<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
For quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
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 September 30, 1997.
Transitional Small Business Disclosure Format: Yes No X
----- -----
<PAGE>
ILLINI CORPORATION
INDEX TO FORM 10-QSB
September 30, 1997
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Income
Nine and Three Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION 22
SIGNATURE PAGE 23
EXHIBIT INDEX 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1997 1996
------------- ------------
ASSETS (dollars in thousands)
<S> <C> <C>
Cash and due from banks $ 3,903 $ 5,473
Interest bearing deposits in other banks 65 40
Federal funds sold 11,285 0
Investment in debt and marketable equity securities
available for sale, at estimated market value 33,990 40,386
Loans, net of the allowance for loan losses and unearned income 85,773 92,133
Premises and equipment 7,332 5,369
Accrued interest receivable 1,483 1,494
Other real estate owned 503 728
Other assets 782 860
------------- ------------
$ 145,116 $ 146,483
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing demand deposits 19,608 20,752
Interest bearing deposits:
NOW and money market accounts 27,387 25,115
Savings deposits 17,534 18,160
Time deposits, $100,000 and over 17,861 14,921
Other time deposits 46,111 46,822
------------- ------------
Total deposits 128,501 125,770
Federal funds purchased 0 1,130
Securities sold under agreements to repurchase 290 500
Other short-term borrowings 0 3,000
Accrued interest payable 652 693
Other liabilities 790 877
------------- ------------
Total liabilities 130,233 131,970
------------- ------------
Shareholders' equity:
Common stock-authorized 800,000 shares of $10
par value; 448,456 shares issued and outstanding 4,485 4,485
Capital surplus 1,886 1,886
Retained earnings 8,395 8,248
Net unrealized gains (losses) on investments in debt and
marketable equity securities available for sale, net 117 (106)
------------- ------------
Total shareholders' equity 14,883 14,513
------------- ------------
$ 145,116 $ 146,483
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
Interest income: (dollars in thousands)
<S> <C> <C> <C> <C>
Interest and fees on loans $ 2,076 $ 2,231 $ 6,198 $ 6,699
Interest on investments in debt and marketable equity securities
Taxable 477 454 1,554 1,185
Exempt from federal income taxes 138 163 473 530
Interest on short term investments 60 0 71 37
-------- -------- -------- --------
Total interest income 2,751 2,848 8,296 8,451
-------- -------- -------- --------
Interest expense:
Interest on deposits:
NOW and money market accounts 201 192 555 558
Savings deposits 111 123 339 376
Time deposits, $100,000 and over 235 227 666 667
Other time deposits 625 651 1,849 2,058
Interest on borrowings 8 42 115 79
-------- -------- -------- --------
Total interest expense 1,180 1,235 3,524 3,738
-------- -------- -------- --------
Net interest income 1,571 1,613 4,772 4,713
Provision for loan losses 75 165 225 795
-------- -------- -------- --------
Net interest income after provision for loan losses 1,496 1,448 4,547 3,918
-------- -------- -------- --------
Noninterest income:
Service charges on deposit accounts 267 250 779 720
Other fee income 40 63 119 183
Mortgage loan servicing fees 52 45 144 128
Gain on sale of mortgage loans 35 9 63 49
Securities gains (losses) 64 17 61 32
Other 19 113 53 130
-------- -------- -------- --------
Total noninterest income 477 497 1,219 1,242
Noninterest expense:
Salaries and employee benefits 825 841 2,484 2,508
Net occupancy expense 168 130 485 421
Equipment expense 75 78 228 227
Data processing 136 133 437 408
Supplies 35 29 92 106
Communication and transportation 91 74 267 220
Marketing and advertising 61 66 194 197
Correspondent and processing fees 37 33 104 95
Loan and other real estate owned expenses 54 22 141 55
Professional fees 170 55 480 237
Directors' fees 28 36 98 107
Regulatory fees 9 6 27 17
Other operating expenses 68 91 222 219
-------- -------- -------- --------
Total noninterest expense 1,757 1,594 5,259 4,817
Income before income tax expense 216 351 507 343
Income tax expense (benefit) 29 129 24 (7)
-------- -------- -------- --------
Net income $ 187 $ 222 $ 483 $ 350
-------- -------- -------- --------
-------- -------- -------- --------
Income per share
(based on weighted average common shares outstanding
of 448,456 for 1997 and 1996) $ 0.42 $ 0.50 $ 1.08 $ 0.78
-------- -------- -------- --------
-------- -------- -------- --------
See accompanying notes to interim consolidated financial statements.
</TABLE>
4
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
Cash flows from operating activities: (dollars in thousands)
<S> <C> <C>
Net income $ 483 $ 350
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 526 420
Provision for loan losses 225 795
Securities gains, net (61) (32)
Gain on sale of land 0 (105)
(Increase) decrease in accrued interest receivable 11 (257)
Decrease in accrued interest payable (41) (175)
Other, net (246) (362)
Origination of mortgage loans for sale (12,526) (12,271)
Proceeds from the sale of mortgage loans 12,299 12,122
---------- ----------
Net cash provided by operating activities 670 485
---------- ----------
Cash flows from investing activities:
Proceeds from sales of investments in debt and marketable equity
securities available for sale 17,430 5,801
Proceeds from maturities and paydowns of investments in debt and
marketable equity securities available for sale 7,257 7,666
Purchases of investments in debt and marketable equity securities
available for sale (17,901) (20,965)
Net decrease in loans 6,362 5,270
Purchases of premises and equipment (2,422) (644)
Proceeds from sale of land 0 488
Proceeds from sales of other real estate 290 0
---------- ----------
Net cash provided by (used in) investing activities 11,016 (2,384)
---------- ----------
Cash flows from financing activities:
Net decrease in non-interest bearing deposit accounts (1,145) (1,823)
Net increase (decrease) in NOW, money market accounts and savings 1,647 (631)
Net increase in time deposits $100,000 and over 2,940 875
Net decrease in other time deposits (711) (2,300)
Net increase (decrease) in Federal funds purchased (1,130) 1,420
Net decrease in securities sold under agreements to repurchase (210) (400)
Net increase (decrease) in other short-term borrowings (3,000) 3,000
Dividends paid (337) (303)
---------- ----------
Net cash used in financing activities (1,946) (162)
---------- ----------
Net increase (decrease) in cash and cash equivalents 9,740 (2,061)
Cash and cash equivalents at beginning of period 5,513 8,079
Cash and cash equivalents at end of period $15,253 $ 6,018
---------- ----------
---------- ----------
Supplemental Information:
Income taxes paid $ 52 $ 145
Interest paid $ 3,565 $ 3,913
---------- ----------
---------- ----------
Other non-cash investing activities:
Transfer of loans to other real estate $ 85 $ 222
---------- ----------
---------- ----------
See accompanying notes to interim consolidated financial statements.
