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 3/31/2000 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 latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 1, 2000
- --------------------------------------------------------------
<S> <C>
Common Stock, without par value 13,473,214
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2000 December 31, 1999
---------------- -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 29,682 $ 69,722
Federal funds sold 18,300 13,500
Securities available for sale (amortized cost 2000, $225,699;
1999, $221,601) 227,585 225,046
Loans (net of unearned interest) 899,245 886,684
Allowance for loan losses (10,698) (10,403)
---------------- ----------------
Net loans $ 888,547 $ 876,281
Premises and equipment 29,200 28,647
Goodwill and other intangibles 13,961 14,344
Other assets 20,212 19,583
---------------- ----------------
Total assets $ 1,227,487 $ 1,247,123
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 104,635 $ 103,001
Interest bearing 904,791 924,980
---------------- ----------------
Total deposits $ 1,009,426 $ 1,027,981
Securities sold under agreements to repurchase 23,019 23,580
Short-term borrowings 50,970 48,327
Long-term debt 52,908 55,849
Other liabilities 9,237 9,102
---------------- ----------------
Total liabilities $ 1,145,560 $ 1,164,839
---------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,750 21,750
Retained earnings 67,560 65,572
Accumulated other comprehensive income 1,135 2,074
---------------- ----------------
Total stockholders' equity before treasury stock, unearned
ESOP shares and deferred compensation for stock grants $ 96,736 $ 95,687
Treasury stock, at cost (12,182) (10,773)
Unearned ESOP shares and deferred compensation for stock grants (2,627) (2,630)
---------------- ----------------
Total stockholders' equity $ 81,927 $ 82,284
---------------- ----------------
Total liabilities and stockholders' equity $ 1,227,487 $ 1,247,123
================ ================
Common Shares outstanding at period end 13,474,614 13,538,809
================ ================
</TABLE>
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
-------- --------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $18,239 $13,673
Interest and dividends on investment securities:
Taxable interest income 2,772 2,306
Non-taxable interest income 504 464
Dividends 30 34
Interest on federal funds sold 199 121
-------- --------
Total interest income $21,744 $16,598
-------- --------
INTEREST EXPENSE:
Deposits $ 9,460 $ 7,215
Short-term borrowings 1,223 105
Long-term debt 782 368
-------- --------
Total interest expense $11,465 $ 7,688
-------- --------
Net interest income $10,279 $ 8,910
Provision for loan losses 390 300
-------- --------
Net interest income after provision for loan losses $ 9,889 $ 8,610
-------- --------
OTHER INCOME:
Trust $ 1,095 $ 988
Commissions and brokers fees, net 408 355
Service charges on deposit accounts 1,181 732
Other service charges and fees 630 480
Security gains (losses), net (7) 179
Trading security gains (losses), net - (1)
Gain on sales of loans 446 214
Net commissions from travel services 253 279
Other operating income 386 334
-------- --------
Total other income $ 4,392 $ 3,560
-------- --------
OTHER EXPENSES:
Salaries and wages $ 3,890 $ 3,580
Employee benefits 727 711
Net occupancy expense of premises 725 647
Furniture and equipment expenses 817 730
Data processing 293 168
Stationery, supplies and printing 209 251
Amortization of intangible assets 383 341
Other operating expenses 1,671 1,497
-------- --------
Total other expenses $ 8,715 $ 7,925
-------- --------
Income before income taxes $ 5,566 $ 4,245
Income taxes 1,959 1,306
-------- --------
Net income $ 3,607 $ 2,939
======== ========
BASIC EARNINGS PER SHARE $ 0.27 $ 0.21
======== ========
DILUTED EARNINGS PER SHARE $ 0.26 $ 0.21
======== ========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.12 $ 0.11
======== ========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- ----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,607 $ 2,939
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,276 1,135
Provision for loan losses 390 300
Increase in deferred income taxes 6 6
Amortization of investment security discounts (110) (24)
Loss (gain) on sales of investment securities, net 7 (179)
Proceeds from sales of pooled loans 11,333 25,667
Loans originated for sale (8,037) (27,779)
Gain on sale of pooled loans (446) (214)
