<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 March 31, 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 April 30, 1997.
<PAGE>
ILLINI CORPORATION
INDEX TO FORM 10-QSB
March 31, 1997
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 5
Notes to Interim Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis 7
PART II. OTHER INFORMATION 15
SIGNATURE PAGE 16
2
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
ASSETS
Cash and due from banks $ 4,747,196 $ 5,473,027
Interest bearing deposits in other banks 86,512 39,808
Investment in debt and marketable equity
securities available for sale, at estimated
market value 46,299,306 40,385,552
Loans, net of unearned income 88,788,313 93,391,257
Allowance for loan losses (1,216,625) (1,257,913)
------------ ------------
Net loans 87,571,688 92,133,344
------------ ------------
Premises and equipment 5,961,481 5,368,571
Other real estate owned 708,652 728,460
Accrued interest receivable 1,495,838 1,493,879
Other assets 994,371 860,037
------------ ------------
$147,865,044 $146,482,678
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing demand deposits 20,119,337 20,752,203
Interest bearing deposits:
NOW and money market accounts 25,377,398 25,114,991
Savings deposits 18,822,360 18,160,206
Time deposits, $100,000 and over 15,485,742 14,921,086
Other time deposits 46,009,617 46,821,761
------------ ------------
Total deposits 125,814,454 125,770,247
Federal funds purchased 2,485,000 1,130,000
Securities sold under agreements to repurchase 100,000 500,000
Other short-term borrowings 3,900,000 3,000,000
Accrued interest payable 623,099 692,867
Other liabilities 682,831 876,349
------------ ------------
Total liabilities 133,605,384 131,969,463
------------ ------------
Shareholders' 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 8,252,404 8,248,756
Net unrealized gains (losses) on investments
in debt and marketable equity securities
available for sale, net (363,217) (106,014)
------------ ------------
Total shareholders' equity $ 14,259,660 $ 14,513,215
------------ ------------
$147,865,044 $146,482,678
------------ ------------
------------ ------------
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
Interest income:
Interest and fees on loans $2,048,261 $2,259,581
Interest on investments in debt and marketable
equity
Taxable 489,858 320,749
Exempt from federal income taxes 165,713 180,603
Interest on short term investments 8,319 31,629
---------- ----------
Total interest income 2,712,151 2,792,562
---------- ----------
Interest expense:
Interest on deposits:
NOW and money market accounts 174,580 186,528
Savings deposits 114,497 125,160
Time deposits, $100,000 and over 220,213 225,161
Other time deposits 609,699 727,978
Interest on borrowings 23,930 4,580
---------- ----------
Total interest expense 1,142,919 1,269,407
---------- ----------
Net interest income 1,569,232 1,523,155
Provision for possible loan losses 75,000 140,000
---------- ----------
Net interest income after provision for
loan losses 1,494,232 1,383,155
Noninterest income:
Service charges on deposit accounts 248,895 228,146
Other fee income 35,853 49,469
Mortgage loan servicing fees 45,292 45,000
Gain on sale of mortgage loans 10,773 27,000
Securities gains 4,114 1,250
Other 14,300 7,720
---------- ----------
Total noninterest income 359,227 358,585
---------- ----------
Noninterest expense:
Salaries and employee benefits 846,585 837,375
Net occupancy expense 178,181 164,130
Equipment expense 79,290 75,998
Data processing 177,081 136,663
Supplies 32,057 36,011
Communication and transportation 98,168 74,556
Marketing and advertising 60,952 65,622
Correspondent and processing fees 33,959 29,333
Loan and OREO expenses 23,829 12,460
Professional fees 178,924 97,929
Directors' and regulatory fees 43,769 41,359
Other operating expenses 66,335 65,536
---------- ----------
Total noninterest expense 1,819,130 1,636,972
---------- ----------
Income before income tax expense (benefit) 34,329 104,768
Income tax expense (benefit) (81,433) 6,691
---------- ----------
Net income $ 115,762 $ 98,077
---------- ----------
---------- ----------
Income per common share
(based on weighted average common shares outstanding
of 448,456 in 1996 and 1995 $ 0.26 $ 0.22
---------- ----------
---------- ----------
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
------------ ------------
Cash flows from operating activities:
Net income $ 115,762 $ 98,077
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 160,860 143,863
Provision for possible loan losses 75,000 140,000
Securities gains, net (4,114) (1,250)
Increase in accrued interest receivable (1,959) (100,785)
Decrease in accrued interest payable (69,768) (25,137)
Other, net (275,068) (150,442)
Origination of secondary market mortgage loans (4,005,111) (3,953,354)
Proceeds from the sale of secondary market
mortgage loans 3,811,078 3,719,354
---------- ----------
Net cash used in operating activities (193,320) (129,674)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of debt and marketable equity
securities
Available for sale 260,000 1,714,729
Proceeds from maturities and paydowns of debt
securities
Available for sale 2,550,888 2,684,852
Purchases of debt and marketable equity securities
Available for sale (9,141,202) (12,207,836)
Net decrease in loans 4,680,689 5,205,716
Purchases of premises and equipment (729,572) (95,601)
Proceeds from sales of other real estate 106,297 0
---------- ----------
Net cash provided by (used in) investing
activities (2,272,900) (2,698,140)
---------- ----------
Cash flows from financing activities:
Net decrease in noninterest-bearing deposit accounts (632,866) (1,750,788)
Net increase in savings, NOW and money market
accounts 924,561 1,139,262
Net increase in time deposits $100,000 and over 564,656 1,196,108
Net increase (decrease) in other time deposits (812,144) 252,375
Net increase in Federal funds purchased 1,355,000 0
Net decrease in securities sold under agreements to
repurchase (400,000) (400,000)
Net increase in short-term borrowings 900,000 0
Dividends paid (112,114) (100,903)
---------- ----------
Net cash used in financing activities 1,743,000 336,054
---------- ----------
Net decrease in cash and cash equivalents (723,220) (2,491,760)
Cash and cash equivalents at beginning of period 5,512,835 8,079,146
---------- ----------
Cash and cash equivalents at end of period $4,833,708 $5,587,386
---------- ----------
---------- ----------
Supplemental Information:
Income taxes paid $ 0 $ 145,000
Interest paid $1,212,687 $1,294,544
---------- ----------
---------- ----------
Other non-cash investing activities:
Transfer of loans to other real estate $ 0 $ 0
---------- ----------
---------- ----------
See accompanying notes to interim consolidated financial statements.
