<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For quarterly period ended June 30, 1996
Commission file number 0-13343
ILLINI CORPORATION
(Exact name of small business issuer as specified in its charter)
Illinois 37-1135429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 South Chatham Road, Springfield, Illinois 62704
(Address of principal executive offices)
(217) 787-1651
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 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 __
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: 448,456 shares of $10 par value common stock as of August
1, 1996.
<PAGE>
ILLINI CORPORATION
INDEX TO FORM 10-QSB
June 30, 1996
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
June 30, 1996 and December 31, 1995
Consolidated Statements of Income 4
Six and Three Months Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows 5
Six and Three Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION 14
SIGNATURE PAGE 15
2
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited)
June 30, December 31,
1996 1995
-------------- ---------------
Assets:
Cash and due from banks $ 4,551,230 $ 8,079,146
Interest bearing deposits in other banks 18,937 0
Investment in debt and marketable equity
securities:
Available for sale, at estimated market value 40,465,414 34,967,265
Loans 95,862,258 100,999,481
Less: Unearned income 114,594 128,976
Allowance for loan losses 1,122,055 1,246,480
-------------- ---------------
Loans, net 94,625,609 99,624,025
-------------- ---------------
Premises and equipment 4,972,871 4,870,132
Accrued interest receivable 1,608,937 1,541,427
Other assets 1,707,566 1,287,201
-------------- ---------------
Total assets $147,950,564 $150,369,196
============== ===============
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing demand deposits $ 17,944,023 $ 20,538,752
Interest bearing deposits:
NOW and money market accounts 27,187,474 27,223,687
Savings deposits 20,236,680 20,318,381
Time deposits, $100,000 and over 15,704,483 14,750,120
Other time deposits 49,201,721 50,481,132
-------------- ---------------
Total deposits 130,274,381 133,312,072
Federal funds purchased 2,000,000 0
Securities sold under agreements to repurchase 250,000 650,000
Accrued interest payable 765,731 880,006
Other liabilities 754,311 920,763
-------------- ---------------
Total liabilities 134,044,423 135,762,841
-------------- ---------------
Stockholders' equity:
Common stock-authorized 800,000 shares of $10
par value; 448,456 shares issued and
outstanding 4,484,560 4,484,560
Capital surplus 1,885,913 1,885,913
Retained earnings 8,134,959 8,209,528
Net unrealized holding gains (losses) on
investments in debt and marketable equity
securities available for sale, net of tax (599,291) 26,354
-------------- ---------------
Total stockholders' equity 13,906,141 14,606,355
-------------- ---------------
Total liabilities and stockholders'
equity $147,950,564 $150,369,196
============== ===============
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $2,208,421 $2,341,633 $4,468,002 $4,529,907
Interest on investment securities:
Taxable 410,900 407,200 731,649 869,870
Exempt from federal income taxes 187,186 124,755 367,789 251,285
Interest on short term investments 3,836 31,270 35,465 36,826
----------- ----------- ------------ -----------
Total interest income 2,810,343 2,904,858 5,602,905 5,687,888
----------- ----------- ------------ -----------
Interest expense:
Interest on deposits 1,199,943 1,270,241 2,464,914 2,407,352
Interest on federal funds purchased 29,938 11,244 29,938 33,108
Interest on securities sold under
agreements to repurchase 3,352 11,621 7,788 22,443
Interest on note payable 0 739 0 9,035
----------- ----------- ------------ -----------
Total interest expense 1,233,233 1,293,845 2,502,640 2,471,938
----------- ----------- ------------ -----------
Net interest income 1,577,110 1,611,013 3,100,265 3,215,950
Provision for loan losses 490,000 30,000 630,000 60,000
----------- ----------- ------------ -----------
Net interest income after