</TABLE>
5
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
(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 Illini Corporation
Annual Report on Form 10-KSB for the year ended December 31, 1996.
Results for the three and nine months ended September 30, 1997 may not be
indicative of the annual performance of Illini Corporation (Illini or the
Corporation).
(2) ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
The allowance for loan losses is increased by provisions charged to
operations and is available to absorb loan losses. Illini Bank (the Bank),
the Corporation's wholly owned subsidiary, utilizes a systematic,
documented approach in determining the appropriate level of the allowance
for loan losses. Management's approach, which provides for general and
specific allowances, is based on current economic conditions, past loan
losses, collection experience, risk characteristics of the portfolio,
assessing collateral values by obtaining independent appraisals for
significant properties, and such other factors which, in management's
judgment, deserve current recognition in estimating potential loan losses.
Management's determination of the allowance for loan losses is one of the
significant estimates made by management in the preparation of the
consolidated financial statements.
Loans, except large groups of smaller-balance homogeneous loans, for which
the full collection of principal and interest according to the contractual
terms of the loan agreement is not probable, are evaluated for impairment.
Information regarding impaired loans at September 30, 1997 and December 31,
1996 is as follows:
September 30, December 31,
1997 1996
---- ----
(dollars in thousands)
Nonaccrual loans $ 720 $ 869
Impaired loans continuing to accrue interest 20 309
--- -----
Total impaired loans $ 740 $1,178
--- -----
--- -----
Allowance for losses on impaired loans $ 41 $ 435
Impaired loans with no related allowance for
loan losses 661 69
Average balance of impaired loans during the
period 959 1,665
--- -----
--- -----
6
<PAGE>
(3) NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board (FASB) has issued a
number of Statements of Financial Accounting Standards (SFAS). The SFAS
presented below was issued during the first nine months of 1997 and could
impact Illini.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE, which
establishes standards for computing and presenting earnings per share
(EPS). SFAS No. 128 simplifies existing standards for computing EPS and
makes them comparable to international standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the components of basic and diluted EPS.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of Illini. SFAS No. 128
is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and requires restatement of
all prior-period EPS data presented. Illini does not believe the adoption
of SFAS No. 128 will have a material effect on its financial condition or
results of operations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
This discussion should be read in conjunction with the consolidated financial
statements, notes and tables included elsewhere in this report and in the 1996
Illini Corporation Annual Report on Form 10-KSB. Illini cautions that any
forward looking statements contained in this report, or in any report
incorporated by reference to this report or made by management of Illini involve
risks and uncertainties and are subject to change based on various factors.
Actual results could differ materially from those expressed or implied.
SUMMARY
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 30, September 30,
----------------- Percent ------------------- Percent
EARNINGS $(thousands, except per share data). . . . 1997 1996 Change 1997 1996 Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue . . . . . . . . . . . . . . . . . . . . $3,229 $3,346 (3.49%) $9,516 $9,694 (1.84%)
Net income. . . . . . . . . . . . . . . . . . . . . . 187 222 (15.85%) 483 350 38.14%
Income per share. . . . . . . . . . . . . . . . . . . $ 0.42 $ 0.50 (15.85%) $ 1.08 $ 0.78 38.14%
KEY RATIOS
- ------------------------------------------------------------------------------------------------------------------------------
Return on average assets. . . . . . . . . . . . . . . 0.52% 0.59% (0.07%) 0.44% 0.31% 0.13%
Return on average equity. . . . . . . . . . . . . . . 5.01% 6.27% (1.25%) 4.44% 3.25% 1.19%
Average equity to assets. . . . . . . . . . . . . . . 10.27% 9.41% 0.87% 10.00% 9.56% 0.44%
Tier 1 leverage ratio . . . . . . . . . . . . . . . . 10.15% 9.67% .48%
Tier 1 risk-based capital ratio . . . . . . . . . . . 14.91% 13.45% 1.46%
Total risk-based capital ratio. . . . . . . . . . . . 16.20% 14.49% 1.71%
Dividend payout ratio . . . . . . . . . . . . . . . . 59.94% 45.39% 14.54% 69.66% 86.61% (16.94%)
Net interest margin . . . . . . . . . . . . . . . . . 5.01% 4.89% 0.12% 5.08% 4.81% 0.26%
Efficiency ratio. . . . . . . . . . . . . . . . . . . 82.90% 72.87% 10.03% 84.39% 77.63% 6.76%
</TABLE>
8
<PAGE>
RESULTS OF OPERATION
EARNING ASSETS
Average earning assets of the Corporation for the first nine months of 1997
decreased 3.90% or $5.36 million to $132.1 million from $137.4 million for the
first nine months of 1996.
