SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1995 Commission file number 0-8426
FIRSTBANK OF ILLINOIS CO.
(exact name of registrant as specified in its charter)
DELAWARE 37-6141253
(State of other jurisdiction (I.R.S. Employer
ofincorporation of Identification No.)
organization)
205 S. Fifth Street
Springfield, Illinois 62701
(address of principal executive (Zip code)
offices)
Registrant's telephone number, including area code (217) 753-7543.
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 and (2) has been subject to the
filing requirements for the past 90 days.
YES __X__ NO _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, par value $1.00 per share -- 9,838,666 shares outstanding on
March 31, 1995.
Part I. Financial Information
Item 1. Financial Statements
FIRSTBANK OF ILLINOIS CO. AND SUBSIDIARIES
INTERIM CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(in thousands of dollars except per share data)
March 31, December 31,
1995 1994
ASSETS
Cash and due from banks $ 68,183 $ 72,540
Short-term investments 48,562 15,193
Investment securities:
Available-for-sale, at market value 375,100 407,238
Held-to-maturity, at amortized cost
(market values of $48,993 and $51,470
for 1995 and 1994, respectively) 47,912 51,015
Total investment securities 423,012 458,253
Loans 1,139,770 1,140,645
Unearned discount (7,765) (8,606)
Loans, net of unearned discount 1,132,005 1,132,039
Reserve for possible loan losses (17,701) (17,801)
Loans, net 1,114,304 1,114,238
Premises and equipment, net 41,042 41,784
Accrued income receivable 16,524 17,425
Other assets 30,592 33,628
Total assets $1,742,219 $1,753,061
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing $ 234,987 $ 252,420
Interest-bearing 1,277,250 1,224,014
Total deposits 1,512,237 1,476,434
Short-term borrowings 33,655 92,764
Other liabilities 17,940 14,741
Long-term borrowings 10,595 10,638
Total liabilities 1,574,427 1,594,577
SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized and unissued -- 1,000,000 shares
Common stock, par value $1 per share:
Authorized -- 20,000,000 shares
Issued including shares in treasury --
9,838,666 shares in 1995 and 9,829,362
shares in 1994 9,839 9,829
Capital surplus 39,514 39,439
Retained earnings 124,596 120,711
Unrealized holding losses on investment
securities available-for-sale (6,157) (11,370)
Less treasury stock at cost:
4,868 shares in 1994 - (125)
Total shareholders' equity 167,792 158,484
Total liabilities and
shareholders' equity $1,742,219 $1,753,061
See accompanying notes to interim consolidated condensed financial
statements.
Part I. Financial Information ... continued
Item 1. Financial Statements ... continued
FIRSTBANK OF ILLINOIS CO. AND SUBSIDIARIES
INTERIM CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(in thousands of dollars except per share data)
Three Months Ended
March 31,
1995 1994
INTEREST INCOME
Interest and fees on loans $24,350 $21,872
Interest on investment securities:
Taxable 5,545 5,920
Exempt from Federal income tax 656 878
Interest on short-term investments 243 153
Total interest income 30,794 28,823
INTEREST EXPENSE
Interest on deposits 11,436 9,218
Interest on short-term borrowings 932 484
Interest on long-term borrowings 206 422
Total interest expense 12,574 10,124
Net interest income 18,220 18,699
Provision for possible loan losses 525 675
Net interest income after
provision for possible loan losses 17,695 18,024
NONINTEREST INCOME
Securities gains, net 8 95
Revenues from fiduciary activities 1,475 1,311
Service charges on deposit accounts 1,436 1,396
Other 2,034 1,913
Total noninterest income 4,953 4,715
NONINTEREST EXPENSE
Salaries and employee benefits 7,356 8,057
Net occupancy 1,089 1,086
Equipment 1,166 1,116
Other 3,677 4,289
Total noninterest expense 13,288 14,548
Net income before income taxes 9,360 8,191
Income tax expense 3,313 2,717
Net income $ 6,047 $ 5,474
Earnings per common share $ 0.61 $ 0.55
See accompanying notes to interim consolidated condensed financial
statements.