provision for loan losses 1,087,110 1,581,013 2,470,265 3,155,950
Noninterest income 387,526 391,757 745,062 781,176
Noninterest expense 1,587,885 1,656,925 3,223,808 3,299,078
----------- ----------- ------------ -----------
Income or (loss) before income
tax expense (113,249) 315,845 (8,481) 638,048
Income tax expense (benefit) (142,408) 80,500 (135,717) 150,600
----------- ----------- ------------ -----------
Net income $ 29,159 $ 235,345 $ 127,236 $ 487,448
=========== =========== ============ ===========
Income per common share (based on
weighted average common shares
outstanding of 448,456 for 1996
and 1995): $ 0.07 $ 0.52 $ 0.28 $ 1.09
=========== =========== ============ ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
------------ -------------
Cash flows from operating activities:
Net income $ 127,236 $ 487,448
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 286,998 243,264
Provision for loan losses 630,000 60,000
Securities (gains) losses, net (14,734) 4,036
Increase in accrued interest receivable (67,510) (102,406)
Increase (decrease) in accrued interest
payable (114,275) 134,268
Other, net (242,212) (144,021)
Origination of secondary market mortgage
loans (8,438,061) (3,120,496)
Proceeds from the sale of secondary market
mortgage loans 8,275,861 2,662,215
------------ -------------
Net cash provided by operating activities 443,303 224,308
------------ -------------
Cash flows from investing activities:
Proceeds from sales of debt and marketable
equity securities available for sale 3,915,209 13,409,069
Proceeds from maturities and paydowns of
debt securities available for sale 6,216,670 1,236,014
Proceeds from maturities and paydowns of debt
securities held to maturity 0 235,000
Purchases of debt and marketable equity
securities available for sale (16,663,164) (287,573)
Net (increase) decrease in loans 4,530,616 (6,580,487)
Purchases of premises and equipment (312,117) (156,786)
Proceeds from sales of other real estate 0 301,328
------------ -------------
Net cash provided by (used in) investing
activities (2,312,786) 8,156,565
------------ -------------
Cash flows from financing activities:
Net decrease in non-interest bearing deposit
accounts (2,594,729) (2,188,591)
Net decrease in savings, NOW and money market
accounts (117,914) (3,749,481)
Net increase (decrease) in time deposits
$100,000 and over 954,363 (1,782,093)
Net increase (decrease) in other time
deposits (1,279,411) 8,132,659
Net increase (decrease) in federal funds
purchased 2,000,000 (4,165,000)
Net decrease in securities sold under
agreements to repurchase (400,000) (36,258)
Principal payments on note payable 0 (500,000)
Dividends paid (201,805) (201,806)
------------ -------------
Net cash used in financing activities (1,639,496) (4,490,570)
------------ -------------
Net increase (decrease) in cash and cash
equivalents (3,508,979) 3,890,303
Cash and cash equivalents at beginning of
period 8,079,146 7,762,207
------------ -------------
Cash and cash equivalents at end of period $ 4,570,167 $ 11,652,510
============ =============
Supplemental Information:
Income taxes paid $ 145,000 $ 100,000
Interest paid $ 2,616,915 $ 2,337,670
============ =============
Other non-cash investing activities:
Transfer of loans to other real estate $ 0 $ 43,495
============ =============
See accompanying notes to interim consolidated financial statements.
5
<PAGE>
ILLINI CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to
Form 10-QSB 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 consolidated financial
statements and footnotes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
Results for the three months ended June 30, 1996 and the six
months ended June 30, 1996 may not be indicative of the
companies annual performance.
6
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 1996
This discussion should be read in conjunction with the financial
statements, notes and tables included elsewhere in this report
and in the 1995 Illini Corporation Annual Report on Form 10-KSB,
and quarterly report on Form 10-QSB for the quarter ended March
31, 1996.