As discussed in the asset quality section of this Form 10-QSB, management has
actively pursued the improvement of the asset quality of all earning assets,
loans and investment securities. Management has focused on improving credit
quality which has resulted in a decline in outstanding loans. Average
investments have increased over the nine months of 1997 as a result of the
decrease in loans outstanding.
Average net loans declined to $86.3 million for the three months ended September
30, 1997 compared to $94.7 million for the same period in 1996. The decline of
$8.4 million for the three months ended September 30, 1997 as compared to the
same period for 1996 was primarily due to a decrease of $2 million in commercial
loans, including commercial real estate loans, $2.9 million in residential real
estate and $4.1 million in consumer loans. The average yield on the loan
portfolio before the allowance for loan losses increased 19 basis points to
9.45% due to the prime lending rate being 25 basis points higher for the three
months ended September 30, 1997 as compared to the same period in 1996.
Average net loans declined to $87.2 million for the nine months ended September
30, 1997 compared to $95.8 million for the same period in 1996. The decline of
$8.6 million for the nine months ended September 30, 1997 as compared to the
same period in 1996 was primarily due to a decline of $3.7 million in commercial
loans, including commercial real estate loans, $1.7 million in residential real
estate, and $2.9 million in consumer loans. The average yield on the loan
portfolio before the allowance for loan losses increased 20 basis points to
9.42% due to the prime lending rate being 25 basis points higher for the nine
months ended September 30, 1997 as compared to the same period in 1996.
Average investment securities decreased $3.2 million and increased $2.3 million
for the three and nine months ended September 30, 1997 as compared to the same
period in 1996. The average yield of the investment securities portfolio was
6.90% and 6.95% for the three and nine months ended September 30, 1997, an
increase of 39 and 56 basis points as compared to the same periods in 1996. The
increase in yield is due to slightly higher interest rates available in 1997 as
compared to 1996.
FUNDING
The most important and stable source of funding is core deposits, considered by
management to include non-interest bearing demand deposits, NOW and money market
accounts, savings deposits and time deposits under $100,000. Average core
deposits for the nine months ended September 30, 1997 decreased 4.35% or $5.1
million to $111.4 million from $116.4 million. While average core deposits have
decreased for the first nine months of 1997 versus the first nine months of
1996, loan growth over the same period has not been a focus of management given
the efforts to focus on improving credit quality. Therefore, the decline in
average core deposits has not adversely affected funding requirements. Time
deposits of $100,000 and over, federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings round out Illini's
sources of funding. As a result of management restructuring its investment
portfolio at the end of the second quarter 1997, average short-term borrowings
declined from $2.8 million to $530,000 for the quarter ended
9
<PAGE>
September 30, 1996 and 1997, respectively. Should immediate funding become
necessary, Illini could draw upon an overnight federal funds line of credit with
an unaffiliated financial institution and a line of credit with the Federal Home
Loan Bank of Chicago both of which were established during the fourth quarter of
1996.
NET INTEREST INCOME/NET INTEREST MARGIN
The operating results of the Corporation depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on assets and rates paid on liabilities and the relative
amounts of interest-earning assets and interest-bearing liabilities.
Interest income, on a fully taxable equivalent basis, was $2.8 million and $8.5
million for the three months and nine months ended September 30, 1997, which is
consistent with the $2.9 million and $8.7 million for same periods in 1996.
Interest expense was $1.2 million and $3.5 million for the three and nine months
ended September 30, 1997, compared to $1.2 and $3.7 million for the same periods
in 1996. Consistent interest income and slightly lower interest expense,
coupled with the decline in both interest-earning assets and interest-bearing
liabilities resulted in net interest income of $5.0 million and net interest
margin of 5.08% for the nine months ended September 30, 1997, increases of 1.01%
and 5.61% over the same period in 1996. This net interest income and net
interest margin increase was attributed to increased rate and volume on
investments and increased rates and volume on commercial loans, tempered by a
net decrease in rate and volume of other types of loans and a net decrease in
rate and volume of core deposits.
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. Also, the Corporation's interest-rate spread
is affected by regulatory, economic and competitive factors that influence
interest rates, loan demand and deposit flow. Individual components of net
interest income and net interest margin are presented in the consolidated
average balance, interest income/expense and yield/rate tables on pages 12 and
13 and a net interest income rate/volume variance analysis on pages 14 and 15.
