33,487
Interest expense 15,251 - 189 15,440 $ 13 15,453
Other income 4,293 2,075 8,807 15,175 $ (7,664) 7,511
Net income 6,061 745 6,611 13,417 $ (7,120) 6,297
Total assets 975,559 3,944 102,742 1,082,245 $ (91,199) 991,046
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
-----------------------------------------------------------------------------------
First Busey
Trust & Consolidated
Busey Bank Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 32,796 $ 80 $ 467 $ 33,343 $ (6) $ 33,337
Interest expense 15,675 - 562 16,237 $ 14 16,251
Other income 3,847 1,805 8,278 13,930 $ (7,278) 6,652
Net income 5,943 637 5,922 12,502 $ (6,790) 5,712
Total assets 928,818 3,246 125,118 1,057,182 $ (104,646) 952,536
</TABLE>
LIQUIDITY
- ---------
Liquidity is the availability of funds to meet all present and future financial
obligations arising in the daily operations of the business at a minimal cost.
These financial obligations consist of needs for funds to meet extensions of
credit, deposit withdrawals and debt servicing.
14 of 24
<PAGE>
The sources of short-term liquidity utilized by the Corporation consist of
non-reinvested asset maturities, deposits and capital funds. Long-term
liquidity needs will be satisfied primarily through retention of capital funds.
The Corporation does not deal in or use brokered deposits as a source of
liquidity. Additional liquidity is provided by bank lines of credit, repurchase
agreements and the ability to borrow from the Federal Reserve Bank and the
Federal Home Loan Bank of Chicago. The Corporation has an operating line with
American National Bank and Trust Company of Chicago in the amount of $10,000,000
with $4,100,000 available as of June 30, 1999.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) increased to 9.3% at June 30, 1999 from 8.4%
at December 31, 1998. This is the ratio of total large liabilities to total
liabilities, and is low in comparison to the Corporation's peers. This change
was due largely to a $6,346,000 increase in time deposits over $100,000 and a
$5,400,000 increase in short-term debt which resulted in a higher ratio of
large liabilities to total liabilities.
CAPITAL RESOURCES
- -----------------
Other than from the issuance of common stock, the Corporation's primary source
of capital is retained net income. During the six months ended June 30, 1999,
the Corporation earned $6,297,000 and paid dividends of $3,016,000 to
stockholders, resulting in a retention of current earnings of $3,281,000. The
Corporation's dividend payout for the six months ended June 30, 1999 was 47.9%.
The Corporation's risk-based capital ratio was 13.17% and the leverage ratio was
7.99% as of June 30, 1999, as compared to 13.23% and 7.87% respectively as of
December 31, 1998. The Corporation and its bank subsidiaries were well above
all minimum required capital ratios as of June 30, 1999.
MARKET RISK
- -----------
Market risk is the risk of change in asset values due to movements in underlying
market rates and prices. Interest rate risk is the risk to earnings and capital
arising from movements in interest rates. Interest rate risk is the most
significant market risk affecting the Corporation as other types of market risk,
such as foreign currency exchange rate risk and commodity price risk, do not
arise in the normal course of the Corporation's business activities.
The Corporation's banking subsidiary, Busey Bank, has an asset-liability
committee which meets monthly to review current market conditions and attempts
to structure the bank's balance sheet to ensure stable net interest income
despite potential changes in interest rates with all other variables constant.
The asset-liability committee uses gap analysis to identify mismatches in the
dollar value of assets and liabilities subject to repricing within specific time
periods. The Funds Management Policy established by the asset-liability
committee and approved by the Corporation's board of directors establishes
guidelines for maintaining the ratio of cumulative rate-sensitive assets to
rate-sensitive liabilities within prescribed ranges at certain intervals. A
summary of the Corporation's gap analysis is summarized on page 18.
The committee does not rely solely on gap analysis to manage interest-rate risk
as interest rate changes do not impact all categories of assets and liabilities
equally or simultaneously. The asset-liability committee supplements gap
analysis with balance sheet and income simulation analysis to determine the
potential impact on net interest income of changes in market interest rates.