(Gain) loss on sale and disposition of premises and equipment (168) 7
Change in assets and liabilities:
(Increase) decrease in other assets (15) 132
Decrease in accrued expenses (1,399) (333)
Decrease in interest payable (419) (113)
Increase in income taxes payable 1,953 1,068
---------- ----------
Net cash provided by operating activities $ 7,978 $ 2,612
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 1,049 $ 2,033
Proceeds from maturities of securities classified available for sale 17,595 51,497
Purchase of securities classified available for sale (22,639) (43,648)
Increase in federal funds sold (4,800) (700)
Increase in loans (15,506) (21,636)
Proceeds from sale of premises and equipment 407 20
Purchases of premises and equipment (1,682) (1,254)
---------- ----------
Net cash (used in) investing activities ($25,576) ($13,688)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in certificates of deposit ($29,202) ($3,941)
Net increase in demand, money market and saving deposits 10,647 5,054
Cash dividends paid (1,619) (1,507)
Purchase of treasury stock (1,409) (352)
Proceeds from sale of treasury stock - 353
Net decrease in securities sold under agreement to repurchase (561) -
Proceeds from short-term notes payable 16,926 -
Principal payments on short-term borrowings (14,283) -
Proceeds from long-term borrowings 10,000 -
Principal payments on long-term borrowings (12,941) 5,000
---------- ----------
Net cash provided by (used in) financing activities ($22,442) $ 4,607
---------- ----------
Net increase (decrease) in cash and cash equivalents ($40,040) ($6,469)
Cash and due from banks, beginning $ 69,722 $ 35,644
---------- ----------
Cash and due from banks, ending $ 29,682 $ 29,175
========== ==========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---------- ----------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Net income $ 3,607 $ 2,939
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period ($1,566) ($1,758)
Less reclassification adjustment for (gains) losses included in net income 7 (179)
--------- ---------
Other comprehensive income, before tax (1,559) (1,937)
Income tax expense related to items of other comprehensive income 620 678
--------- ---------
Other comprehensive income, net of tax ($939) ($1,259)
Comprehensive income $ 2,668 $ 1,680
========= =========
</TABLE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: 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 2: LOANS
The major classifications of loans at March 31, 2000 and December 31, 1999 were
as follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------------------------
(Dollars in thousands)
<S> <C> <C>
Commercial $ 124,092 $ 119,800
Real estate construction 54,314 52,479
Real estate - farmland 15,800 15,841
Real estate - 1-4 family residential mortgage 358,244 345,114
Real estate - multifamily mortgage 63,541 63,805
Real estate - non-farm nonresidential mortgage 216,704 213,156
Installment 49,964 56,470
Agricultural 16,682 20,126
-------------------------------------
$ 899,341 $ 886,791
Less:
Unearned Interest 96 107
-------------------------------------
$ 899,245 $ 886,684
Less:
Allowance for loan losses 10,698 10,403
-------------------------------------
Net loans $ 888,547 $ 876,281
=====================================
</TABLE>
The real estate-mortgage category includes loans held for sale with carrying
values of $2,640,000 at March 31, 2000 and $1,375,000 at December 31, 1999;
these loans had fair market values of $2,663,000 and $1,393,000 respectively.
On December 31, 1999, the installment category includes loans held for sale with
carrying values of $4,115,000; these loans had a fair market value of
$4,558,000.
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<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: INCOME PER SHARE
Net income per common share has been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net income $ 3,607,000 $ 2,939,000
Shares:
Weighted average common shares outstanding 13,368,992 13,689,431
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 273,647 298,636
----------- -----------
Weighted average common shares outstanding,
as adjusted for diluted earnings per share calculation 13,642,639 13,988,067
=========== ===========
Basic earnings per share $ 0.27 $ 0.21
=========== ===========
Diluted earnings per share $ 0.26 $ 0.21
=========== ===========
</TABLE>
NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND 1999.