10
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Quarter ended September 30,
--------------------------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------------------------
PERCENT INTEREST AVERAGE Percent Interest Average
AVERAGE OF TOTAL INCOME/ YIELD/ Average of Total Income/ Yield/
BALANCE ASSETS EXPENSE RATE Balance Assets Expense Rate
------- ------ ------- ----- -------- ------ ------- ----
(dollars in thousands)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Short-term investments $ 4,434 3.1 % $ 60 5.41 % $ 22 0.0 % $ 0 8.52 %
Investment securities (3)
Taxable 28,305 19.6 477 6.75 29,213 19.6 454 6.21
Tax-exempt (1) 10,975 7.7 200 7.29 13,217 8.8 237 7.16
---------- ------ ------- ----- ---------- ------ ------- -----
Total securities 39,280 27.3 677 6.90 42,430 28.4 691 6.51
Loans
Commercial (1) 16,035 11.1 391 9.67 13,329 8.9 286 8.52
Agriculture 6,765 4.7 131 7.71 5,980 4.0 129 8.55
Real estate
Commercial 23,613 16.4 558 9.37 28,335 19.0 671 9.39
Agriculture 2,607 1.8 60 9.20 2,602 1.7 60 9.21
Residential 24,196 16.8 567 9.29 27,122 18.1 628 9.18
Consumer, net 13,718 9.5 352 10.17 17,774 11.9 435 9.72
Credit card 629 0.4 26 16.52 652 0.4 26 15.96
---------- ------- ---------- -------
Total loans 87,563 60.7 2,085 9.45 95,794 64.0 2,235 9.26
Allowance for loan losses (1,248) (0.9) (1,110) (0.7)
---------- ------- ---------- -------
Net loans (1) (2) 86,315 59.8 2,085 9.58 94,684 63.3 2,235 9.37
---------- ------ ------- ---------- ------ -------
Total interest earning assets 130,029 90.2 2,822 8.61 137,136 91.7 2,926 8.46
---------- ------- ---------- -------
Cash and due from banks 4,467 3.1 4,838 3.2
Premises and equipment 6,660 4.6 5,000 3.3
Other real estate owned 511 0.4 629 0.4
Other assets (3) 2,406 1.7 2,015 1.4
---------- ------ ---------- ------
TOTAL ASSETS $ 144,073 100.0 % $ 149,618 100.0 %
---------- ------ ---------- ------
---------- ------ ---------- ------
LIABILITIES
Deposits:
Non interest bearing deposits $ 20,149 14.0 % $ % $ 18,919 12.6 % $ %
Interest bearing demand 26,830 18.6 201 2.97 28,512 19.1 192 2.67
Savings 17,988 12.5 111 2.46 19,679 13.2 123 2.49
Time deposits less than $100,000 46,008 31.9 625 5.39 48,091 32.1 651 5.37
------- ---------- -------
Total core deposits 110,975 77.0 937 3.35 115,201 77.0 966 3.33
Time deposits $100,000 and over 16,279 11.3 235 5.73 15,967 10.7 227 5.64
--------- ------- ---------- -------
Total deposits 127,254 88.3 1,172 3.65 131,168 87.7 1,193 3.61
Short-term borrowings 530 0.4 8 5.95 2,869 1.9 42 5.78
Total interest bearing liabilities 107,635 74.7 1,180 4.35 115,118 77.0 1,235 4.26
Other liabilities 1,486 1.0 1,509 1.0
---------- ------ ---------- ------
Total liabilities 129,270 89.7 135,546 90.6
Stockholders' Equity 14,803 10.3 14,072 9.4
---------- ------ ---------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 144,073 100.0 % $ 149,618 100.0 %
---------- ------ ---------- ------
---------- ------ ---------- ------
NET INTEREST MARGIN $1,642 5.01 % $1,691 4.89 %
------- ---- ------- ------
------- ---- ------- ------
</TABLE>
(1) Income amounts are presented on a fully taxable equivalent basis (FTE),
which is defined as income on earning assets that is subject to either a
reduced rate or zero rate of income tax, adjusted to give effect to the
appropriate incremental federal income tax rate and adjusted for
non-deductible carrying costs, where applicable. Where appropriate, yield
calculations include these adjustments. The federal statutory rate was 34%
for all years presented.
(2) Nonaccrual loans are included in the loan balances. Interest income
includes related fee income of $65,000 in 1997 and $61,000 in 1996.
(3) Average securities balances are based on amortized historical cost,
excluding SFAS 115 adjustments to fair value, which are included in other
assets.
11
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------------------------
PERCENT INTEREST AVERAGE Percent Interest Average
AVERAGE OF TOTAL INCOME/ YIELD/ Average of Total Income/ Yield/
BALANCE ASSETS EXPENSE RATE Balance Assets Expense Rate
------- ------ ------- ----- -------- ------ ------- ----
(dollars in thousands)
-----------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Short-term investments $ 1,870 1.3 % $ 71 5.04 % $ 881 0.6 % $ 37 5.56 %
Investment securities (3)
Taxable 30,646 21.1 1,554 6.76 26,240 17.5 1,185 6.02
Tax-exempt (1) 12,366 8.5 687 7.40 14,521 9.7 768 7.06
---------- ------ ------- ---- ---------- ------ ------- ------
Total securities 43,012 29.6 2,241 6.95 40,761 27.2 1,953 6.39
Loans
Commercial (1) 14,959 10.3 1,119 10.00 14,474 9.7 936 8.62
Agriculture 5,596 3.8 355 8.47 5,433 3.6 341 8.35
Real estate
Commercial 24,751 17.0 1,697 9.17 28,896 19.3 2,007 9.25
Agriculture 2,336 1.6 160 9.17 2,770 1.9 189 9.09
Residential 25,148 17.3 1,726 9.18 26,864 17.9 1,876 9.30
Consumer, net 15,003 10.3 1,093 9.74 17,889 11.9 1,295 9.64
Credit card 633 0.4 77 16.33 628 0.4 68 14.38
---------- ------- ---------- -------
Total loans 88,426 60.7 6,227 9.42 96,954 64.7 6,712 9.22
Allowance for loan losses (1,235) (0.8) (1,166) (0.8)
---------- ------- ---------- -------
Net loans (1) (2) 87,191 59.9 6,227 9.55 95,788 63.9 6,712 9.33
---------- ------ ------- ---------- ------ -------
Total interest earning assets 132,073 90.8 8,539 8.64 137,430 91.7 8,702 8.44
---------- ------- ---------- -------
Cash and due from banks 4,575 3.1 4,937 3.3
Premises and equipment 6,125 4.2 4,923 3.3
Other real estate owned 610 0.4 697 0.4
Other assets (3) 2,103 1.5 1,952 1.3
---------- ------ ---------- ------
TOTAL ASSETS $ 145,486 100.0 % $149,939 100.00 %
---------- ------ ---------- ------
---------- ------ ---------- ------
LIABILITIES
Deposits:
Non interest bearing deposits $ 20,042 13.8 % $ % $ 18,846 12.5 % $ %
Interest bearing demand 26,503 18.25 55 2.80 28,069 18.7 558 2.65
Savings 18,402 12.7 339 2.47 20,149 13.5 376 2.48
Time deposits less than $100,000 46,407 31.9 1,849 5.33 49,350 32.9 2,058 5.55
---------- ---------- -------
Total core deposits 111,354 76.6 2,743 3.29 116,414 77.6 2,992 3.42
Time deposits $100,000 and over 15,484 10.6 666 5.75 15,655 10.5 667 5.68
------- ---------- -------
Total deposits 126,838 87.2 3,409 3.59 132,069 88.1 3,659 3.69
Short-term borrowings 2,600 1.8 115 5.91 1,872 1.2 79 5.66
Total interest bearing liabilities 109,396 75.2 3,524 4.31 115,095 76.8 3,738 4.33
Other liabilities 1,502 1.0 1,667 1.1
---------- ------ ---------- ------
Total liabilities 130,940 90.0 135,608 90.4
Stockholders' Equity 14,546 10.0 14,331 9.6
---------- ------ ---------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 145,486 100.0 % $149,939 100.0 %
---------- ------ ---------- ------
---------- ------ ---------- ------
NET INTEREST MARGIN $5,015 5.08 % $4,964 4.81 %
------- ---- ------- ------
------- ---- ------- ------
</TABLE>
(1) Income amounts are presented on a fully taxable equivalent basis (FTE),
which is defined as income on earning assets that is subject to either a
reduced rate or zero rate of income tax, adjusted to give effect to the
appropriate incremental federal income tax rate and adjusted for
non-deductible carrying costs, where applicable. Where appropriate, yield
calculations include these adjustments. The federal statutory rate was 34%
for all years presented.