In these simulation models the balance sheet is projected out over a one-year
period and net interest income is calculated under current market rates, and
then assuming permanent instantaneous shifts in the yield curve of +/- 100 basis
point and +/- 200 basis points. These interest-rate scenarios indicate the
interest rate risk of the Corporation over a one-year time horizon due to
changes in interest rates, as of June 30, 1999, is as follows:
<TABLE>
<CAPTION>
Basis Point Changes
---------------------------------
-200 -100 +100 +200
---------------------------------
<S> <C> <C> <C> <C>
Percentage change in net interest income due to an immediate change
in interest over a one-year period (1.23%) (0.71%) (.86%) (1.84%)
</TABLE>
YEAR 2000 COMPLIANCE
- --------------------
The "Year 2000" is an issue due to the fact that computer programmers and other
designers of microprocessor controlled systems have used only the last two
digits to refer to a year. As the calendar moves from December 31, 1999 to
January 1, 2000, systems may be unable to distinguish between the year 1900 and
2000. This could result in inaccurate processing of information that is date
related which could cause a variety of problems for businesses.
15 of 24
<PAGE>
First Busey Corporation has appointed a Year 2000 Project Team, headed by a
full-time project coordinator to manage the project. The team members come from
all areas of the organization and have experience with the processes and systems
in use by the organization.
The Corporation's software and hardware systems provide essential support to all
of its businesses. Failure to properly address Year 2000 issues could result in
an adverse affect on the daily operations and financial performance of the
Corporation. Additionally, those on whom Corporation relies or does business
with could also adversely affect the organization if they are not properly
prepared. Given the number of possible scenarios it is virtually impossible to
determine the potential cost of problems should the Corporation's remediation
efforts or the efforts of those with whom it does business not be successful.
In addition should the Corporation fail to make satisfactory progress toward
Year 2000 preparedness or not fully comply with government agency mandated steps
there could be steps taken by state or federal regulators that would adversely
affect the Corporation's business.
The project team has employed a five-step plan to effectively deal with all
aspects of the Y2K issue. The first step is awareness during which the project
was defined. This was followed closely be the assessment phase where all
software, hardware, equipment, physical plant issues and forms were inventoried
and a priority assigned as to the importance in overall operations. Items
included in the physical plant inventory were HVAC systems, security systems,
vaults, and elevators among others.
The third step of the project plan is renovation. This involves making changes
to existing items, elimination of unnecessary items or replacement of items.
During 1997 and early 1998 Busey Bank conducted a search process to select a new
core processing system to replace the system then processed by a third party
vendor. The third party processor undertook a project to consolidate systems
requiring Busey Bank to convert to another of their systems. The bank took this
opportunity to review all options available and select a solution that would be
Year 2000 compliant.
The fourth step of the Year 2000 project plan is validation, which involves
testing all mission critical items. This step was completed as of March 31,
1999. Testing will continue throughout 1999 on non-mission critical systems.
The testing will be done on all systems even those such as the core banking
applications that were purchased as being Year 2000 compliant. Any systems that
have changes made after the initial testing will be re-tested to ensure that
they remain compliant. The Corporation relies on entities such as the Federal
Reserve to conduct banking business. Testing has been done with the Federal
Reserve to ensure that the services used will be available.
The fifth step of the Corporation's Year 2000 project plan is implementation.
This phase involves the review of test results by end users to verify that
performance is as expected. The Corporation has completed all five steps of
the plan as of March 31, 1999.
In addition to the five-step project plan, First Busey Corporation has also
undertaken the challenge to review its customer base and business suppliers for
compliance. Several approaches have been taken to achieve an understanding of
how well prepared these groups are. Questionnaires have been sent to the
Corporation's significant customers and suppliers. These questionnaires were
followed up with personal interviews when questionnaire answers did not provide
clear indications of the entities' preparedness. The Corporation cannot control
the success of any given entity's preparations but is merely trying to have as
complete an understanding as possible about all aspects of its business.
First Busey Corporation has also developed a business continuity plan to
implement should a problem arise. This business continuity plan is complete and
will be tested several times prior to the end of 1999. Five tests have been
completed as of July 14, 1999 and additional tests will be conducted throughout
the remainder of the year. The plan was developed with three scenarios, the
most critical of which is worst case where there would be no utilities of any
kind. The organization has five back-up generators for operating customer
service locations and a large generator to power the data processing center,
which will support the most critical operations functions.