<TABLE>
<CAPTION>
2000 1999
------- ------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $11,884 $7,801
======= ======
Income taxes $ 0 $ 185
======= ======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $ 0 $ 52
======= ======
</TABLE>
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<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 March 31, 2000
(unaudited) when compared with December 31, 1999 and the results of operations
for the three months ended March 31, 2000 and 1999 (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.
First Busey Corporation acquired First Federal Savings & Loan Association of
Bloomington on October 29, 1999, when it acquired the outstanding shares of
First Federal's parent Eagle BancGroup, Inc. First Federal had total assets of
$172 million as of March 31, 2000, and $183 million as of December 31, 1999. A
summary of this subsidiary's earnings for the three months ending March 31,
2000, is included in the Reportable Segments section of this report.
FINANCIAL CONDITION AT MARCH 31, 2000 AS COMPARED TO DECEMBER 31, 1999
Total assets decreased $19,636,000, or 1.6%, to $1,227,487,000 at March 31, 2000
from $1,247,123,000 at December 31, 1999.
Securities available for sale increased $2,539,000 or 1.1%, to $227,585,000 at
March 31, 2000 from $225,046,000 at December 31, 1999.
Loans increased $12,561,000 or 1.4%, to $899,245,000 at March 31, 2000 from
$886,684,000 at December 31, 1999, primarily due to increases in commercial,
real estate construction, 1-4 family residential mortgages, and non-farm,
non-residential mortgages. These increases were partially offset by decreases
in installment and agricultural loans.
Total deposits decreased $18,555,000, or 1.8%, to $1,009,426,000 at March 31,
2000 from $1,027,981,000 at December 31, 1999. Non interest-bearing deposits
increased 1.6% to $104,635,000 at March 31, 2000 from $103,001,000 at December
31, 1999. Interest-bearing deposits decreased 2.2% to $904,791,000 at March 31,
2000 from $924,980,000 at December 31, 1999. Long-term borrowings decreased
$2,941,000 to $52,908,000 at March 31, 2000, as compared to $55,849,000 at
December 31, 1999.
In the first three months of 2000, the Corporation repurchased 64,195 shares of
its common stock at an aggregate cost of $1,409,000. 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.
The following table sets forth the components of non-performing assets and past
due loans.
<TABLE>
<CAPTION>
March 31, 2000 December 31,1999
---------------- ------------------
(Dollars in thousands)
<S> <C> <C>
Non-accrual loans $ 1,159 $ 1,220
Loans 90 days past due, still accruing 901 897
Restructured loans - -
Other real estate owned 979 459
Non-performing other assets 7 5
---------------- ------------------
Total non-performing assets $ 3,046 $ 2,581
================ ==================
Total non-performing assets as a percentage of total assets 0.25% 0.21%
================ ==================
Total non-performing assets as a percentage of loans plus non-performing assets 0.34% 0.29%
================ ==================
</TABLE>
The ratio of non-performing assets to loans plus non-performing assets
increased to 0.34% at March 31, 2000
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<PAGE>
from 0.29 % at December 31, 1999. This was due to increases in the balance
of other real estate owned offset partially by a decrease in non-accrual loans.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO MARCH 31, 1999
SUMMARY
- -------
Net income for the three months ended March 31, 2000 increased 22.7% to
$3,607,000 as compared to $2,939,000 for the comparable period in 1999. Diluted
earnings per share increased 23.8% to $.26 at March 31, 2000 as compared to $.21
for the same period in 1999.
Operating earnings, which exclude security gains (losses) and the related tax
expense (benefit), were $3,612,000, or $.26 per share for the three months ended
March 31, 2000, as compared to $2,823,000, or $.20 per share for the same period
in 1999.
The Corporation's return on average assets was 1.18% for the three months ended
March 31, 2000, as compared to 1.25% achieved for the comparable period in 1999.
The return on average assets from operations of 1.19% for the three months ended
March 31, 2000 was a slight decline from the 1.20% achieved in the comparable
period of 1999.
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 3.74% for the three months ended March 31, 2000, as compared to 4.22% for
the same period in 1999. The net interest margin expressed as a percentage of
average total assets, also on a fully taxable equivalent basis, was 3.48% for
the three months ended March 31, 2000, compared to 3.93% for the same period in
1999.