SUMMARY
<TABLE>
<CAPTION>
Quarter Ended Six months ended
June 30, June 30,
---------------- Percent ---------------- Percent
EARNINGS $(thousands, except per share data) 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue......................... $3,198 $3,297 (3.00)% $6,348 $6,469 (1.87)%
Net income............................ 29 234 (87.61)% 127 487 73.92)%
Net income per share.................. $0.07 $0.52 (87.61)% $0.28 $1.09 (73.92)%
KEY RATIOS Change Change
- -----------------------------------------------------------------------------------------------------
Return on average assets.............. 0.08% 0.60% (0.52)% 0.17% 0.63% (0.46)%
Return on average equity.............. 0.82% 6.95% (6.13)% 1.76% 7.40% (5.64)%
Average equity to assets.............. 9.48% 8.66% 0.82% 9.63% 8.50% 1.14%
Tangible equity to net assets......... 9.25% 8.70% 0.55%
Tier I leverage ratio................. 9.73% 8.96% 0.77%
Total risk adjusted capital ratio..... 15.27% 14.05% 1.22%
Dividend payout ratio................. 346.61% 43.11% 303.50% 158.57% 41.44% 117.31%
Net interest margin................... 4.89% 4.69% 0.20% 4.81% 4.73% 0.08%
Net funds function.................... 3.45% 4.59% (1.14)% 3.88% 4.61% (0.73)%
Efficiency ratio...................... 76.86% 80.04% (3.19)% 79.71% 79.80% (0.09)%
</TABLE>
7
<PAGE>
RESULTS OF OPERATION
NET INTEREST INCOME/NET INTEREST MARGIN
Net interest income on a taxable equivalent basis was $1,678,000
and $3,299,000 for the three and six months ended June 30, 1996,
compared with $1,679,000 and $3,353,000 for the same periods in
1995. Net interest margin was 4.89% and 4.81% for the three and
six months ended June 30, 1996, compared with 4.69% and 4.73% for
the same periods in 1995.
Net interest income is affected by the growth, pricing, mix and
maturity of interest earning assets and interest bearing
liabilities, as well as other factors including loan quality.
The average balance of loans decreased $6,851,000 and the average
balance of deposits decreased $7,307,000 for the second quarter
of 1996 compared to the second quarter of 1995. This decrease is
due primarily to the sale of loans totaling $6,200,000 and
deposits totaling $12,600,000 of a branch in Coffeen, Illinois in
November 1995. Excluding the deposit sale of the Coffeen branch,
average deposits increased approximately $5,296,000 from the
second quarter of 1995. Despite competitive pricing on interest
earning assets and interest bearing liabilities, Illini
Corporation achieved a 20 basis point increase in the margin
compared to the three months ended June 30, 1995. Individual
components of net interest income and net interest margin are
presented in the consolidated average balances, interest
income/expense and yield/rate table on pages 9 and 10, and a net
interest income rate/volume variance analysis is presented on
page 11.
8
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Quarter ended June 30,
--------------------------------------------------------------------------------------
1996 1995
------------------------------------------- ------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
$(thousands) Balance Assets Expense Rate Balance Assets Expense Rate
- ------------------------------- ---------- -------- ----------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 265 0.2% $ 4 5.81% $ 2,065 1.3% $ 31 6.07%
Investment securities (3)
Taxable 27,117 18.1 411 6.06 29,753 19.1 407 5.47
Tax-exempt (1) 15,228 10.2 283 7.43 10,360 6.7 189 7.30
---------- -------- ----------- -------- --------- -------- --------- ---------
Total securities 42,345 28.3 694 6.55 40,113 25.8 596 5.95
Loans
Commercial (1) 14,300 9.5 305 8.55 15,932 10.2 361 9.09
Agriculture 5,481 3.7 118 8.66 4,816 3.1 111 9.24
Real estate
Commercial 28,673 19.1 654 9.15 29,239 18.8 665 9.12
Agriculture 2,733 1.8 62 9.04 3,456 2.2 75 8.66
Residential 26,531 17.7 623 9.41 31,272 20.1 703 9.02
Consumer, net 17,862 11.9 428 9.62 18,192 11.7 426 9.40
Credit card 622 0.4 23 15.02 146 0.1 5 12.61
---------- ----------- --------- ---------
Total loans 96,202 64.2 2,213 9.25 103,053 66.2 2,346 9.14
Reserve for loan losses (1,106) (0.7) (1,489) (1.0)
---------- ----------- --------- ---------
Net loans (1)(2) 95,096 63.5 2,213 9.35 101,564 65.3 2,346 9.28
---------- -------- ----------- --------- -------- ---------
Total interest earning
assets 137,706 91.9 2,911 8.92 143,742 92.4 2,973 8.58
---------- ----------- --------- ---------
Cash and due from banks 4,749 3.2 5,051 3.2
Premises and equipment 4,896 3.3 4,146 2.7
Other assets (3) 2,491 1.7 2,651 1.7
---------- -------- --------- --------