Part I. Financial Information ... continued
Item 1. Financial Statements ... continued
FIRSTBANK OF ILLINOIS CO. AND SUBSIDIARIES
INTERIM CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (Unaudited)
(in thousands of dollars)
Three Months Ended
March 31,
1995 1994
OPERATING ACTIVITIES
Net income $ 6,047 $ 5,474
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,755 2,851
Provision for possible loan losses 525 675
Writedowns in value and losses incurred
on other real estate owned 10 31
(Increase) decrease in accrued income
receivable 901 (540)
Other, net 5,498 (264)
Originations of loans for sale (15,495) (38,998)
Proceeds from sale of loans 14,881 40,516
Net cash provided by operating activities 15,122 9,745
INVESTING ACTIVITIES
Purchases of investment securities:
Available-for-sale (28) (152,534)
Held-to-maturity - (3)
Proceeds from sales of investment securities
Available-for-sale 30,471 1,210
Proceeds from maturities of and principal
payments on investment securities:
Available-for-sale 5,717 49,261
Held-to-maturity 3,068 4,866
Purchases of premises and equipment (450) (1,724)
Proceeds from sales of premises and equipment 34 -
Proceeds from sales of other real estate owned 718 852
Net loan principal collected (loans originated) (536) 17,638
Other, net - 110
Net cash provided by (used in) investing
activities 38,994 (80,324)
FINANCING ACTIVITIES
Net decrease in noninterest-bearing
deposit accounts (17,433) (14,017)
Net increase (decrease) in savings, NOW
and money market deposits (31,547) 91,451
Net increase (decrease) in certificates
of deposit 84,783 (63,221)
Net increase (decrease) in short-term borrowings (59,109) 32,196
Principal payments under capital lease obligations (43) (40)
Cash dividends paid (1,974) (1,668)
Proceeds from exercise of common stock options 111 383
Proceeds from dividend reinvestment plan 115 121
Purchase of shares for treasury (7) (162)
Net cash provided by (used in) financing
activities (25,104) 45,043
Increase (decrease) in cash and cash equivalents 29,012 (25,536)
Cash and cash equivalents at beginning of year 87,733 105,856
Cash and cash equivalents at end of period $116,745 $ 80,320
Supplemental information:
Income taxes paid $ - $ 256
Interest paid 31,697 9,845
Noncash transfers of loans to other real estate 559 701
See accompanying notes to interim consolidated condensed financial
statements.
PART I. FINANCIAL INFORMATION ... Continued
Item 1. Financial Statement ... Continued
FIRSTBANK OF ILLINOIS CO. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(unaudited)
March 31, 1995
1. The accompanying unaudited interim consolidated condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and, therefore, do not include all of the information
and notes required by generally accepted accounting principles
for complete consolidated financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. For further information, refer to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
2. On March 2, 1994, the Company acquired Rowe, Henry & Deal, Inc.
(RHD), an independent registered securities dealer headquartered
in Jacksonville, Illinois. The transaction was an exchange of
8,919 shares of Company common stock for all of the issued and
outstanding common stock of RHD. This acquisition was accounted
for as a pooling-of-interests. Prior period financial statements
have not been restated due to immateriality.
3. On April 25, 1994, the Company acquired Colonial Bancshares, Inc.
(Colonial). Colonial, with total assets of approximately $165
million and headquartered in Des Peres, Missouri, operates
Colonial Bank in Des Peres and Ellisville, Missouri. The
transaction, an exchange of 336,917 shares of Company common
stock for all of the issued and outstanding common stock of
Colonial, was recorded under the pooling-of-interests method of
accounting on the date of acquisition. The consolidated
condensed financial statements included herein have been restated
to include Colonial's operating results.
4. On January 25, 1995, the Company's Board of Directors authorized
a three-for-two stock split effected in the form of a 50 percent
stock dividend. One share for each two shares held by
shareholders of record on March 17, 1995 was distributed on April
1, 1995. This resulted in the issuance of 3,279,106 additional
shares of common stock. The par value of the new shares issued
totaled $3,279,106, which was transferred from capital surplus to
the common stock account. In addition, all references to number
of shares, per share amounts, and common stock outstanding for
all periods presented prior to that time have been restated to
reflect the stock split.
Part I. Financial Information ... Continued
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (dollars in
thousands, except per share data)
The acquisition of Colonial Bancshares, Inc. was consummated
during April of 1994. The transaction was accounted for as a pooling-
of-interests and, accordingly, all previously reported financial
information has been restated to reflect its addition.
