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 9/30/2000 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
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(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 October 31, 2000
-------------------------------------------------------------------
<S> <C>
Common Stock, without par value 13,461,842
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2000 December 31, 1999
------------------ -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 49,395 $ 69,722
Federal funds sold 15,100 13,500
Securities available for sale (amort. cost 2000 $212,843; 1999 $221,601) 217,352 225,046
Loans (net of unearned interest) 987,014 886,684
Allowance for loan losses (11,698) (10,403)
------------ ------------
Net loans $ 975,316 $ 876,281
Premises and equipment 31,272 28,647
Goodwill and other intangibles 13,608 14,344
Other assets 20,959 19,583
------------ ------------
Total assets $ 1,323,002 $ 1,247,123
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 121,370 $ 103,001
Interest bearing 986,284 924,980
------------ ------------
Total deposits $ 1,107,654 $ 1,027,981
Securities sold under agreements to repurchase 22,952 23,580
Short-term borrowings 38,320 48,327
Long-term debt 54,951 55,849
Other liabilities 10,962 9,102
------------ ------------
Total liabilities $ 1,234,839 $ 1,164,839
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,962 21,750
Retained earnings 71,836 65,572
Accumulated other comprehensive income 3,158 2,074
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP $ 103,247 $ 95,687
shares and deferred compensation for stock grants
Treasury stock, at cost (12,453) (10,773)
Unearned ESOP shares and deferred compensation for stock grants (2,631) (2,630)
------------ ------------
Total stockholders' equity $ 88,163 $ 82,284
------------ ------------
Total liabilities and stockholders' equity $ 1,323,002 $ 1,247,123
============ ============
Common Shares outstanding at period end 13,468,545 13,538,809
============ ============
</TABLE>
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
--------- ---------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $58,525 $42,930
Interest and dividends on investment securities:
Taxable interest income 7,898 6,900
Non-taxable interest income 1,522 1,445
Dividends 95 95
Interest on federal funds sold 317 175
------- --------
Total interest income $68,357 $51,545
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INTEREST EXPENSE:
Deposits $30,008 $21,962
Short-term borrowings 4,186 834
Long-term debt 2,183 1,300
------- --------
Total interest expense $36,377 $24,096
------- --------
Net interest income $31,980 $27,449
Provision for loan losses 1,675 900
------- --------
Net interest income after provision for loan losses $30,305 $26,549
------- --------
OTHER INCOME:
Trust $ 3,249 $ 2,983
Commissions and brokers' fees, net 1,408 1,071
Service charges on deposit accounts 3,886 2,554
Other service charges and fees 1,570 1,621
Security gains, net 347 696
Trading security gains (losses), net - (1)
Net commissions from travel services 700 838
Gain on sales of pooled loans 827 759
Other operating income 1,359 810
------- --------
Total other income $13,346 $11,331
------- --------
OTHER EXPENSES:
Salaries and wages $11,908 $10,776
Employee benefits 2,174 2,076
Net occupancy expense of bank premises 2,214 2,009
Furniture and equipment expenses 2,561 2,505
Data processing 955 553
Stationery, supplies and printing 750 651
Amortization of intangible assets 1,165 826
Other operating expenses 4,772 4,446
------- --------
Total other expenses $26,499 $23,842
------- --------
Income before income taxes $17,152 $14,038
Income taxes 6,080 4,287
------- --------
NET INCOME $11,072 $ 9,751
======= ========
BASIC EARNINGS PER SHARE $ 0.83 $ 0.71
======= ========
DILUTED EARNINGS PER SHARE $ 0.81 $ 0.70
======= ========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.36 $ 0.33
======= ========
</TABLE>
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
--------- ---------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $20,914 $15,071
Interest and dividends on investment securities:
Taxable interest income 2,548 2,445
Non-taxable interest income 511 495
Dividends 31 30
Interest on federal funds sold 22 17
------- -------
Total interest income $24,026 $18,058
------- -------
INTEREST EXPENSE:
Deposits $10,810 $ 7,620
Short-term borrowings 1,615 503
Long-term debt 686 520
------- -------
Total interest expense $13,111 $ 8,643
------- -------
Net interest income $10,915 $ 9,415
Provision for loan losses 690 300
------- -------
Net interest income after provision for loan losses $10,225 $ 9,115
------- -------
OTHER INCOME:
Trust $ 993 $ 933
Commissions and brokers' fees, net 453 352
Service charges on deposit accounts 1,378 995
Other service charges and fees 425 572
Security gains, net 322 230
Net commissions from travel services 216 244
Gain on sales of pooled loans 307 239
Other operating income 244 255
------- -------
Total other income $ 4,338 $ 3,820
------- -------
OTHER EXPENSES:
Salaries and wages $ 4,107 $ 3,632
Employee benefits 726 681
Net occupancy expense of bank premises 779 695
Furniture and equipment expenses 884 936
Data processing 232 200
Stationery, supplies and printing 297 187
Amortization of intangible assets 369 239
Other operating expenses 1,661 1,474
------- -------