Total assets $149,842 100.0% $155,590 100.0%
========== ======== ========= ========
LIABILITIES
Interest bearing deposits:
Savings and NOW accounts $ 47,797 31.9% $307 2.57% $ 50,571 32.5% $ 325 2.58%
Time deposits 64,959 43.4 893 5.52 68,513 44.0 945 5.53
Federal funds purchased 2,200 1.5 30 5.43 779 0.5 12 6.18
Securities sold under agreements
to repurchase 246 0.2 3 5.47 851 0.5 12 5.47
Note payable --- --- --- --- --- --- --- ---
---------- -------- ----------- -------- --------- -------- --------- ---------
Total interest bearing
liabilities 115,202 76.9 1,233 4.29 120,714 77.6 1,294 4.30
Non-interest bearing deposits 18,868 12.6 19,847 12.8
Other liabilities 1,564 1.0 1,559 1.0
---------- -------- --------- --------
Total liabilities 135,634 90.5 142,120 91.3
Stockholders' Equity 14,208 9.5 13,470 8.7
---------- -------- --------- --------
Total liabilities and
stockholders' equity $149,842 100.0% $155,590 100.0%
========== ======== ========= ========
Net interest margin $ 1,678 4.89% $ 1,679 4.69%
Provision for loan losses (490) (1.44)% (30) (0.10)%
----------- -------- --------- ---------
Net funds function 1,188 3.45% 1,649 4.59%
=========== ======== ========= =========
</TABLE>
(1) Fully taxable equivalent basis using the federal statutory rate of 34%.
(2) Nonaccrual loans are included in the loan balances. Interest income
includes related fee income of $59,000 in 1996 and $53,000 in 1995.
(3) Average balance is based on amortized historical cost (excluding FASB 115
adjustments to fair value).
9
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------------------------------------------------------------
1996 1995
------------------------------------------- ------------------------------------------
Percent Interest Average Percent Interest Average
Average of Total Income/ Yield/ Average of Total Income/ Yield/
$(thousands) Balance Assets Expense Rate Balance Assets Expense Rate
- ------------------------------- ---------- -------- ----------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold $ 1,316 0.9% $ 35 5.40% $ 1,233 0.8% $ 37 6.02%
Investment securities (3)
Taxable 24,729 16.5 732 5.92 32,143 20.8 870 5.41
Tax-exempt 15,182 10.1 557 7.34 10,405 6.7 381 7.32
---------- -------- ----------- -------- --------- -------- --------- ---------
Total securities 39,911 26.6 1,289 6.46 42,548 27.5 1,251 5.88
Loans
Commercial (1) 15,052 10.0 651 8.67 14,969 9.7 662 8.92
Agriculture 5,157 3.4 212 8.23 4,591 3.0 207 9.09
Real estate
Commercial 29,178 19.4 1,336 9.19 28,715 18.5 1,295 9.05
Agriculture 2,854 1.9 129 9.03 3,556 2.3 153 8.67
Residential 26,734 17.8 1,249 9.37 31,680 20.5 1,415 9.01
Consumer, net 17,948 12.0 859 9.60 17,107 11.0 798 9.41
Credit card 616 0.4 42 13.53 82 0.1 7 17.43
---------- ----------- --------- ---------
Total loans 97,539 65.0 4,478 9.23 100,700 65.0 4,537 9.10
Reserve for loan losses (1,194) (0.8) (1,513) (1.0)
---------- ----------- --------- ---------
Net loans (1)(2) 96,345 64.2 4,478 9.34 99,187 64.0 4,537 9.24
---------- ----------- --------- -------- ---------
Total interest earning
assets 137,572 91.6 5,802 8.89 142,968 92.3 5,825 8.50
---------- ----------- --------- ---------
Cash and due from banks 4,997 3.3 5,294 3.4
Premises and equipment 4,884 3.3 4,249 2.7
Other assets (3) 2,653 1.8 2,355 1.5
---------- -------- --------- --------
Total assets $150,106 100.0% $154,866 100.0%
========== ======== ========= ========
LIABILITIES
Interest bearing deposits:
Savings and NOW accounts $ 48,227 32.1% $ 618 2.57% $ 51,318 33.1% $ 655 2.57%
Time deposits 65,482 43.6 1,847 5.66 67,197 43.4 1,753 5.26
Federal funds purchased 1,109 0.7 30 5.41 1,106 0.7 33 6.04
Securities sold under
agreements to repurchase 267 0.2 8 5.85 820 0.5 22 5.52
Note payable --- --- --- --- 200 0.1 9 9.00
---------- -------- ----------- -------- --------- -------- ---------
Total interest bearing
liabilities 115,085 76.7 2,503 4.36 120,641 77.9 2,472 4.13
Non interest bearing deposits 18,810 12.5 19,531 12.6
Other liabilities 1,749 1.2 1,536 1.0
---------- -------- --------- --------
Total liabilities 135,644 90.4 141,708 91.5
Stockholders' Equity 14,462 9.6 13,158 8.5
---------- -------- --------- --------
Total liabilities and
stockholders' equity $150,106 100.0% $154,866 100.0%
========== ======== ========= ========
Net interest margin $ 3,299 4.81% $ 3,353 4.73%
Provision for loan losses (630) (0.93)% (60) (0.12)%
----------- -------- --------- ---------
Net funds function 2,669 3.88% 3,293 4.61%
=========== ======== ========= =========
</TABLE>
(1) Fully taxable equivalent basis using the federal statutory rate of 34%.