As discussed in note 4 to the interim consolidated condensed
financial statements included herein, the Company's Board of Directors
authorized a three-for-two stock split effected in the form of a 50
percent stock dividend distributed April 1, 1995. All references to
number of shares, per share amounts, and common stock outstanding for
all periods presented prior to that time have been restated to reflect
the stock split.
Total assets at March 31, 1995 were $1,742,219, down $10,842 from
$1,753,061 at December 31, 1994. During the first three months of
1995, the Company has reduced its reliance on short-term borrowings,
down $59,109 from $92,764 at December 31, 1994, through additional
interest-bearing deposits of $53,236 and investment security sales and
maturities of $39,256 over that period.
Average earning assets, as a percentage of average total assets
remained relatively unchanged at 92.04% as compared to 92.10% for the
first quarter of 1995 and 1994, respectively. The current loan-to-
deposit ratio of 74.86% decreased from the year-end level of 76.67% as
interest-bearing deposits replaced short-term borrowings.
Nonperforming loans as a percentage of total loans was .57% at
March 31, 1995, down from .61% at the end of 1994. Nonperforming
loans at March 31, 1995 include the following:
Restructured $ 391
Nonaccrual 4,400
Past due 90 days or more 1,679
Total $ 6,470
The reserve for possible loan losses at March 31, 1995 was 1.56%
of outstanding loans as compared to 1.57% at December 31, 1994. A
strong reserve for possible loan losses that exceeds the level of
identified problem loans reflects management's conservative approach
by providing for other risks inherent in the portfolio. Reserves
cover 274% of the Company's nonperforming loans at March 31, 1995.
Loan portfolio quality remains management's top priority.
Management believes the reserve for possible loan losses remains
adequate to absorb losses inherent in the consolidated loan portfolio.
Ongoing reviews of the portfolio, the level of nonperforming loans,
coverage ratios, and trends in the reserve and net charge-offs support
this belief.
The Company's March 31, 1995 equity-to-asset and tangible equity-
to-asset ratios were 9.63% and 8.80% up from 9.04% and 8.19%,
respectively, at the end of 1994. The increase in the equity ratios
is largely attributable to the reduction of unrealized holding losses
on investment securities available-for-sale. The March 31, 1995
equity-to-asset ratio excluding investment security unrealized holding
losses is 9.95%. The Company and its banking subsidiaries all exceed
their minimum capital requirements. Tier 1, Total Capital and Tier 1
Leverage Ratios were 14.15%, 15.21% and 9.25%, respectively at March
31, 1995. Shareholders' equity represents book value per common share
of $17.05 at March 31, 1995, as compared to $16.13 at December 31,
1994.
Net income for the three months ended March 31, 1995 was $6,047
as compared to net income for the corresponding period of 1994 of
$5,474. The improvement in earnings is attributable to the
performance of our newest subsidiary, Colonial Bank, the successful
efforts to increase noninterest income and cost reduction measures.
Earnings per share for the three month period was $.61 as compared to
the 1994 amount of $.55, an increase of 10.9%.
Net interest income for the first three months of 1995 was $479
below the first three months of 1994. Interest rates have risen on
the Company's funding, most notably in the certificate of deposit
categories, adding pressure to the Company's interest margin. Net
interest income (on a tax-equivalent basis) as a percentage of average
earning assets for the first quarter was 4.74% versus 4.85% for the
same period a year ago. Average balance sheets and yields are
included for each of those quarters at the end of this discussion.
Interest rate sensitivity is closely monitored through the
Company's asset-liability management procedures. At the end of this
discussion is a table reflecting Firstbank's interest rate gap (rate
sensitive assets minus rate sensitive liabilities) analysis at March
31, 1995, individually and cumulatively, through various time
horizons.
The provision for possible loan losses of $525 for the first
three months of 1995, represents a decrease from $675 reported in the
comparable 1994 period. Consistently low nonperforming loan levels,
low net charge-offs and strong reserve coverage levels have allowed
the Company to reduce the provision for possible loan losses.
Noninterest income for the first three months of 1995 was up 5.0%
as compared to the corresponding period in 1994. Revenues from
fiduciary activities, which includes trust and farm management fees,
reported increases of 12.5% for the first three months of 1995 as
compared to the same period of 1994.
Noninterest expense declined 8.7% for the first three months of
1995 compared to the same period of 1994. Current year expense
reductions have resulted from continued emphasis on operational
efficiency. The consolidation of operations, including item
processing, data processing and retail loan collections, contributed
to the expense reduction. Integration of Colonial Bank, acquired in
April 1994, into the Company has also resulted in significant cost
savings.