Total other expenses $ 9,055 $ 8,044
------- -------
Income before income taxes $ 5,508 $ 4,891
Income taxes 1,975 1,437
------- -------
NET INCOME $ 3,533 $ 3,454
======= =======
BASIC EARNINGS PER SHARE $ 0.27 $ 0.25
======= =======
DILUTED EARNINGS PER SHARE $ 0.26 $ 0.25
======= =======
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.12 $ 0.11
======= =======
</TABLE>
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- -----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,072 $ 9,751
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,906 3,293
Provision for loan losses 1,675 900
Decrease in deferred income taxes (513) (774)
Amortization of investment security discounts (245) (96)
Gain on sales of investment securities, net (347) (696)
Proceeds from sales of pooled loans 40,834 77,232
Loans originated for sale (39,972) (68,103)
Gain on sale of pooled loans (827) (759)
Loss on sales and dispositions of premises and equipment 1 20
Change in assets and liabilities:
Increase in other assets (2,105) (2,258)
(Decrease) increase in accrued expenses (1,564) 365
Increase in interest payable 744 27
Increase (decrease) in income taxes payable 2,680 (105)
---------- -----------
Net cash provided by operating activities $ 15,339 $ 18,797
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 16,245 $ 5,978
Proceeds from maturities of securities classified available for sale 29,268 80,244
Purchase of securities classified available for sale (35,433) (96,524)
Increase in federal funds sold (1,600) (24,700)
Increase in loans (100,745) (81,901)
Purchases of premises and equipment (5,828) (2,790)
Proceeds from sales of premises and equipment 576 26
---------- -----------
Net cash (used in) investing activities ($97,517) ($119,667)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in certificates of deposit 45,773 54,043
Net increase in demand, money market and saving deposits 33,900 5,323
Cash dividends paid (4,808) (4,514)
Purchase of treasury stock (1,881) (4,249)
Proceeds from sale of treasury stock 400 1,033
Proceeds from short-term borrowings 55,925 2,400
Principal payments on short-term borrowings (65,932) (900)
Proceeds from long-term borrowings 18,000 16,000
Principal payments on long-term borrowings (18,898) -
Net increase (decrease) in federal funds purchased,
repurchase agreements and Federal Reserve discount borrowings (628) 23,776
---------- -----------
Net cash provided by financing activities $ 61,851 $ 92,912
---------- -----------
Net decrease in cash and cash equivalents ($20,327) ($7,958)
Cash and due from banks, beginning 69,722 35,644
---------- -----------
Cash and due from banks, ending $ 49,395 $ 27,686
========== ===========
</TABLE>
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<TABLE>
<CAPTION>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONSOLIDATED INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
------- --------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Net Income $11,072 $9,751
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period $ 2,141 ($4,226)
Less reclassification adjustment for gains included in net income 347 696
------- --------
Other comprehensive income, before tax $ 1,794 ($4,922)
Income tax expense related to items of other comprehensive income $ 710 ($1,465)
------- --------
Other comprehensive income, net of tax $ 1,084 ($3,457)
------- --------
Comprehensive income $12,156 $6,294
======= ========
</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 September 30, 2000 and December 31, 1999
were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------------------------
(Dollars in thousands)
<S> <C> <C>
Commercial $ 134,846 $ 119,800
Real estate construction 64,479 52,479
Real estate - farmland 15,692 15,841
Real estate - 1-4 family residential mortgage 406,063 345,114
Real estate - multifamily mortgage 64,633 63,805
Real estate - non-farm nonresidential mortgage 228,186 213,156
Installment 52,363 56,470
Agricultural 20,541 20,126
----------------------------------------
$ 986,803 $ 886,791
Less: unearned interest (211) 107
----------------------------------------
Less: $ 987,014 $ 886,684
Allowance for loan losses 11,698 10,403
----------------------------------------
Net loans $ 975,316 $ 876,281
========================================
</TABLE>
The real estate-mortgage category includes loans held for sale with carrying
values of $5,404,000 at
September 30, 2000 and $1,375,000 at December 31, 1999; these loans had fair
market values of $5,455,000 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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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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 3,533,000 $ 3,454,000 $11,072,000 $ 9,751,000
Shares:
Weighted average common shares outstanding 13,350,088 13,602,302 13,359,036 13,639,763
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 216,975 325,042 249,984 324,474
----------- ----------- ----------- -----------
Weighted average common shares outstanding,
as adjusted 13,567,063 13,927,344 13,609,020 13,967,237
=========== =========== =========== ===========
Basic earnings per share $ 0.27 $ 0.25 $ 0.83 $ 0.71
----------- ----------- ----------- -----------
Diluted earnings per share $ 0.26 $ 0.25 $ 0.81 $ 0.70
----------- ----------- ----------- -----------
</TABLE>
NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2000 AND 1999.