(2) Nonaccrual loans are included in the loan balances. Interest income
includes related fee income of $118,000 in 1996 and $109,000 in 1995.
(3) Average balance is based on amortized historical cost (excluding FASB 115
adjustments to fair value).
10
<PAGE>
NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS
Quarter ending June 30,
1996-1995
--------------------------------------
Changes in Volume Rate
$(thousands) Income/Expense Effect Effect
---------------- -------- --------
Federal funds sold $ (27) $ (25) $ (2)
Investment securities:
Taxable 4 (16) 20
Nontaxable 94 59 35
Loans (133) (150) 17
-------- -------- --------
Total interest income (62) (132) 70
-------- -------- --------
Savings and NOW accounts (18) (18) 0
Time deposits (52) (49) (3)
Federal funds purchased 18 19 (1)
Securities sold under repurchase
agreements (9) (9) 0
Total interest expense (61) (57) (4)
-------- -------- --------
Net interest income $ (1) $ (75) $ 74
-------- -------- --------
======== ======== ========
Six months ending June 30,
1996-1995
--------------------------------------
Changes in Volume Rate
$(thousands) Income/Expense Effect Effect
---------------- -------- --------
Federal funds sold $ (2) $ 3 $ (5)
Investment securities:
Taxable (138) (231) 93
Nontaxable 176 116 60
Loans (59) (94) 35
-------- -------- --------
Total interest income (23) (206) 183
-------- -------- --------
Savings and NOW accounts (37) (37) 0
Time deposits 94 (48) 142
Federal funds purchased (3) 0 (3)
Securities sold under repurchase
agreements (14) (15) 1
Note payable (9) (9) 0
-------- -------- --------
Total interest expense 31 (109) 140
-------- -------- --------
Net interest income $ (54) $ (97) $ 43
======== ======== ========
11
<PAGE>
NONINTEREST INCOME
<TABLE>
<CAPTION>
Six months ended Percent Six months ended Percent
June 30, Change June 30, Change
------------------ --------- ------------------ ---------
1996 1995 1996/1995 1996 1995 1996/1995
-------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts.... $261,085 $264,637 (1.3)% $501,193 $531,823 (5.8)%
Securities gains (losses), net......... 13,484 (4,036) 434.1 14,734 (4,036) 465.1
Mortgage loan servicing fees........... 43,341 39,012 11.1 87,395 77,540 12.7
Gain on sale of mortgage loans......... 13,105 17,508 (25.1) 40,002 26,804 49.2
Other income........................... 56,511 74,636 (24.3) 101,738 149,045 (31.7)
-------- -------- --------- -------- --------- ---------
$387,526 $391,757 (1.1) $745,062 $781,176 (4.6)
======== ======== ========= ======== ========= =========
</TABLE>
The decline in service charges on deposit accounts is primarily
due to a decrease in service charges on demand deposit accounts
of $12,000 for the three months and $22,000 for the six months
ended June 30, 1996 compared to prior year.