First Busey Corporation has developed an education program in conjunction with
its Year 2000 efforts. The Corporation has provided mandatory training for all
in-house personnel. The Corporation has also taken a leadership role in
educating the community about the Year 2000 issues through public forums, radio
and television sessions, and meetings with community organizations to educate
the people in the county about the Year 2000 issues. Within the last 60 days,
16 of 24
<PAGE>
the Task Force has implemented a web-site and telephone system to address
questions related to Year 2000 and the steps being taken to mitigage any
possible problems. It is important that the citizens of the communities which
the Corporation serves understand what the Year 2000 issues are and also
understand the plans and progress that individuals, businesses and government
are making to minimize any negative effects of Year 2000.
First Busey Corporation continues to monitor its liquidity position and has
established a liquidity contingency plan should any unlikely situations occur
which would create a need for additional liquidity.
The estimated expense for Busey's Year 2000 renovation efforts is $155,000. The
cost of in-house personnel that performed testing and other functions for the
Year 2000 project plan is not included, with the exception of the full time Year
2000 Project Coordinator. Of this total figure $67,600 was expensed in 1998.
The remaining amount is for projected expenses not yet incurred. Funding for
these expenses has been including in the operating budget. Expenses related to
the in-house data processing solution conversion are considered to be in the
normal course of business and not Year 2000 related.
RATE-SENSITIVE ASSETS AND LIABILITIES
- -------------------------------------
Interest-rate sensitivity is a measure of the volatility of the net interest
margin as a consequence of changes in market rates. The rate-sensitivity chart
shows the interval of time in which given volumes of rate-sensitive earning
assets and rate-sensitive interest-bearing liabilities would be responsive to
changes in market interest rates based on their contractual maturities or terms
for repricing. It is, however, only a static, single-day depiction of the
Corporation's rate sensitivity structure, which can be adjusted in response to
changes in forecasted interest rates.
17 of 24
<PAGE>
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of June 30, 1999.
<TABLE>
<CAPTION>
Rate Sensitive Within
------------------------------------------------------------------------
1-30 31-90 91-180 181 Days - Over
Days Days Days 1 Year 1 Year Total
------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 2,900 $ - $ - $ - $ - $ 2,900
Investment securities
U.S. Governments 6,012 5,013 18,116 40,129 71,888 141,158
Obligations of states and
political subdivisions - - 2,508 1,261 35,685 39,454
Other securities 6,759 702 651 219 12,534 20,865
Loans (net of unearned int.) 220,730 52,029 64,912 115,815 257,552 711,038
------------------------------------------------------------------------
Total rate-sensitive assets $ 236,401 $ 57,744 $ 86,187 $ 157,424 $377,659 $915,415
------------------------------------------------------------------------
Interest bearing transaction
deposits $ 38,241 $ - $ - $ - $ - $ 38,241
Savings deposits 83,851 - - - - 83,851
Money market deposits 279,189 - - - - 279,189
Time deposits 56,775 41,186 53,025 92,923 105,632 349,541
Short-term borrowings:
Federal funds purchased &
repurchase agreements 5,000 - - - - 5,000
Other 6,300 - - - - 6,300
Long-term debt - - - 6,000 25,000 31,000
------------------------------------------------------------------------
Total rate-sensitive
liabilities $ 469,356 $ 41,186 $ 53,025 $ 98,923 $130,632 $793,122
------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($232,955) $ 16,558 $ 33,162 $ 58,501 $247,027 $122,293
------------------------------------------------------------------------
Cumulative gap ($232,955) ($216,397) ($183,235) ($124,734) $122,293
========================================================================
Cumulative gap as a
percentage of total
rate-sensitive assets -25.45% -23.64% -20.02% -13.63% 13.36%
========================================================================
Cumulative ratio (cumulative RSA/RSL)
0.50x 0.58x 0.67x 0.81x 1.15x
========================================================================
</TABLE>
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $233.0 million in the 1-30 day repricing category. The gap beyond 30 days
becomes slightly less liability sensitive as rate-sensitive assets that reprice
in those time periods are greater less in volume than rate-sensitive liabilities
that are subject to repricing in the same respective time periods. The
composition of the gap structure at June 30, 1999, will benefit the Corporation
more if interest rates fall during the next 30 days by allowing the net interest
margin to grow as liability rates would reprice more quickly than rates on
interest rate-sensitive assets. After 30 days, a rate increase would benefit
the Corporation because the volume of rate-sensitive assets repricing would
exceed the volume of rate-sensitive liabilities that would be repricing.