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $35,633 $24,069
======= =======
Income taxes $ 3,921 $ 4,392
======= =======
</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 September 30,
2000 (unaudited) when compared with December 31, 1999 and the results of
operations for the nine months ended September 30, 2000 and 1999 (unaudited) and
the results of operations for the three months ended September 30, 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. On June 10, 2000, First Federal's
name was changed to Busey Bankfsb. On this same date, Busey Bank branch offices
located in McLean County in Illinois were transferred to Busey Bankfsb. Busey
Bankfsb had total assets of $273 million as of September 30, 2000, and $183
million as of December 31, 1999. A summary of this subsidiary's earning for the
nine months ending September 30, 2000, is included in the Reportable Segments
section of this report.
FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AS COMPARED TO DECEMBER 31, 1999
Total assets increased $75,879,000, or 6.1%, to $1,323,002,000 at September 30,
2000 from $1,247,123,000 at December 31, 1999.
Securities available for sale decreased $7,694,000, or 3.4%, to $217,352,000 at
September 30, 2000 from $225,046,000 at December 31, 1999.
Loans increased $100,330,000 or 11.3%, to $987,014,000 at September 30, 2000
from $886,684,000 at December 31, 1999, primarily due to increases in commercial
and mortgage loans. Loan growth has occurred in all markets, but it has been
especially strong in Busey Bank's loan production office in Fort Meyers,
Florida, and its branch office in Indianapolis, Indiana. Loan growth in these
two markets represents $45,681,000 of the total loan growth during the nine
month period.
With recent changes in the interest-rate environment, the Corporation has chosen
to fund its asset growth primarily through deposit growth rather than through
higher-cost short-term debt instruments. Total deposits increased $79,673,000,
or 7.8%, to $1,107,654,000 at September 30, 2000 from $1,027,981,000 at December
31, 1999. Non-interest bearing deposits increased 17.8% to $121,370,000 at
September 30, 2000 from $103,001,000 at December 31, 1999. Interest-bearing
deposits increased 6.6% to $986,284,000 at September 30, 2000 from $924,890,000
at December 31, 1999. Short-term borrowings decreased $10,007,000 to
$38,320,000 at September 30, 2000, as compared to $48,327,000 at December 31,
1999.
In the first nine months of 2000, the Corporation repurchased 90,964 shares of
its common stock at an aggregate cost of $1,881,000. 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.
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The following table sets forth the components of non-performing assets and past
due loans.
<TABLE>
<CAPTION>
September 30, 2000 December 31,1999
------------------ ----------------
(Dollars in thousands)
<S> <C> <C>
Non-accrual loans $ 299 $ 1,220
Loans 90 days past due, still accruing 2,836 897
Restructured loans - -
Other real estate owned 952 929
Non-performing other assets 1 5
------------------ ---------------
Total non-performing assets $ 4,088 $ 3,051
================== ===============
Total non-performing assets as a percentage of total assets 0.31% 0.24%
================== ===============
Total non-performing assets as a percentage of loans plus non-
performing assets 0.41% 0.34%
================== ===============
</TABLE>
The ratio of non-performing assets to loans plus non-performing assets increased
to 0.41% at September 30, 2000 from 0.34% at December 31, 1999. This was due
primarily to an increase in the balance of loans 90 days past due and still
accruing, partially offset by a decrease in non-accrual loans.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO SEPTEMBER 30, 1999
SUMMARY
-------
Net income for the nine months ended September 30, 2000 increased 13.5% to
$11,072,000 as compared to $9,751,000 for the comparable period in 1999.
Diluted earnings per share increased 15.7% to $.81 at September 30, 2000 as
compared to $.70 for the same period in 1999.