Income taxes of $3,313 for the first three months of 1995
exceeded the corresponding 1994 period amount of $2,717 by 21.9%. The
primary differences between the two periods were higher pre-tax
earnings and lower levels of tax-exempt interest income in the current
year. The Company's effective tax rate for the first quarter of 1995
was 35.4% as compared to 33.2% in the same period of 1994.
EFFECT OF NEW ACCOUNTING STANDARDS
During May 1993, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard No. 114, "Accounting
by Creditors for Impairment of a Loan" (Statement 114). During
October, 1994, the FASB issued Statement of Financial Accounting
Standard No. 118, "Accounting by Creditors for Impairment of a Loan--
Income Recognition and Disclosures" (Statement 118). Statement 114
(as amended by Statement 118) defines the recognition criteria for
loan impairment and the measurement methods for certain impaired loans
and loans for which terms have been modified in trouble-debt
restructurings (a restructured loan). The Company has adopted the
provisions of these statements effective January 1, 1995 and has
elected to continue to use its existing nonaccrual methods for
recognizing interest on impaired loans. As a result of adopting these
statements, there was no impact on the Company's financial position or
results of operations.
EFFECTS OF INFLATION
Persistent high rates of inflation can have a significant effect
on the reported financial condition and results of operations of all
industries. However, the asset and liability structure of a bank
holding company is substantially different from that of an industrial
company, in that virtually all assets and liabilities of a bank
holding company are monetary in nature. Accordingly, changes in
interest rates also have a significant impact on a bank holding
company's performance. Interest rates do not necessarily move in the
same direction, or in the same magnitude, as the prices of other goods
and services.
Inflation does have an impact on the growth of total assets in
the banking industry, often resulting in a need to increase equity
capital at higher than normal rates to maintain an appropriate equity
to assets ratio. One of the most important effects that inflation has
had on the banking industry has been to reduce the proportion of
earnings paid out in the form of dividends.
Although it is obvious that inflation affects the growth of total
assets, it is difficult to measure the impact precisely. Only new
assets acquired in each year are directly affected, so a simple
adjustment of asset totals by use of an inflation index is not
meaningful. The results of operations also have been affected by
inflation, but again there is no simple way to measure the effect on
the various categories of income and expense.
Interest rates in particular are significantly affected by
inflation, but neither the timing nor the magnitude of the changes
coincides with changes in standard measurements of inflation such as
the consumer price index. Additionally, changes in interest rates on
some types of consumer deposits may be delayed. These factors in turn
affect the composition of sources of funds by reducing the growth of
deposits that are less interest sensitive and increasing the need for
funds that are more interest sensitive.
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...continued
<TABLE>
FIRSTBANK OF ILLINOIS CO. AND SUBSIDIARIES
INTERIM CONSOLIDATED CONDENSED AVERAGE BALANCE SHEETS (Unaudited)
(in thousands of dollars)
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1995 March 31, 1994
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans $1,127,044 $24,417 8.79% $1,079,653 $21,921 8.23%
Investment securities:
Taxable 400,104 5,545 5.62% 436,117 5,920 5.51%
Nontaxable 44,184 916 8.40% 58,927 1,233 8.49%
Short-term investments:
Federal funds sold 15,288 237 6.29% 23,899 152 2.58%
Other short-term investments 412 6 5.91% 176 1 2.30%
Total earning assets 1,587,032 31,121 7.95% 1,598,772 29,227 7.41%
Nonearning assets:
Cash and due from banks 64,564 71,477
Premises and equipment 41,608 42,903