During the three months ended March 31, 2000, the Corporation recognized
security losses of approximately $5,000, after income taxes, representing -0.14%
of net income. During the same period in 1999, security gains of approximately
$116,000 after income taxes were recognized, representing 3.9% of net income.
INTEREST INCOME
- ---------------
Interest income, on a tax equivalent basis, for the three months ended March 31,
2000 increased 30.6% to $22,068,000 from $16,903.000 for the comparable period
in 1999. The increase in interest income resulted from increases in the average
balances of all categories of interest-earning assets. The average yield on
interest-earning assets increased 5 basis points for the three months ended
March 31, 2000, as compared to the same period in 1999, due to increases in the
yields on Fed funds sold and investments offset by the decline in yield on
loans.
INTEREST EXPENSE
- ----------------
Total interest expense for the three months ended March 31, 2000 increased to
$11,465,000 from $7,688,000 for the comparable period. The increase resulted
primarily from increases in the average balances of time deposits and
borrowings, combined with slightly higher rates on interest-bearing transaction
deposits, money market deposits, time deposits, and long-term debt for the three
months ended March 31, 2000, as compared to the same period in 1999.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses of $390,000 for the three months ended March 31,
2000 is $90,000 more than the provision for the comparable period in 1999. The
provision and the low level of net charge-offs for the period resulted in the
reserve representing 1.19% of total loans on March 31, 2000, slightly higher
than the 1.17% level at December 31, 1999. The adequacy of the reserve for loan
losses is consistent with management's consideration of
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the composition of the portfolio, recent credit quality experience, and
prevailing economic conditions.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security transactions, increased 30.1% for the
three months ended March 31, 2000 as compared to the same period in 1999. This
was a combination of increased trust revenue, service charges on deposit
accounts, and other service charges and fees. Gains of $446,000 were recognized
on the sale of $10,887,000 of loans for the three months ended March 31, 2000 as
compared to gains of $214,000 on the sale of $25,454,000 of loans in the prior
year period. The gains recognized in the three months ending March 31, 2000
include $350,000 in gains on the sale of the Corporation's credit card loan
portfolio, which had balances of $4,116,000.
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 10.0% or $790,000 for the three months ended March
31, 2000 as compared to the same period in 1999.
Salaries and wages expense increased $310,000 or 8.7% and employee benefits
expense increased $16,000 or 2.3% for the three months ended March 31, 2000, as
compared to the same period last year. The Corporation had 495 and 439
full-time-equivalent employees as of March 31, 2000 and 1999, respectively.
Occupancy and furniture and equipment expenses increased 12.0% to $1,542,000 for
the three months ended March 31, 2000 from $1,377,000 in the prior year period.
Data processing expense increased $125,000 to $293,000 for the three months
ended March 31, 2000 from the prior year period. Other operating expenses
increased $174,000 or 11.6% for the three months ended March 31, 2000 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 1.42% for the three
months ended March 31, 2000 from 1.94% 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 and amortization expense). The
consolidated efficiency ratio for the three months ended March 31, 2000 was
55.5% as compared to 60.2% for the prior year period. When the gains on the
sales of loans are excluded, these ratios are 57.2% and 61.3%, respectively.
The change in the current year efficiency ratio is due to the income and expense
items noted above.
Income taxes for the three months ended March 31, 2000 increased to $1,959,000
as compared to $1,306,000 for the comparable period in 1999. The increase is
due to the higher level of pre-tax income and the addition of state income
taxes. The Corporation began accruing state income taxes in September, 1999,
following the expiration of state net operating losses. As a percent of income
before taxes, the provision for income taxes increased to 35.2% for the three
months ended March 31, 2000 from 30.8% for the same period in 1999.
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 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The Statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999. In June
of 1999, Statement of Financial Accounting
Standard No. 137 was issued to extend the effective date by one year to all
fiscal quarters of fiscal years beginning after June 15, 2000. 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.