Operating earnings, which exclude security gains and the related tax expense,
were $10,863,000, or $.80 per share for the nine months ended September 30,
2000, as compared to $9,299,000, or $.67 per share for the same period in 1999.
The Corporation's return on average assets was 1.19% for the nine months ended
September 30, 2000, as compared to 1.33% for the comparable period in 1999. The
return on average assets from operations of 1.17% for the nine months ended
September 30, 2000 was 10 basis points lower than the 1.27% level 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 3.81% for the nine months ended September 30, 2000, or 35 basis points lower
than the 4.16% 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 3.54% for the nine months ended September 30, 2000, compared to 3.88%
for the same period in 1999. As interest rates have risen, the cost of
interest-bearing liabilities has increased by greater degree than the yields
earned on interest-earning assets have increased.
During the nine months ended September 30, 2000, the Corporation recognized
security gains of approximately $209,000, after income taxes, representing 1.9%
of net income. During the same period in 1999, security gains of $452,000,
after income taxes, were recognized, representing 4.6% of net income.
INTEREST INCOME
---------------
Interest income, on a tax equivalent basis, for the nine months ended September
30, 2000 increased 32.1% to $69,337,000 from $52,495,000 for the comparable
period in 1999. The increase in interest income resulted primarily from an
increase in average earning assets of $244,550,000 for the period ended
September 30, 2000, as compared to the same period of 1999. Particularly
significant is the large growth in loan volumes which produce higher yields than
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the other categories of interest-earning assets. Increases in the yields earned
on all categories of interest-earning assets also contributed to the growth in
interest income. The average yield on interest-earning assets increased from
7.69% to 8.01% in the current period when compared to the same period in 1999.
INTEREST EXPENSE
----------------
Total interest expense increased $12,281,000 or 51.0% for the nine months ended
September 30, 2000 as compared to the prior year period. Again, volume growth
in the average balances of all interest-bearing liability categories is the
primary reason for this increase, with the increase in the rates paid on most
categories of interest-bearing liabilities also contributing to the growth in
interest expense.
PROVISION FOR LOAN LOSSES
-------------------------
The provision for loan losses of $1,675,000 for the nine months ended September
30, 2000 is $775,000 more than the provision for the comparable period in 1999.
The provision and the net charge-offs of $380,000 for the period resulted in the
reserve representing 1.19% of total loans and 286% of non-performing loans at
September 30, 2000, as compared to the reserve representing 1.17% of total loans
and 341% of non-performing loans at December 31, 1999. While rapid growth in
the loan portfolio is the primary reason for the large increase in the provision
expense, several other factors contributed to management's decision to add to
the allowance for loan losses. These contributing factors include increased
pressure on adjustable rate borrowers due to rising interest rates, downturns in
certain economic sectors such as agriculture, rapid growth in expanded
geographic markets, and growth in both the number and dollar volume of large
balance loan customers. 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.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
--------------------------------------------
Total other income, excluding security gains, increased $2,364,000 or 22.2% for
the nine months ended September 30, 2000, as compared to the same period in
1999. This increase is due primarily to growth in trust, commissions and
brokers' fees, and service charges on deposit accounts. Gains of $827,000 were
recognized on the sale of $40,007,000 of pooled loans for the nine months ended
September 30, 2000 as compared to gains of $759,000 on the sale of $76,473,000
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 are high relative to historic
norms 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 expenses increased 11.1% or $2,657,000 for the nine months ended
September 30, 2000 as compared to the same period in 1999. Most of the change
in these other expense categories can be attributed to the growth associated
with the acquisition of Busey Bankfsb.
Salaries and wages expense increased $1,132,000 or 10.5%, and employee benefits
expense increased $98,000 or 4.7% for the nine months ended September 30, 2000,
as compared to the same period last year. The Corporation had 495 full time
equivalent employees as of September 30, 2000 as compared to 430 as of September
30, 1999. Occupancy and furniture and equipment expenses increased 5.8% to
$4,775,000 for the nine months ended September 30, 2000 from $4,514,000 in the
prior year period. Data processing expense increased $402,000 to $955,000 for
the nine months ended September 30, 2000 from the prior year period. During
June of 2000, Busey Bankfsb converted from its existing outsourced data
processor to a solution provided in-house by Busey Bank. Nonrecurring costs
associated with this conversion and included in 2000 data processing expenses
totaled $180,000. Amortization expense increased $339,000 for the nine months
ended September 30, 2000 as compared to the same period in 1999 due to the First
Federal acquisition.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, decreased to 1.5% for the nine
months ended September 30, 2000 from 1.80% in the prior year period as a result
of the income and expense items described above.