(2) Nonaccrual loans are included in the loan balances. Interest income
includes related fee income of $184,000 in 1997 and $179,000 in 1996.
(3) Average securities balances are based on amortized historical cost,
excluding SFAS 115 adjustments to fair value, which are included in other
assets.
12
<PAGE>
NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS
QUARTER ENDED SEPTEMBER 30, 1997
AS COMPARED TO
QUARTER ENDED SEPTEMBER 30, 1996
------------------------------------------
CHANGES IN VOLUME RATE
INCOME/EXPENSE EFFECT EFFECT
-------------- ------ ------
(dollars in thousands)
Short-term investments $ 60 $ 60 $ 0
Investment securities:
Taxable 23 (14) 37
Nontaxable (37) (41) 4
-------------- ------------- ------------
Total securities (14) (55) 41
Loans:
Commercial 105 63 42
Agriculture 2 10 (8)
Real Estate:
Commercial (113) (112) (1)
Agriculture 0 0 0
Residential (61) (68) 7
Consumer, net (83) (105) 22
Credit card 0 (3) 3
-------------- ------------- ------------
Total loans (150) (215) 65
-------------- ------------- ------------
Total interest income (104) (210) 106
-------------- ------------- ------------
Interest bearing demand 9 (10) 19
Savings (12) (11) (1)
Time deposits less than $100,000 (26) (28) 2
-------------- ------------- ------------
Total core deposits (29) (49) 20
Time deposits $100,000 and over 8 4 4
-------------- ------------- ------------
Total deposits (21) (45) 24
Short-term borrowings (34) (35) 1
-------------- ------------- ------------
Total interest expense (55) (80) 25
-------------- ------------- ------------
Net interest income $ (49) $ (130) $ 81
-------------- ------------- ------------
-------------- ------------- ------------
13
<PAGE>
NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 1997
AS COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------
CHANGES IN VOLUME RATE
INCOME/EXPENSE EFFECT EFFECT
-------------- ------ ------
(dollars in thousands)
Short-term investments $ 34 $ 37 $ (3)
Investment securities:
Taxable 369 214 155
Nontaxable (81) (121) 40
-------------- ------------- ------------
Total securities 288 93 195
Loans:
Commercial 183 32 151
Agriculture 14 10 4
Real Estate:
Commercial (310) (291) (19)
Agriculture (29) (31) 2
Residential (150) (124) (26)
Consumer, net (202) (216) 14
Credit card 9 0 9
-------------- ------------- ------------
Total loans (485) (620) 135
-------------- ------------- ------------
Total interest income (163) (490) 327
-------------- ------------- ------------
Interest bearing demand (3) 122 (125)
Savings (37) (34) (3)
Time deposits less than $100,000 (209) (125) (84)
-------------- ------------- ------------
Total core deposits (249) (37) (212)
Time deposits $100,000 and over (1) 15 (16)
-------------- ------------- ------------
Total deposits (250) (22) (228)
Short-term borrowings 35 31 4
-------------- ------------- ------------
Total interest expense (215) 9 (224)
-------------- ------------- ------------
Net interest income $ 52 $ (499) $ 551
-------------- ------------- ------------
-------------- ------------- ------------
14
<PAGE>
NONINTEREST INCOME
<TABLE>
<CAPTION>
Three months ended Percent Nine Months ended Percent
September 30, Change September 30, Change
-------------------- ---------- ------------------- ---------
1997 1996 1997/1996 1997 1996 1997/1996
------ ------ ---------- ------ -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Service charges on deposit accounts $ 267 $ 250 6.8 % $ 779 $ 720 8.2 %
Other fee income 40 63 (36.5) 119 183 (35.0)
Mortgage loan servicing fees 52 45 15.6 144 128 12.5
Gain on sale of mortgage loans 35 9 288.9 63 49 28.6
Securities gains (losses) 64 17 276.5 61 32 90.6
Other income 19 113 (83.2) 53 130 (59.2)
------ ------ ---------- ------ ------ ---------
$ 477 $ 497 (4.0) % $1,219 $1,242 (1.9)
------ ------ ---------- ------ ------ ---------
------ ------ ---------- ------ ------ ---------
</TABLE>
Despite a decline in average deposits during the three and nine months ended
September 30, 1997 compared with the same period in 1996, service charges on
deposit accounts increased slightly as a result of non balance related increases
in fees for insufficient funds, automatic teller machine usage and check charge
backs. The increase in fees for insufficient funds was due to a new method of
check processing which was implemented when the Bank converted to a new in-house
data processing system in February 1997.