The gain on the sale of securities totaling $13,000 for the three
months ended June 30, 1996 resulted from the sale of $2,200,000
of short-term municipal bonds to minimize the alternative minimum
tax.
The increase in mortgage loan service fees and the gain on sale
of mortgage loans for the six months ended June 30, 1996 is due
to an increase in the origination of mortgage loans for sale in
the secondary market to $8,438,000 as compared to $3,121,000 for
the same period in the prior year.
The decrease in other noninterest income for the six months ended
June 30, 1996 is primarily due to a $31,000 gain on the sale of
other real estate that was recorded during the quarter ended
March 31, 1995.
12
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Six months ended Percent Six months ended Percent
June 30, Change June 30, Change
------------------ --------- --------------------- ---------
1996 1995 1996/1995 1996 1995 1996/1995
-------- -------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Salaries.................................. $677,622 $650,333 4.2% $1,344,702 $1,281,501 4.9%
Benefits.................................. 142,207 142,749 (0.4) 294,794 284,881 3.5
Occupancy expense......................... 126,620 131,241 (3.5) 291,000 266,421 9.2
Equipment expense......................... 108,505 118,237 (8.2) 214,651 233,373 (8.0)
Data processing........................... 92,793 88,767 4.5 189,629 184,090 3.0
Insurance................................. 6,891 8,150 (15.4) 13,982 20,436 (31.6)
Directors' fees........................... 35,637 44,600 (20.1) 71,275 76,200 (6.5)
Audit fees................................ 21,704 9,954 118.0 40,704 33,030 23.2
Legal fees................................ 40,844 22,854 78.7 100,855 48,008 110.1
Consulting fees........................... 16,590 21,160 (21.6) 28,383 34,014 (16.6)
Regulatory fees........................... 5,636 82,727 (93.2) 11,357 165,541 (93.1)
Supplies.................................. 37,467 29,070 28.9 71,136 75,166 (5.4)
Postage................................... 25,666 26,022 (1.4) 55,370 59,653 (7.2)
Amortization.............................. 13,476 22,810 (40.9) 26,953 45,620 (40.9)
Marketing and advertising................. 65,595 54,450 20.5 131,217 108,900 20.5
Other real estate expenses................ 4,304 8,187 (47.4) 4,577 10,207 (55.2)
Other expense............................. 166,328 195,614 (15.0) 333,223 372,037 (10.4)
---------- ---------- --------- ---------- ----------- ---------
$1,587,885 $1,656,925 (4.2) $3,223,808 $3,299,078 (2.3)
========== ========== ========= ========== =========== =========
</TABLE>
Salaries and benefits increased for the three months and six
months ended June 30, 1996, primarily due to headcount added for
the production of agricultural and residential mortgage loans.
Occupancy expense increased for the six months ended June 30,
1996, primarily due to expenses of $35,000 associated with moving
leasehold improvements out of a building in which the lease had
expired.
Legal fees increased for the three months and six months ended
June 30, 1996 due to cost associated with collection of non-
performing loans and fees incurred in the first quarter of 1996
due to non-recurring regulatory matters pursued by the bank.
Regulatory fees decreased as a result of the Federal Deposit
Insurance Corporation decision to lower deposit insurance
premiums from .23 cents per $100 in bank insurance fund deposits
to the regulatory minimum of $500 per quarter for well
capitalized and well managed banks, resulting in a decline of
$77,000 for the three months ended June 30, 1996 and a decline of
$154,000 for the six months ended June 30, 1996 in FDIC insurance
premiums.
INCOME TAXES
The income tax benefit of $142,000 for the three months ended
June 30, 1996 resulted from a net operating loss incurred for
that period due to an increase in the provision for loan losses.
13
<PAGE>
CREDIT QUALITY
The provision for loan losses increased to $490,000 and $630,000 for the
three and six months ended June 30, 1996, as compared to $30,000 and $60,000
for the comparable periods in the prior year. Net charge-offs increased to
$464,000 and $754,000 for the three and six months ended June 30, 1996, as
compared to $49,000 for the comparable periods in the prior year. A
problem agricultural credit was responsible for $507,000 of the net
charge-offs for the six months ended June 30, 1996. The remaining balance of
this credit is $32,000 as of June 30, 1996 and no further losses are
anticipated for this credit.