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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 nine months ended
September 30, 2000 was 57.7% as compared to 61.1% for the prior year period.
When the gains on the sales of pooled loans are excluded, these ratios are 58.7%
and 62.3%, respectively. The change in the current year efficiency ratio is due
to the income and expense items noted above.
Income taxes for the nine months ended September 30, 2000 increased to
$6,080,000 as compared to $4,287,000 for the comparable period in 1999. As a
percent of income before taxes, the provision for income taxes increased to
35.4% for the nine months ended September 30, 2000 from 30.5% for the same
period in 1999. The increase in the ratio of tax expense to income before taxes
can be largely attributed to the addition of state income taxes. During 1999
and prior years the Corporation had state net operating losses available to
offset current income in the calculation of state taxable income. These net
operating losses were fully utilized during 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO SEPTEMBER 30, 1999
SUMMARY
-------
Net income for the three months ended September 30, 2000 increased 2.3% to
$3,533,000 as compared to $3,454,000 for the comparable period in 1999. Diluted
earnings per share increased 4.0% to $.26 at September 30, 2000 as compared to
$.25 for the same period in 1999.
Operating earnings, which exclude security gains and the related tax expense,
were $3,339,000, or $.25 per share for the three months ended September 30,
2000, as compared to $3,304,000, or $.24 per share for the same period in 1999.
The Corporation's return on average assets was 1.10% for the three months ended
September 30, 2000, as compared to 1.35% achieved for the comparable period in
1999. The return on average assets from operations of 1.04% for the three
months ended September 30, 2000 is 25 basis points lower than the 1.29% level
achieved in the comparable period of 1999.
The net interest margin expressed as a percentage of average earning assets was
3.76% for the three months ended September 30, 2000, or 31 basis points lower
than the 4.07% level achieved for the like period in 1999. The net interest
margin expressed as a percentage of average total assets was 3.50% for the three
months ended September 30, 2000, or 30 basis points lower than the 3.80% for the
same period in 1999.
During the three months ended September 30, 2000, the Corporation recognized
security gains of approximately $194,000, after income taxes, representing 5.5%
of net income. During the same period in 1999, security gains of approximately
$150,000, after income taxes, were recognized, representing 4.3% of net income.
INTEREST INCOME
---------------
Interest income on a fully taxable equivalent basis increased $5,925,000 or
32.2% for the three months ended September 30, 2000 from the same period in
1999. The increase resulted from a higher level of interest income on greater
average volumes of loans outstanding for the three months ended September 30,
2000 as compared to the same period of 1999, combined with higher yields on all
categories of interest-earning assets. The yield on interest earning assets
increased 46 basis points for the three months ended September 30, 2000 as
compared to the same period in 1999.
INTEREST EXPENSE
----------------
Total interest expense increased $4,468,000, or 51.7%, for the three months
ended September 30, 2000 as compared to the prior year period. This increase
12 of 23
<PAGE>
resulted primarily from increases in the average volumes of all categories of
interest-bearing liabilities. Again, increases in the rates paid on all
categories of interest-bearing liabilities except long-term debt also
contributed to the increase in interest expense.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
--------------------------------------------
Total other income, excluding security transactions, increased $426,000 or 11.9%
for the three months ended September 30, 2000 as compared to the same period in
1999. This was a combination of increased trust revenue, commissions and
brokers' fees, service charges on deposit accounts, and gains on sales of
pooled loans. Gains of $307,000 were recognized on the sale of $19,734,000 of
pooled loans for the three months ended September 30, 2000 as compared to gains
of $239,000 on the sale of $20,723,000 of pooled loans in the prior year period.
Total other expenses increased 12.6% or $1,011,000 for the three months ended
September 30, 2000 as compared to the same period in 1999.
Salaries and wages expense increased $475,000 or 13.1% and employee benefits
expense increased $45,000 or 6.6% for the three months ended September 30, 2000,
as compared to the same period last year. Occupancy and
furniture and equipment expenses increased 2.0% to $1,663,000 for the three
months ended September 30, 2000 from $1,631,000 in the prior year period.
The consolidated efficiency ratio for the three months ended September 30, 2000
was 59.4% as compared to 60.4% for the prior year period. When the gains on the
sales of pooled loans are excluded, these ratios are 60.6% and 61.5%,
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 September 30, 2000 increased to
$1,975,000 as compared to $1,437,000 for the comparable period in 1999. As a
percent of income before taxes, the provision for income taxes increased to
35.9% for the three months ended September 30, 2000 from 29.9% 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. Statement of Financial
Accounting Standard No. 138 was issued in June of 2000 and amended and clarified
various issues within Statement No. 133.