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<PAGE>
YEAR 2000 COMPLIANCE
- --------------------
We have tested our products and believe that they are year 2000 compliant. We
have also inquired of significant vendors of our internal systems as to their
year 2000 readiness, and we have also tested our material internal systems. We
believe that, based on these tests and assurances of our vendors, we will not
incur material costs to resolve year 2000 issues for our products and internal
systems. Furthermore, to date we have not experienced any year 2000 problems
and our customers or vendors have not informed us of any material year 2000
problems. If it comes to our attention that there are any 2000 problems with
our products or that some of our third-party hardware and software used in our
internal systems are not year 2000 compliant, then we will endeavor to make
modifications to our products and internal systems, or purchase new internal
systems, to quickly respond to the problem. The costs already incurred by us
to date related to year 2000 compliance are not material, and we do not
anticipate incurring additional material costs related to year 2000 compliance.
REPORTABLE SEGMENTS AND RELATED INFORMATION
- -------------------------------------------
First Busey Corporation has three reportable segments, Busey Bank, First Busey
Trust & Investment Co., and First Federal Savings and Loan Association of
Bloomington. 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. First Federal Savings and Loan Association of Bloomington
provides a full range of banking services to individual and corporate customers
in Bloomington, Illinois, and the surrounding communities.
The Corporation's three 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
three 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>
March 31, 2000
--------------------------------------------------------------------------------------------------------
First Federal First Busey
Savings & Trust & Consolidated
Busey Bank Loan Investment Co. All Other Totals Eliminations Totals
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 18,626 $ 3,046 $ 41 $ 33 $ 21,746 ($2) $ 21,744
Interest expense 9,150 1,638 - 627 11,415 50 11,465
Other income 2,489 171 1,101 5,237 8,998 (4,606) 4,392
Net income 3,501 265 361 3,764 7,891 (4,284) 3,607
Total assets 1,041,904 173,455 3,399 128,302 1,347,060 (119,573) 1,227,487
<CAPTION>
March 31, 1999
-----------------------------------------------------------------------------------------
First Busey
Trust & Consolidated
Busey Bank Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 16,528 $ 45 $ 26 $ 16,599 ($1) $ 16,598
Interest expense 7,589 - 92 7,681 7 7,688
Other income 2,003 999 4,172 7,174 (3,614) 3,560
Net income 2,861 357 3,081 6,299 (3,360) 2,939
Total assets 944,218 3,704 103,375 1,051,297 (92,851) 958,446
</TABLE>
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<PAGE>
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.
The sources of short-term liquidity utilized by the Corporation consist of
non-reinvested asset maturities, deposits and capital funds. 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.
The Corporation does not deal in or use brokered deposits as a source of
liquidity. The Corporation has an operating line with American National Bank
and Trust Company of Chicago in the amount of $10,000,000 with $2,325,000
available as of March 31, 2000. Long-term liquidity needs will be satisfied
primarily through retention of capital funds.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) decreased to 14.1% at March 31, 2000 from
15.4% at December 31, 1999. This is the ratio of total large liabilities to
total liabilities. This change was due to a $18,914,000 decrease in time
deposits over $100,000 partially offset by the increase in short-term debt.
CAPITAL RESOURCES
- -----------------
Other than from the issuance of common stock, the Corporation's primary source
of capital is retained net income. During the three months ended March 31,
2000, the Corporation earned $3,607,000 and paid dividends of $1,619,000 to
stockholders, resulting in a retention of current earnings of $1,988,000. The
Corporation's dividend payout for the three months ended March 31, 2000 was
44.9%. The Corporation's total risk-based capital ratio was 9.48% and the
leverage ratio was 5.52%as of March 31 2000, as compared to 9.40% and 5.62%
respectively as of December 31, 1999. The Corporation and its bank subsidiary
were well above all minimum required capital ratios as of March 31, 2000.
12 of 18
<PAGE>
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.
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of March 31, 2000.