The declines in other fee income year to date and quarter to date were primarily
due to a reduction in fees for account research. A new in-house data processing
system was installed by the Bank in February 1997 which provides imaging of all
check documents. For the period February through August fees for balance
inquiry and research were waived. Beginning in August 1997 a reduced fee
structure was implemented. The fee structure was reduced through the ease of
data retrieval.
During the first half of 1997 and continuing through the third quarter,
management reduced the margin between mortgage rates offered to customers and
those realized at the time of sale. This strategy was implemented in order to
allow the Corporation to be more competitive, increase volume and expand market
share. The effectiveness of this strategy is exhibited in the year to date and
quarter to date increases in mortgage loan servicing fees. Additionally, a
second experienced mortgage lender was hired. As a result, the volume of
mortgage loans originated and sold has increased such that gains on the sale of
mortgage loans is also larger both for the quarter ended and nine months ended
September 30, 1997, despite reduced margins.
Securities gains for the three and nine months ended September 30, 1997 resulted
from management restructuring its investment portfolio. In July and September
1997 management sold a number of tax exempt municipal securities, agency issues
and mortgage backed pools to shorten the duration of the bond portfolio.
The decrease in other noninterest income for the three and nine months ended
September 30, 1997 was primarily due to a $105,000 gain taken in the third
quarter of 1996 on the sale of a lot held for expansion, which management
concluded was no longer needed for that purpose. The decrease in other
noninterest income is off-set by gains on the sale of other real estate of
$8,000 for the three months ended September 30, 1997 compared to no gains
realized for the same period in 1996 and higher commissions received by Illini
as a result of its first quarter 1997 renegotiated contract with its check
printer.
15
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Three months ended Percent Nine Months ended Percent
September 30, Change September 30, Change
-------------------- ---------- ------------------- ---------
1997 1996 1997/1996 1997 1996 1997/1996
------ ------ ---------- ------ -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 825 $ 841 (1.9) % $2,484 $2,508 (1.0) %
Net occupancy expense 168 130 29.2 485 421 14.9
Equipment expense 75 78 (3.8) 228 227 0.4
Data processing 136 133 2.3 437 408 7.1
Supplies 35 29 20.7 92 106 (13.2)
Communication and transportation 91 74 23.0 267 220 21.4
Marketing and advertising 61 66 (7.6) 194 197 (1.5)
Correspondent and processing fees 37 33 12.1 104 95 9.5
Loan and other real estate owned expenses 54 22 145.5 141 55 156.4
Professional fees 170 55 209.1 480 237 102.5
Directors' fees 28 36 (22.2) 98 107 (8.4)
Regulatory fees 9 6 (50.0) 27 17 58.8
Other operating expenses 68 91 (25.3) 222 219 1.4
------ ------ ---------- ------ -------- ---------
1,757 $1,594 10.2 $5,259 $4,817 9.2
------ ------ ---------- ------ -------- ---------
------ ------ ---------- ------ -------- ---------
</TABLE>
Salaries and employee benefits expense has declined slightly for the three and
nine months ended September 30, 1997 compared to the same period in 1996 in part
due to management generating employee benefit statements internally rather than
employing an actuary to prepare the annual statements, coupled with officer
moving expenses incurred during the first six month of 1996 but not in 1997.
Additionally, no third quarter 1997 salary was recognized for one senior officer
position which was eliminated in June 1997.
Net occupancy expense increased $38,000 for the three and nine months ended
September 30, 1997 compared to the same period in the prior year due to
leasehold improvement and rent expense of $24,000 for the new Lincoln office,
and property taxes of $13,000 for land in Bloomington, Illinois which was
acquired for expansion.
Communication and transportation expense increased $47,000 for the nine months
ended September 30, 1997 compared to the same period in the prior year primarily
due to an increase in telephone voice and data line expense related to training
for the new computer system and linking all branches to the operations center as
a result of the February 1997 conversion. Though not as significant as the year
to date increase, the quarter to date increase reflects increased usage of data
transmitting lines because of the need for each branch to be networked to
operations. Additionally, included in communication and transportation are
courier costs which are now necessary for Illini to transport its own cash
letters, whereas their data processor and servicer provided this service prior
to conversion.
Loan and other real estate owned expenses increased $86,000 for the nine months
and $32,000 for the three months ended September 30, 1997 as compared to the
same periods in the prior year due to expenses of holding and disposing of other
real estate owned. During the first three quarters of 1997, management has
aggressively pursued the disposition of other real estate properties. Other
real estate owned has decreased from $728,000 at December 31, 1996 to $503,000
at September 30, 1997.
16
<PAGE>
Professional fees increased $243,000 for the nine months ended September 30,
1997 and $115,000 for the three months ended September 30, 1997 compared to the
same periods last year, of which $192,000 and $86,000, respectively was due to
legal and financial advisory expenses connected with establishing and issuing a
shareholders rights plan and defending the Bank and Corporation in various legal
matters.
Other operating expenses increased for the nine months ended September 30, 1997
over the same period in 1996 when the Bank installed additional security and
surveillance equipment at various locations. Additionally, recognition of other
operating losses and charge-offs as a result of forgeries, stop payment items,
etc. have been greater during the first six months of 1997 than the same period
last year. Other operating expenses declined during the three months ended
September 30, 1997 as compared to the three months ended September 1996 due to
$25,000 in senior officer moving expenses recognized in September 1996.