In September of 2000, Statement of Financial Accounting Standard No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities" was issued to replace Statement of Financial Accounting Standard
No. 125 which was issued in June 1996. Statement No. 125 addressed issues
related to transfers of financial assets in which the transferor has some
continuing involvement with the transferred assets or with the transferee.
Statement No. 140 resolves implementation issues which arose as a result of
Statement No. 125, but carries forward most of Statement No. 125's provisions.
Statement No. 140 is effective for transfers occurring after March 31, 2001 and
for disclosures related to securitization transacations and collateral for
fiscal years ending after December 15, 2000. Management does not believe the
adoption of Statement No. 140 will have a significant impact on the consolidated
financial statements.
In December of 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes some of the staff's interpretations of the
application of generally accepted accounting principles to revenue recognition.
13 of 23
<PAGE>
The Corporation will adopt SAB No. 101 when required in the fourth quarter of
2000. Management believes the adoption of SAB No. 101 will not have significant
effect on the consolidated financial statements.
REPORTABLE SEGMENTS AND RELATED INFORMATION
-------------------------------------------
First Busey Corporation has three reportable segments, Busey Bank, Busey
Bankfsb, 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. Busey Bankfsb
provides a full range of banking services to individual and corporate customers
in McLean County.
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 in the annual report. The Corporation accounts for
intersegment revenue and transfers at current market value.
<TABLE>
<CAPTION>
September 30, 2000
--------------------------------------------------------------------------------------------------------
First Busey
Trust & Consolidated
Busey Bank Busey Bank(fsb) Investment Co. All Other Totals Eliminations Totals
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 56,366 $ 11,805 $ 133 $ 104 $ 68,408 $ (51) $ 68,357
Interest expense 28,144 6,251 - 1,920 36,315 62 36,377
Other income 7,492 680 3,281 16,132 27,585 (14,239) 13,346
Net income 10,355 1,051 1,096 11,509 24,011 (12,939) 11,072
Total assets 1,036,795 273,328 3,554 133,069 1,446,746 (123,744) 1,323,002
<CAPTION>
September 30, 1999
--------------------------------------------------------------------------------------------------------
First Busey
Trust & Consolidated
Busey Bank Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 51,323 $ 143 $ 80 $ 51,546 $ (1) $ 51,545
Interest expense 23,788 - 288 24,076 20 24,096
Other income 6,574 3,045 13,380 22,999 (11,668) 11,331
Net income 9,341 1,045 10,209 20,595 (10,844) 9,751
Total assets 1,036,211 3,873 103,430 1,143,514 (92,471) 1,051,043
</TABLE>
14 of 23
<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. 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. The Corporation generally does not rely upon the purchases of
federal funds for liquidity needs. Additional liquidity is provided by bank
lines of credit, repurchase agreements and the ability to borrow from the
Federal Reserve Bank. The Corporation has an operating line with American
National Bank and Trust Company of Chicago in the amount of $10,000,000 with
$4,700,000 available as of September 30, 2000.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) increased to 18.2% at September 30, 2000
from 15.4% at December 31, 1999. This is the ratio of total large liabilities
to total liabilities, and is low in comparison to the Corporation's peers. This
increase was due largely to a $56,647,000 increase in time deposits over
$100,000 offset partially by a $10,635,000 decrease 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 nine months ended September 30,
2000, the Corporation earned $11,072,000 and paid dividends of $4,808,000 to
stockholders, resulting in a retention of current earnings of $6,264.000. The
Corporation's dividend payout for the nine months ended September 30, 2000 was
43.4%. The Corporation's risk-based capital ratio was 9.37% and the leverage
ratio was 5.68% as of September 30, 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 September 30, 2000.
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.