<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>
Interest-bearing deposits $ 967 $ - $ - $ - $ - $ 967
Federal funds sold 18,300 - - - - 18,300
Investment securities
U.S. Governments 8,915 12,779 2,900 42,378 101,309 168,281
Obligations of states and
political subdivisions 231 747 - 3,120 36,577 40,675
Other securities 8,283 1,272 - - 9,074 18,629
Loans (net of unearned int.) 247,424 68,401 86,160 122,352 374,908 899,245
-------------------------------------------------------------------------
Total rate-sensitive assets $ 284,120 $ 83,199 $ 89,060 $ 167,850 $521,868 $1,146,097
-------------------------------------------------------------------------
Interest bearing transaction
deposits $ 43,640 $ - $ - $ - $ - $ 43,640
Savings deposits 99,547 - - - - 99,547
Money market deposits 307,626 - - - - 307,626
Time deposits 48,385 60,518 87,049 101,744 156,282 453,978
Short-term borrowings:
Federal funds purchased &
repurchase agreements 23,019 - - - - 23,019
Other 4,975 - 45,995 - - 50,970
Long-term debt 1,643 4,306 4,976 16,984 24,999 52,908
-------------------------------------------------------------------------
Total rate-sensitive
liabilities $ 528,835 $ 64,824 $ 138,020 $ 118,728 $181,281 $1,031,688
-------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($244,715) $ 18,375 ($48,960) $ 49,122 $340,587 $ 114,409
-------------------------------------------------------------------------
Cumulative Gap ($244,715) ($226,340) ($275,300) ($226,178) $114,409
=========================================================================
Cumulative amounts as a
percentage of total
rate-sensitive assets -21.35% -19.75% -24.02% -19.73% 9.98%
=========================================================================
Cumulative ratio 0.54 0.62 0.62 0.73 1.11
=========================================================================
</TABLE>
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $244.7 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 in volume than rate-sensitive liabilities that
are subject to repricing in the same respective time periods. The composition
of the gap structure at March 31, 2000 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.
13 of 18
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED MARCH 31, 2000 AND 1999
2000 1999
------------------------------ ----------------------------
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 $ 14,509 $ 199 5.52% $ 10,532 $ 121 4.66%
Investment securities
U.S. Government obligations 177,376 2,559 5.80% 149,384 2,116 5.74%
Obligations of states and political
subdivisions (1) 40,517 775 7.69% 38,456 714 7.53%
Other securities 21,360 242 4.56% 21,029 224 4.32%
Loans (net of unearned interest) (1) (2) 885,669 18,293 8.31% 666,260 13,728 8.36%
--------------------- -------------------
Total interest earning assets $1,139,431 $ 22,068 7.79% $885,661 $ 16,903 7.74%
======== ========
Cash and due from banks 33,650 29,714
Premises and equipment 29,147 24,487
Reserve for possible loan losses (10,510) (7,203)
Other assets 33,197 19,094
----------- ---------
Total Assets $1,224,915 $951,753
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 24,490 $ 137 2.25% $ 13,278 $ 52 1.59%
Savings deposits 97,502 732 3.02% 85,856 645 3.05%
Money market deposits 325,832 2,591 3.20% 300,737 2,244 3.03%
Time deposits 460,732 6,000 5.24% 334,485 4,274 5.18%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 25,021 356 5.72% 481 6 5.06%
Other 47,849 867 7.29% 5,900 99 6.81%
Long-term debt 53,744 782 5.85% 27,111 368 5.50%
--------------------- -------------------
Total interest-bearing liabilities $1,035,170 $ 11,465 4.45% $767,848 $ 7,688 4.06%
======== ========
Net interest spread 3.34% 3.68%
======= =======
Demand deposits 99,901 89,223
Other liabilities 8,565 7,891
Stockholders' equity 81,279 86,791
----------- ---------
Total Liabilities and Stockholders' Equity $1,224,915 $951,753
=========== =========
Interest income / earning assets (1) $1,139,431 $ 22,068 7.79% $885,661 $ 16,903 7.74%
Interest expense / earning assets $1,139,431 $ 11,465 4.05% $885,661 $ 7,688 3.52%
----------------- -----------------
Net interest margin (1) $ 10,603 3.74% $ 9,215 4.22%
================= =================
<FN>
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2000 and 1999.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
</TABLE>
14 of 18
<PAGE>
<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED MARCH 31, 2000 AND 1999
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 $ 52 $ 26 $ 78
Investment securities:
U.S. Government obligations 420 23 443
Obligations of states and political
subdivisions (2) 43 18 61
Other securities 4 14 18
Loans (2) 4,644 (79) 4,565
-------------------------------
Change in interest income (2) $ 5,163 $ 2 $ 5,165
-------------------------------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 57 $ 28 $ 85
Savings deposits 93 (6) 87
Money market deposits 206 141 347
Time deposits 1,679 47 1,726
Short-term borrowings:
Federal funds purchased and repurchase
agreements 349 1 350
Other 760 8 768
Long-term debt 389 25 414
-------------------------------
Change in interest expense $ 3,533 $ 244 $ 3,777
-------------------------------
Increase in net interest income (2) $ 1,630 ($242) $ 1,388
===============================
<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
2000 and 1999.