17
<PAGE>
CREDIT QUALITY
Gross loans totaled $87.1 million at September 30, 1997, a decline of $6.3
million, or 6.7%, from $93.4 million at December 31, 1996, while the allowance
for loan losses has remained relatively consistent at $1.3 million at September
30, 1997 and December 31, 1996, respectively. The decline in the gross loan
balance has resulted in an increase in the allowance to ending loans to 1.46%
from 1.35%, at September 30, 1997 and December 31, 1996, respectively. The
decline in loans has been spread across all loan types as Illini continues its
efforts to improve the credit quality of the portfolio.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES: (dollars in thousands)
Balance at beginning of period $1,227 $1,122 $1,258 $1,246
Provision charged to expense 75 165 225 795
Charge-offs 54 178 262 981
Recoveries (23) (10) (50) (59)
------ ------ ------ ------
Net charge-offs 31 168 212 922
------ ------ ------ ------
Balance at end of period $1,271 $1,119 $1,271 $1,119
------ ------ ------ ------
------ ------ ------ ------
NET CHARGE-OFF RATIOS (1):
Commercial 0.10% 0.47% 0.13% 4.10%
Real Estate 0.20 0.77 0.26 0.29
Installment 0.00 0.60 0.73 1.09
Credit Cards 0.00 3.57 1.90 5.85
Totals 0.14% 0.70% 0.32% 1.27%
</TABLE>
(1) Ratios to average loans are presented on an annualized basis
Illini's primary business of making commercial, real estate and consumer loans
entails potential losses, the magnitude of which depends on a variety of
economic factors affecting borrowers which are beyond the control of the
Corporation. Accordingly, a significant factor in the Corporation's past and
future operating results is the level of the provision for loan losses. The
provision for loan losses decreased to $75,000 and $225,000 for the three and
nine months ended September 30, 1997 as compared to $165,000 and $795,000 for
the comparable periods in the prior year. Net charge-offs decreased to $31,000
and $212,000 for the three and nine months ended September 30, 1997 as compared
to $168,000 and $922,000 for the comparable periods in the prior year.
The significant provisions and charge-offs during the three and nine months
ended September 30, 1996 were in large part the result of a single, agricultural
credit identified by management as a potential problem loan in late December
1995. This single credit contributed $505,000 to commercial, financial and
agricultural charge-offs during the first nine months of 1996. Also
contributing to the increase in net charge-offs for the nine months ended
September 30, 1996 were suspected irregularities by a former branch manager with
limited opportunity for recovery. Management believes the majority of these
charge-offs were recognized in 1995 and 1996. Management feels that recently
implemented credit quality systems and controls, including a new comprehensive
loan policy, will contribute to continued improved credit quality. This
improvement has resulted in decreasing the provision as well as loan losses.
The net charge-off ratio for the three months ended September 30, 1997 is 0.14%
compared to 0.29% for the six months ended June 30, 1997 and 1.17% for the year
ended December 31, 1996.
18
<PAGE>
At September 30, 1997, impaired loans totaled $740 for which an allowance for
loan losses of $41,000 has been allocated compared to December 31, 1996 impaired
loans of $1,178,000 for which an allowance for loan losses of $435,000 had been
allocated. The decrease in the amount of the allowance allocated to impaired
loans is partially attributable to a change in management's methodology for
analyzing the adequacy of the allowance for loan losses. Of the total impaired
loans at September 30, 1997 and December 31, 1996, $20,000 and $309,000 were
loans continuing to accrue interest.
<TABLE>
<CAPTION>
SEPTEMBER 30, September 30, December 31,
CREDIT QUALITY $(dollars in thousands) 1997 1996 1996
- --------------------------------------------------------- ------------- ------------- ------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Loans delinquent over 90 days, still accruing interest $ 0 $ 523 $ 151
Nonaccrual 720 1,158 870
Other real estate owned 503 697 728
------------- ------------- ------------
Total nonperforming assets $1,223 $2,378 $1,749
------------- ------------- ------------
------------- ------------- ------------
KEY RATIOS:
Nonperforming loans to ending loans 0.83% 1.77% 1.09%
90 days delinquent to ending loans 0.00 0.55 0.16
Allowance to ending loans 1.46 1.18 1.35
Allowance to nonperforming loans 176.53 66.57 123.20
</TABLE>
Illini's loan underwriting guidelines, credit review procedures and policies are
designed to protect the Corporation from avoidable credit losses. Illini's
process for monitoring loan quality includes detailed monthly trend analysis of
delinquencies and non-performing assets. Management and the board of directors
monitor potential problem loans, changes to the watchlist and extensions of
credit outside of the loan policy. Management extensively monitors significant
credit relationships through appraisals, assessment of the financial condition
of borrowers, restrictions on out-of-area lending, and avoidance of loan
concentrations.
The Corporation has actively taken steps to improve asset quality in 1997.
Management continues to refine its process for reviewing significant credit
exposures and large problem loans by stressing the need for loan officers to
downgrade credits as soon as the officer becomes aware of any situation
warranting a downgrade. Although, officers are responsible for initiating
downgrades, credit administration still exercises control over the process and
has full authority to assign final grades on all credits. Also, management has
adopted a migration based analysis of the allowance for loan loss adequacy which
allows for historical and judgmental allocation of allowance percentages to
significant segments of the portfolio. Other initiatives have been implemented
in 1997, including the adoption of a new loan policy, centralization of
commercial loan underwriting, and lending officers meeting monthly to discuss
the progress of collection efforts and status of nonaccural loans and other real
estate owned. Management's more proactive approach to identifying and resolving
past due and problem loans were undertaken in order to improve Illini's future
loan loss experience and has proven effective as evidenced by the reduction of
nonperforming assets at September 30, 1997. Nonaccrual loans, other real estate
owned and loans delinquent more than 90 days have all declined since December
31, 1996.