CREDIT QUALITY $(dollars in thousands) QUARTER ENDED YEAR TO DATE
- ---------------------------------------------
1996 1995 1996 1995
------ ------- ------ -----
Ending allowance for loan losses............. $1,122 $1,471
------ -------
Nonperforming assets
Nonaccrual................................ 1,291 830
OREO...................................... 542 395
------ -------
Total nonperforming assets................ $1,833 $1,225
------ -------
------ -------
Loans delinquent over 90 days................. $314 $837
------ -------
Gross charge-offs............................. 484 69 803 168
Less: recoveries.............................. 20 20 49 33
------ ------- ---- ----
Net charge-offs........................... $464 $49 $754 $135
====== ======= ==== ====
KEY RATIOS
Allowance to ending loans................. 1.17% 1.39%
Nonperforming assets to ending loans...... 1.91% 1.16%
Allowance to nonperforming loans.......... 0.52% 0.72%
90 days delinquent to ending loans........ 0.39% 0.79%
Net charge-offs to average loans.......... 1.93% 0.19% 1.55% 0.27%
INTEREST RATE SENSITIVITY
Interest rate sensitivity is a function of the repricing
characteristics of Illini Corporation's portfolio of assets and
liabilities. These repricing characteristics are the time frame
within which the interest bearing assets and liabilities are
subject to change in interest rates either at replacement,
repricing or maturity during the life of the instruments.
Interest rate sensitivity management focuses on repricing
relationships of assets and liabilities during periods of changes
in market interest rates. Effective interest rate sensitivity
management seeks to ensure that both assets and liabilities
respond to changes in interest rates within an acceptable time
frame, thereby minimizing the effect of interest rate movements
on net interest income. Illini Corporation manages its interest
rate sensitivity using on-balance sheet investment products. The
present value equity of Illini
14
<PAGE>
Corporation would change as described in the following table should
interest rates shift in an immediate and parallel manner.
Present Value Equity
Change in
Basis Points Market Value % Change
- ------------------------------------------------------------------
(200) 23,270,657 7.77%
(150) 22,927,259 6.18%
(100) 22,557,919 4.47%
(50) 22,102,915 2.36%
0 21,592,471 0.00%
50 21,080,456 (2.37)%
100 20,585,923 (4.66)%
150 20,095,990 (6.93)%
200 19,617,494 (9.14)%
Management believes Illini is appropriately positioned for future
interest rate movements within the guidelines of the Asset
Liability Management Committee Policy approved by the Board of
Directors.
15
<PAGE>
PART II. OTHER INFORMATION
ILLINI CORPORATION AND SUBSIDIARY
June 30, 1996
Item 1 LEGAL PROCEEDINGS
Various legal claims have arisen in the normal course of
business, which, in the opinion of Illini management and
legal counsel, will not result in any material liability to
Illini.
Item 2 CHANGES IN SECURITIES - None
Item 3 DEFAULTS UPON SENIOR SECURITIES - None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- None
Item 5 OTHER INFORMATION - None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended June 30, 1996.
16
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
June 30, 1996
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Illini Corporation by
/s/ Burnard K. McHone 8/14/96
- -------------------------------- ------------------------
Burnard K. McHone Date signed
President
/s/ Mark R. Edmiston 8/14/96
- -------------------------------- ------------------------
Mark R. Edmiston Date signed
Chief Financial Officer
17
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<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,551,230
<INT-BEARING-DEPOSITS> 18,937
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,465,414
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<LOANS> 95,976,852
<ALLOWANCE> 1,122,055
<TOTAL-ASSETS> 147,950,564
<DEPOSITS> 130,274,381
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0
0
<COMMON> 4,484,560
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<INTEREST-DEPOSIT> 2,464,914
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<INTEREST-INCOME-NET> 3,100,265
<LOAN-LOSSES> 630,000
<SECURITIES-GAINS> 14,734
<EXPENSE-OTHER> 3,223,808
<INCOME-PRETAX> (8,481)
<INCOME-PRE-EXTRAORDINARY> (8,481)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,236
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 4.81
<LOANS-NON> 1,291,000
<LOANS-PAST> 314,000
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<LOANS-PROBLEM> 73,513
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