</TABLE>
15 of 18
<PAGE>
ITEM 3: QUANTITAVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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 subsidiary banks, Busey Bank, and First Federal have
asset-liability committees which meet at least quarterly to review current
market conditions and attempt to structure the banks' balance sheets to ensure
stable net interest income despite potential changes in interest rates with all
other variables constant.
The asset-liability committees use 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 thes asset-liability
committees 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 in the Rate Sensitive Assets and
Liabilities section of this report.
The committees do 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 committees supplement 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 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
points 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 March 31, 2000, 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 rates over a one-year period (2.49%) (1.09%) (0.54%) (1.04%)
</TABLE>
16 of 18
<PAGE>
PART II - OTHER INFORMATION
ITEM 4:
The annual meeting of Stockholders of First Busey Corporation was held on April
25, 2000. At that meeting, the following matters were approved by the
Stockholders:
1. Election of the following fourteen (14) directors to serve until the next
annual meeting of stockholders:
Joseph M. Ambrose Samuel P. Banks
T. O. Dawson Victor F. Feldman
Kenneth M. Hendren E. Phillips Knox
P. David Kuhl V. B. Leister, Jr.
Douglas C. Mills Linda M. Mills
Robert C. Parker David C. Thies
Edwin A. Scharlau II Arthur R. Wyatt
2. Ratification of the appointment of McGladrey & Pullen, LLP as independent
auditors for the fiscal year ending December 31, 2000.
For: 10,900,666 (80.83%) Against : 140,067 (1.04%)
Abstain: 118,510 (0.88%)
ITEM 5:
Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the three months
ending March 31, 2000.
17 of 18
<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
Chief Financial Officer
(Principal financial and accounting officer)
Date: May 15, 2000
18 of 18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 28,715
<INT-BEARING-DEPOSITS> 967
<FED-FUNDS-SOLD> 18,3000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 227,585
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 899,245
<ALLOWANCE> 10,698
<TOTAL-ASSETS> 1,227,487
<DEPOSITS> 1,009,426
<SHORT-TERM> 73,989
<LIABILITIES-OTHER> 9,237
<LONG-TERM> 52,908
0
0
<COMMON> 6,291
<OTHER-SE> 75,636
<TOTAL-LIABILITIES-AND-EQUITY> 1,227,487
<INTEREST-LOAN> 18,239
<INTEREST-INVEST> 3,306
<INTEREST-OTHER> 199
<INTEREST-TOTAL> 21,744
<INTEREST-DEPOSIT> 9,460
<INTEREST-EXPENSE> 11,465
<INTEREST-INCOME-NET> 10,279
<LOAN-LOSSES> 390
<SECURITIES-GAINS> (7)
<EXPENSE-OTHER> 8,715
<INCOME-PRETAX> 5,566
<INCOME-PRE-EXTRAORDINARY> 3,607
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,607
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.26
<YIELD-ACTUAL> 7.79
<LOANS-NON> 1,159
<LOANS-PAST> 901
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 843
<ALLOWANCE-OPEN> 10,403
<CHARGE-OFFS> 131
<RECOVERIES> 36
<ALLOWANCE-CLOSE> 10,698
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 544
</TABLE>