19
<PAGE>
CAPITAL RESOURCES
The current economic and regulatory environment places increased emphasis on
capital strength. A strong capital position, which is vital to the continued
profitability of Illini, also promotes depositor and investor confidence and
provides a solid foundation for the future growth of the organization. Illini
has satisfied its capital requirements principally through the retention of
earnings. At September 30, 1997, Tier 1 risk based capital, total risk-based
capital and leverage capital ratios were 14.91%, 16.20% and 10.15%,
respectively. As of September 30, 1997, the Bank met the criteria to be
classified as "well capitalized."
Earnings retention is affected by the board of director's declaration of cash
dividends. The dividend payout ratio is an indicator of the level of earnings
retained. The dividend payout ratio for the three and nine months ended
September 30, 1997 was 59.94% and 69.66%, respectively, versus 45.39% and 86.61%
for the three and nine months ended September 30, 1996, respectively.
LIQUIDITY
Illini's policy is to manage interest rate risk to a level which places limits
on the sensitivity of its earnings to changes in market interest rates. An
explanation of the asset/liability management process is found in the Illini
Corporation Annual Report on Form 10-KSB for the year ended December 31, 1996,
beginning on page 12. Interest rate risk management at Illini is executed by
the use of on-balance sheet investment products.
The assets portion of the balance sheet provides liquidity primarily through
loan principal repayments, maturities of investment securities and sales of
investment securities available for sale. The liability side of the balance
sheet provides liquidity through various customers' interest bearing and non
interest bearing deposit accounts. Short term borrowings are an additional
source of liquidity and represent Illini's incremental borrowing capacity.
At September 30, 1997, large liability dependence was 4.5%, a decline from 11.2%
at June 30, 1997 and 13.68% at December 31, 1996. The decrease in large
liability dependence is due to an increase in short-term investments of $11.0
million to $11.3 million at September 30, 1997 compared to $275,000 at June 30,
1997 and zero at December 31, 1996, coupled with the decrease in short-term
borrowings of $4.3 million to $290,000 at September 30, 1997 compared to
$290,000 at June 30, 1997, $6.5 million at March 31, 1997 and $4.6 million at
December 31, 1996. Illini manages the large liability position to be no greater
than 20% of net interest-earning assets.
The decrease in short-term borrowings to $290,000 occurred during June 1997, and
has remained constant throughout the third quarter, when management restructured
its available for sale investment securities portfolio by selling a number of
higher risk, long-term, fixed rate securities. Some of the proceeds from the
sale of these securities was used to paydown the then existing $4.3 million in
short-term borrowings. The remainder of the proceeds was used to restructure
the investment securities portfolio to more evenly spread investment security
maturities throughout the next five years to match the liquidity needs of the
Corporation's borrowers and depositors. Additionally, certain third quarter
sales and maturities of investments in debt and equity securities were rolled
into federal funds sold of $11.3 million at September 30, 1997. Management's
philosophy toward asset/liability management is to utilize less risky,
continually maturing investment securities to meet lending and borrower
requirements. To the extent investment securities available for sale at any
given time are not sufficient to meet lending and borrower needs, management
will utilize their federal funds line of credit or Federal Home Loan Bank line.
20
<PAGE>
In November 1996, Illini entered into a contract for construction of a new
banking center which will serve as the Company's headquarters in Springfield,
Illinois. The cost of the center is $2.5 million, of which $2.1 million has
been incurred to date. Construction has been underway throughout the first six
months of 1997 with completion expected on or before November 30, 1997. Illini
is funding the purchase and construction internally and has increased their
investment securities available for sale portfolio and short-term investments to
provide a source of funding, if needed. Other expenditures to furnish the new
headquarters of approximately $200,000 are expected to be incurred during the
fourth quarter of 1997.
21
<PAGE>
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS - none
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) EXHIBITS:
The Exhibits filed herewith are set forth in the Exhibit Index
filed as a part of these Form 10-QSB.
(b) REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed for the quarter ended
September 30, 1997.
22
<PAGE>
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
(Registrant)
BY: /s/ BURNARD K. MCHONE November 7, 1997
- -------------------------------------------- -------------------
Burnard K. McHone Date signed
President
By: /s/ Deann Hager November 7, 1997
- -------------------------------------------- -------------------
Deann Hager Date signed
Controller
23
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
27 Financial Data Schedule
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,903
<INT-BEARING-DEPOSITS> 65
<FED-FUNDS-SOLD> 11,285
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,990
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 87,044
<ALLOWANCE> 1,271
<TOTAL-ASSETS> 145,116
<DEPOSITS> 128,501
<SHORT-TERM> 290
<LIABILITIES-OTHER> 1,442
<LONG-TERM> 0
0
0
<COMMON> 4,485
<OTHER-SE> 10,398
<TOTAL-LIABILITIES-AND-EQUITY> 14,883
<INTEREST-LOAN> 6,198
<INTEREST-INVEST> 2,027
<INTEREST-OTHER> 71
<INTEREST-TOTAL> 8,296
<INTEREST-DEPOSIT> 3,409
<INTEREST-EXPENSE> 3,524
<INTEREST-INCOME-NET> 4,772
<LOAN-LOSSES> 225
<SECURITIES-GAINS> 61
<EXPENSE-OTHER> 5,259
<INCOME-PRETAX> 507
<INCOME-PRE-EXTRAORDINARY> 507
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 483
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 5.08
<LOANS-NON> 720
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 740
<ALLOWANCE-OPEN> 1,258
<CHARGE-OFFS> 262
<RECOVERIES> 50
<ALLOWANCE-CLOSE> 1,271
<ALLOWANCE-DOMESTIC> 943
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 328
</TABLE>