Reserve for possible loan losses (17,779) (18,183)
Other assets 48,873 41,029
Total nonearning assets 137,266 137,226
Total assets $1,724,298 $1,735,998
LIABILITIES
Interest-bearing liabilities:
Interest-bearing deposits:
Savings, NOW and money
market accounts $604,773 $3,761 2.52% $650,650 $ 3,558 2.22%
Time deposits 642,040 7,675 4.85% 593,515 5,660 3.87%
Federal funds purchased and
securities sold under
repurchase agreements 63,875 903 5.73% 59,249 478 3.27%
Other short-term borrowings 2,484 29 4.73% 881 6 2.76%
Long-term borrowings 10,620 206 7.87% 21,358 422 8.01%
Total interest-bearing
liabilities 1,323,792 12,574 3.85% 1,325,653 10,124 3.10%
Noninterest-bearing deposits 224,508 237,917
Other liabilities 14,639 16,698
Total liabilities 1,562,939 1,580,268
SHAREHOLDERS' EQUITY 161,359 155,730
Total liabilities and
shareholders' equity $1,724,298 $1,735,998
Net interest income/net yield
on earning assets $18,547 4.74% $19,103 4.85%
</TABLE>
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...continued
(in thousands of dollars)
<TABLE>
Remaining Maturity if Fixed Rate;
Earliest Possible Repricing Interval if Floating Rate
<CAPTION>
3 Over 3 Over 1
months months - year - Over
or 12 5 5
less months years years Total
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Loans $ 367,889 $ 214,322 $ 519,594 $ 30,200 $1,132,005
Investment securities 14,197 61,303 320,207 27,305 423,012
Other interest-earning assets 48,562 - - - 48,562
Total interest-earning assets $ 430,648 $ 275,625 $ 839,801 $ 57,505 $1,603,579
INTEREST-BEARING LIABILITIES
Savings, NOW, Money Markets $ 589,725 $ - $ - $ - $ 589,725
C.D.'s over $100,000 43,018 47,040 3,815 - 93,873
All other time deposits 162,597 310,501 120,158 396 593,652
Nondeposit interest-bearing
liabilities 33,711 7,651 2,888 - 44,250
Total interest-bearing
liabilities $ 829,051 $ 365,192 $ 126,861 $ 396 $1,321,500
GAP by Period $(398,403) $ (89,567) $ 712,940 $ 57,109 $ 282,079
Cumulative GAP $(398,403) $(487,970) $ 224,970 $ 282,079 $ 282,079
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K:
A Form 8-K was filed as of January 26, 1995, announcing the Board
of Directors' authorization of a three-for-two common stock
split. The split, to be effected in the form of a 50% stock
dividend, was payable April 1, 1995 to shareholders of record
March 17, 1995.
A. Exhibit 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Firstbank of Illinois Co.
By: /s/ Chris Zettek
Executive Vice President and
Chief Financial Officer
Date: May 10, 1995
Exhibit 11
FIRSTBANK OF ILLINOIS CO.
Computation of Net Earnings per Common Share
Three Months Ended
March 31,
1995 1994
Net Income $6,047,000 $5,474,000
Weighted average common
shares outstanding 9,831,834 9,805,250
Plus weighted average
common share equivalents:
Assuming exercise of
employee stock options 139,878 119,565
Weighted average common shares
and common share equivalents
outstanding 9,971,712 9,924,815
Net earnings per common share $ 0.61 $ 0.55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 681833
<INT-BEARING-DEPOSITS> 1277250
<FED-FUNDS-SOLD> 48185
<TRADING-ASSETS> 24
<INVESTMENTS-HELD-FOR-SALE> 375100
<INVESTMENTS-CARRYING> 47912
<INVESTMENTS-MARKET> 48933
<LOANS> 1132005
<ALLOWANCE> 17701
<TOTAL-ASSETS> 1742219
<DEPOSITS> 1512237
<SHORT-TERM> 33655
<LIABILITIES-OTHER> 17940
<LONG-TERM> 10595
<COMMON> 9839
0
0
<OTHER-SE> 157953
<TOTAL-LIABILITIES-AND-EQUITY> 1742219
<INTEREST-LOAN> 24350
<INTEREST-INVEST> 6201
<INTEREST-OTHER> 243
<INTEREST-TOTAL> 30794
<INTEREST-DEPOSIT> 11436
<INTEREST-EXPENSE> 12574
<INTEREST-INCOME-NET> 18220
<LOAN-LOSSES> 525
<SECURITIES-GAINS> 8
<EXPENSE-OTHER> 3677
<INCOME-PRETAX> 9360
<INCOME-PRE-EXTRAORDINARY> 9360
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6047
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 4.66
<LOANS-NON> 4400
<LOANS-PAST> 1679
<LOANS-TROUBLED> 391
<LOANS-PROBLEM> 9457
<ALLOWANCE-OPEN> 17801
<CHARGE-OFFS> 961
<RECOVERIES> 336
<ALLOWANCE-CLOSE> 17701
<ALLOWANCE-DOMESTIC> 6941
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10760
</TABLE>