15 of 23
<PAGE>
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of September 30, 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 $ 3,546 $ - $ - $ - $ - $ 3,546
Federal Funds Sold 15,100 - - - - 15,100
Investment securities
U.S. Governments 2,938 16,869 18,863 27,846 88,497 155,013
Obligations of states and
political subdivisions 638 2,741 94 158 37,796 41,427
Other securities 8,073 1,400 - 50 11,389 20,912
Loans (net of unearned int.) 281,923 90,734 89,799 129,992 394,566 987,014
--------------------------------------------------------------------------
Total rate-sensitive assets $ 312,218 $ 111,744 $ 108,756 $ 158,046 $532,248 $1,223,012
--------------------------------------------------------------------------
Interest bearing transaction
deposits $ 48,737 $ - $ - $ - $ - $ 48,737
Savings deposits 87,947 - - - - 87,947
Money market deposits 319,546 - - - - 319,546
Time deposits 47,465 67,988 86,249 197,787 130,565 530,054
Short-term borrowings:
Federal funds purchased &
repurchase agreements 22,952 - - - - 22,952
Other 33,320 5,000 38,320
Long-term debt 1,978 4,985 21,988 - 26,000 54,951
--------------------------------------------------------------------------
Total rate-sensitive
liabilities $ 561,945 $ 77,973 $ 108,237 $ 197,787 $156,565 $1,102,507
--------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($249,727) $ 33,771 $ 519 ($39,741) $375,683 $ 120,505
--------------------------------------------------------------------------
Cumulative gap ($249,727) ($215,956) ($215,437) ($255,178) $120,505
==============================================================
Cumulative gap as a
percentage of total
rate-sensitive assets -20.42% -17.66% -17.62% -20.86% 9.85%
==========================================================================
Cumulative ratio (cumulative
RSA/RSL) 0.56 0.66 0.71 0.73 1.11
==========================================================================
</TABLE>
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $249.7 million in the 1-30 day repricing category. The gap becomes slightly
less liability sensitive in the periods from 31 to 180 days as rate-sensitive
assets that reprice are greater in volume than rate- sensitive liabilities that
are subject to repricing in the same respective time periods. In the period from
181 days to one-year, the gap again becomes liability-sensitive, and then
switches back to an asset-sensitive position beyond one year. The composition
of the gap structure at September 30, 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.
16 of 23
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
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 $ 7,343 $ 317 5.77% $ 4,990 $ 175 4.69%
Investment securities
U.S. Government obligations 164,802 7,151 5.80% 150,158 6,305 5.61%
Obligations of states and political
subdivisions(1) 40,680 2,342 7.70% 39,735 2,223 7.48%
Other securities 21,762 842 5.17% 20,912 690 4.41%
Loans (net of unearned interest)(1) (2) 922,060 58,685 8.51% 696,302 43,102 8.28%
--------------------- -------------------
Total interest- earning assets $1,156,647 $ 69,337 8.01% $912,097 $ 52,495 7.69%
======== ========
Cash and due from banks 33,559 29,861
Premises and equipment 30,172 24,753
Reserve for possible loan losses (10,836) (7,461)
Other assets 32,811 19,533
----------- ---------
Total Assets $1,242,353 $978,783
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $ 26,860 $ 568 2.83% $ 12,479 $ 157 1.68%
Savings deposits 93,942 2,136 3.04% 84,266 1,888 3.00%
Money market deposits 317,156 8,008 3.38% 301,899 6,702 2.97%
Time deposits 470,303 19,296 5.49% 344,625 13,216 5.13%
Short-term borrowings:
Federal funds purchased and
Repurchase agreements 32,339 1,510 6.24% 12,921 525 5.43%
Other 48,253 2,676 7.41% 6,270 308 6.57%
Long-term debt 53,304 2,183 5.48% 31,637 1,300 5.49%
--------------------- -------------------
Total interest bearing liabilities $1,042,157 36,377 4.67% $794,097 $ 24,096 4.06%
======== ========
------- -------
Net interest spread 3.34% 3.63%
======= =======
Demand deposits 107,541 90,768
Other liabilities 9,357 7,817
Stockholders' equity 83,298 86,101
----------- ---------
Total Liabilities and Stockholders' Equity $1,242,353 $978,783
=========== =========
Interest income / earning assets(1) $1,156,647 69,337 8.01% $912,097 $ 52,495 7.69%
Interest expense / earning assets $1,156,647 36,377 4.20% $912,097 $ 24,096 3.53%
----------------- -----------------
Net interest margin(1) 32,960 3.81% $ 28,399 4.16%
================= =================
<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>
17 of 23
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
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 $ 95 $ 47 $ 142
Investment securities:
U.S. Government obligations 630 216 846
Obligations of states and political
subdivisions(2) 54 65 119
Other securities 29 123 152