18 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998
----------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 6,848 $ 158 4.65% $ 21,815 $ 596 5.51%
Investment securities
U.S. Government obligations 145,301 4,066 5.64% 168,886 4,850 5.79%
Obligations of states and political
subdivisions (1) 39,415 1,462 7.48% 32,474 1,303 8.09%
Other securities 20,835 454 4.39% 22,311 493 4.46%
Loans (net of unearned interest) (1) (2) 681,177 27,973 8.28% 608,270 26,691 8.85%
------------------- -------------------
Total interest earning assets $893,576 $ 34,113 7.70% $853,756 $ 33,933 8.02%
======== ========
Cash and due from banks 29,364 31,977
Premises and equipment 24,730 24,004
Reserve for possible loan losses (7,338) (7,224)
Other assets 19,002 17,854
--------- ---------
Total Assets $959,334 $920,367
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 13,197 $ 98 1.50% $ 11,323 $ 111 1.97%
Savings deposits 85,091 1,272 3.01% 80,484 1,318 3.30%
Money market deposits 301,032 4,428 2.97% 267,784 3,937 2.96%
Time deposits 336,346 8,544 5.12% 353,387 9,715 5.54%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 5,094 128 5.07% 275 8 5.60%
Other 6,071 203 6.74% 14,764 566 7.74%
Long-term debt 28,646 780 5.49% 21,823 596 5.50%
------------------- -------------------
Total interest bearing liabilities $775,477 $ 15,453 4.02% $749,840 $ 16,251 4.37%
======== ========
Net interest spread 3.68% 3.65%
======= =======
Demand deposits 89,615 79,534
Other liabilities 7,916 7,838
Stockholders' equity 86,326 83,155
--------- ---------
Total Liabilities and Stockholders' Equity $959,334 $920,367
========= =========
Interest income / earning assets (1) $893,576 $ 34,113 7.70% $853,756 $ 33,933 8.02%
Interest expense / earning assets $893,576 $ 15,453 3.49% $853,756 16,251 3.84%
----------------- -----------------
Net interest margin (1) $ 18,660 4.21% $ 17,682 4.18%
================= =================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1999 and 1998.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
</TABLE>
19 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Change due to (1)
Average Average Total
Volume Yield/Rate Change
--------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income:
Federal funds sold ($357) ($81) ($438)
Investment securities:
U.S. Government obligations (663) (121) (784)
Obligations of states and political
subdivisions (2) 246 (87) 159
Other securities (32) (7) (39)
Loans (2) 2,758 (1,476) 1,282
--------------------------------
Change in interest income (2) $ 1,952 ($1,772) $ 180
--------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $ 28 ($41) ($13)
Savings deposits 88 (134) (46)
Money market deposits 489 2 491
Time deposits (455) (716) (1,171)
Short-term borrowings:
Federal funds purchased and repurchase agreements 121 (1) 120
Other (298) (65) (363)
Long-term debt 186 (2) 184
--------------------------------
Change in interest expense $ 159 ($957) ($798)
--------------------------------
Increase in net interest income (2) $ 1,793 ($815) $ 978
================================
<FN>
(1) Changes due to both rate and volume have been allocated proportionally.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1999 and 1998.
</TABLE>
20 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED JUNE 30, 1999 AND 1998
1999 1998
----------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 3,203 $ 37 4.63% $ 23,012 $ 316 5.51%
Investment securities
U.S. Government obligations 141,249 1,950 5.54% 166,919 2,414 5.80%
Obligations of states and political
subdivisions (1) 40,363 748 7.43% 33,052 662 8.03%
Other securities 20,683 230 4.46% 22,720 247 4.36%
Loans (net of unearned interest) (1) (2) 695,931 14,245 8.21% 609,555 13,300 8.75%
------------------- -------------------
Total interest earning assets $901,429 $ 17,210 7.66% $855,258 $ 16,939 7.94%
======== ========
Cash and due from banks 29,017 30,912
Premises and equipment 24,960 24,698
Reserve for possible loan losses (7,472) (7,434)
Other assets 18,290 18,801
--------- ---------
Total Assets $966,224 $922,235
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $ 13,117 $ 47 1.44% $ 11,677 $ 59 2.03%
Savings deposits 84,333 627 2.98% 80,471 657 3.27%
Money market deposits 301,324 2,183 2.91% 273,605 2,039 2.99%
Time deposits 338,187 4,270 5.06% 343,750 4,734 5.52%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 9,657 123 5.11% 143 2 5.61%
Other 6,200 103 6.66% 15,925 288 7.25%
Long-term debt 30,165 412 5.48% 24,670 330 5.37%
------------------- -------------------
Total interest bearing liabilities $782,983 $ 7,765 3.98% $750,241 $ 8,109 4.34%
======== ========
Net interest spread 3.68% 3.60%
======= =======
Demand deposits 89,255 80,144
Other liabilities 7,887 7,871
Stockholders' equity 86,099 83,979
--------- ---------
Total Liabilities and Stockholders' Equity 966,224 $922,235
========= =========
Interest income / earning assets (1) $901,429 $ 17,210 7.66% $855,258 $ 16,939 7.94%
Interest expense / earning assets $901,429 7,765 3.46% $855,258 8,109 3.80%
----------------- -----------------
Net interest margin (1) $ 9,445 4.20% $ 8,830 4.14%
================= =================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1999 and 1998.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
</TABLE>
21 of 24
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED JUNE 30, 1999 AND 1998
CHANGE DUE TO (1)
Average Average Total
Volume Yield/Rate Change
--------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income:
Federal funds sold ($236) ($43) ($279)
Investment securities:
U.S. Government obligations (358) (106) (464)
Obligations of states and political
subdivisions (2) 130 (44) 86
Other securities (23) 6 (17)
Loans (2) 1,678 (733) 945
--------------------------------
Change in interest income (2) $ 1,191 ($920) $ 271
--------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $ 9 ($21) ($12)
Savings deposits 35 (65) (30)
Money market deposits 199 (55) 144
Time deposits (75) (389) (464)
Short-term borrowings:
Federal funds purchased and repurchase
agreements 121 - 121
Other (164) (21) (185)
Long-term debt 74 8 82
--------------------------------
Change in interest expense $ 199 ($543) ($344)
--------------------------------
Increase in net interest income (2) $ 992 ($377) $ 615
================================
<FN>
(1) Changes due to both rate and volume have been allocated proportionally.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for
1999 and 1998.
</TABLE>
22 of 24
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the three
months ending June 30, 1999.
23 of 24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BUSEY CORPORATION
(REGISTRANT)
By: //Barbara J. Jones//
--------------------------------
Barbara J. Jones
Senior Vice President and
Chief Financial Officer
(Principal financial and
accounting officer)
Date: August 13, 1999
24 of 24
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 37,621
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 201,477
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 711,038
<ALLOWANCE> 7,614
<TOTAL-ASSETS> 991,046
<DEPOSITS> 855,146
<SHORT-TERM> 11,300
<LIABILITIES-OTHER> 7,333
<LONG-TERM> 31,000
0
0
<COMMON> 6,291
<OTHER-SE> 79,976
<TOTAL-LIABILITIES-AND-EQUITY> 991,046
<INTEREST-LOAN> 14,186
<INTEREST-INVEST> 2,666
<INTEREST-OTHER> 37
<INTEREST-TOTAL> 16,889
<INTEREST-DEPOSIT> 7,127
<INTEREST-EXPENSE> 7,765
<INTEREST-INCOME-NET> 9,124
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 287
<EXPENSE-OTHER> 7,873
<INCOME-PRETAX> 4,902
<INCOME-PRE-EXTRAORDINARY> 3,358
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,358
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 7.66
<LOANS-NON> 683
<LOANS-PAST> 1,059
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 652
<ALLOWANCE-OPEN> 7,338
<CHARGE-OFFS> 109
<RECOVERIES> 85
<ALLOWANCE-CLOSE> 7,614
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 35
</TABLE>