Loans(2) 14,337 1,246 15,583
-----------------------------
Change in interest income(2) $ 15,145 $ 1,697 $16,842
-----------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits $ 258 $ 153 $ 411
Savings deposits 220 28 248
Money market deposits 351 955 1,306
Time deposits 5,102 978 6,080
Short-term borrowings:
Federal funds purchased and repurchase
Agreements 896 89 985
Other 2,323 45 2,368
Long-term debt 887 (4) 883
-----------------------------
Change in interest expense $ 10,037 $ 2,244 $12,281
-----------------------------
Increase in net interest income(2) $ 5,108 ($547) $ 4,561
=============================
<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>
18 of 23
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
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 $ 1,324 $ 22 6.59% $ 1,334 $ 17 5.06%
Investment securities
U.S. Government obligations 154,154 2,265 5.83% 159,708 2,239 5.56%
Obligations of states and political
subdivisions(1) 41,017 786 7.60% 40,366 761 7.48%
Other securities 20,044 314 6.22% 21,095 236 4.44%
Loans (net of unearned interest)(1) (2) 966,364 20,919 8.59% 726,059 15,128 8.27%
--------------------- ---------------------
Total interest earning assets $1,182,903 $ 24,306 8.15% $ 948,562 $ 18,381 7.69%
======== ========
Cash and due from banks 37,883 30,801
Premises and equipment 30,743 24,807
Reserve for possible loan losses (11,194) (7,702)
Other assets 33,109 20,626
----------- -----------
Total Assets $1,273,444 $1,017,094
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing transaction deposits $ 34,096 $ 251 2.91% $ 11,065 59 2.12%
Savings deposits 90,230 700 3.08% 82,645 616 2.96%
Money market deposits 311,938 2,812 3.58% 303,605 2,274 2.97%
Time deposits 488,676 7,049 5.72% 360,914 4,671 5.13%
Short-term borrowings:
Federal funds purchased and 41,945 675 6.38% 28,319 398 5.58%
repurchase agreements
Other 47,015 927 7.82% 6,625 105 6.29%
Long-term debt 53,220 662 4.94% 37,522 520 5.50%
--------------------- ---------------------
Total interest bearing liabilities $1,067,120 $ 13,076 4.86% $ 830,695 $ 8,643 4.13%
======== ========
Net interest spread 3.29% 3.56%
======= =======
Demand deposits 110,855 92,981
Other liabilities 10,038 7,668
Stockholders' equity 85,931 85,750
----------- -----------
Total Liabilities and Stockholders' Equity $1,273,444 $1,017,094
=========== ===========
Interest income / earning assets(1) $1,182,903 $ 24,306 8.15% $ 948,562 $ 18,381 7.68%
Interest expense / earning assets $1,182,903 $ 13,076 4.39% $ 948,562 $ 8,643 3.61%
----------------- -----------------
Net interest margin(1) $ 11,230 3.76% $ 9,738 4.07%
================= =================
<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>
19 of 23
<PAGE>
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
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 $ - $ 5 $ 5
Investment securities:
U.S. Government obligations (68) 94 26
Obligations of states and political
subdivisions(2) 12 13 25
Other securities (11) 89 78
Loans(2) 5,182 609 5,791
------------------------------
Change in interest income(2) $ 5,115 $ 810 $ 5,925
------------------------------
Increase (decrease) in interest expense:
Interest bearing transaction deposits 162 30 192
Savings deposits 58 26 84
Money market deposits 64 474 538
Time deposits 1,797 581 2,378
Short-term borrowings:
Federal funds purchased and repurchase
agreements 212 65 277
Other 790 32 822
Long-term debt 188 (46) 142
------------------------------
Change in interest expense $ 3,271 $ 1,162 $ 4,433
------------------------------
Increase in net interest income (2) $ 1,844 ($352) $ 1,492
==============================
<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>
20 of 23
<PAGE>
ITEM 3. QUANTITATIVE 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 has an asset-liability committee which meets monthly to review
current market conditions and attempts to structure the Bank's and Thrift's
balance sheets 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 16.
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 September 30, 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 (2.69%) (1.60%) (1.12%) (1.66%)
</TABLE>
21 of 23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
Not applicable
ITEM 2: Changes in Securities and Use of Proceeds
Not applicable
ITEM 3: Defaults Upon Senior Securities
Not Applicable
ITEM 4: Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5: Other Information
Not Applicable
ITEM 6: Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed during the nine
months ending September 30, 2000.
22 of 23
<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: //Douglas C. Mills//
--------------------------
Douglas C. Mills
Chairman of the Board
By: //Barbara J. Jones//
--------------------------
Barbara J. Jones
Chief Financial Officer
Date: November 14, 2000
23 of 23