5
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 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 Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
Results for the three months ended March 31, 1997 may not be indicative of
the annual performance of Illini Corporation.
(2) 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 the Company. SFAS No.
128 is effective for financial statement issued for periods ending after
December 15, 1997, including interim periods, and requires restatement of
all prior-period EPS data presented. The Company does not believe the
adoption of SFAS No. 128 will have a material effect on its financial
condition or results of operations.
6
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 1997
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 Corporation cautions
that any forward looking statements contained in this report, in a report
incorporated by reference to this report or made by management of Illini
Corporation involve risks and uncertainties and are subject to change based on
various factors. Actual results could differ materially from those expressed or
implied.
SUMMARY
Quarter ended
March 31,
---------------- Percent
EARNINGS $(thousands, except per share data) 1997 1996 Change
- ----------------------------------------------------------------------------
Total revenue.................................. $3,071 $3,151 (2.54%)
Net income..................................... 116 98 18.03%
Net income per share........................... $0.26 $0.22 18.03%
KEY RATIOS Change
- ----------------------------------------------------------------------------
Return on average assets....................... 0.32% 0.26% 0.06%
Return on average equity....................... 3.22% 2.67% 0.54%
Average equity to assets....................... 10.06% 9.79% 0.28%
Tier 1 leverage ratio.......................... 9.98% 9.58% 0.40%
Tier 1 risk-based capital ratio ............... 14.49% 13.43% 1.06%
Total risk-based capital ratio................. 15.70% 14.45% 1.25%
Dividend payout ratio.......................... 96.85% 102.88% (6.03%)
Net interest margin............................ 5.09% 4.69% 0.39%
Net funds function............................. 4.86% 4.29% 0.57%
Efficiency ratio............................... 90.57% 83.26% 7.31%
7
<PAGE>
RESULTS OF OPERATION
NET INTEREST INCOME/NET INTEREST MARGIN
Interest income, on a fully taxable equivalent basis, was $2.8 million for
the three months ended March 31, 1997 compared with $2.9 million for the same
period in 1996. The net interest margin was 5.09% for the three months ended
March 31, 1997 compared with 4.69% for the same period in 1996.
The decrease in interest income was primarily due to a decline in earning
assets. Average earning asset balances decreased to $131.9 million for the
three months ended March 31, 1997 as compared to $137.4 million for the same
period in 1996.
Average loans declined to $89.6 million for the three months ended March 31,
1997 compared to $98.9 million for the same period in 1996. The decline of
$9.3 million for the three months ended March 31, 1997 as compared to the
same period for 1996 was due to a decrease of $3.3 million in commercial
loans, $2.2 million in commercial real estate loans, and $1.6 million in
consumer loans. The average yield on the loan portfolio increased 14 basis
points to 9.32% for the three months ended March 31, 1997 as compared to the
same period in 1996.
Average investment securities increased $4.9 million for the three months
ended March 31, 1997 as compared to the same period in 1996. Net investing
activities (purchases, sales and maturities) resulted in an increase in the
investment portfolio of $6.3 million for the three months ended March 31,
1997. The average yield of the investment securities portfolio was 6.88% for
the three months ended March 31, 1997, an increase of 66 basis points as
compared to the same period in 1996.
Interest expense was $1.1 million for the three months ended March 31, 1997,
down $0.1 million compared to the same period in 1996. The retail funding
base decreased $5.8 million for the three months ended March 31, 1997 as
compared to the same period in 1996 primarily due to a decline of $3.3
million in retail certificates of deposits. The cost of retail certificates
of deposits declined 55 basis points to 5.23% in the three months ended March
31, 1997 as compared to the same period in 1996.
Illini Corporation'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 Annual Report on Form 10-KSB for the year ended December 31,
1996, beginning on page 13. Interest rate risk management at Illini
Corporation is executed by the use of on-balance sheet investment products.
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. 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 page 9, and a net interest
income rate/volume variance analysis is presented on page 10.
8
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Three months ended March,
-----------------------------------------------------------------------------
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Short-term investments $ 1,095 0.8% $ 9 3.27% $ 2,371 1.6% $ 32 5.35%
Investment securities (3)
Taxable 29,458 20.3 489 6.64 22,350 14.9 320 5.74
Tax-exempt (1) 12,958 9.0 240 7.41 15,133 10.0 262 6.92
-------- ------ ------ ------ -------- ------ ------ ------
Total securities 42,416 29.2 729 6.88 37,483 24.9 582 6.22
Loans
Commercial (1) 12,475 8.6 314 10.21 15,802 10.5 346 8.78
Agriculture 4,338 3.0 100 9.35 4,832 3.2 93 7.76
Real estate
Commercial 27,445 18.9 611 9.03 29,682 19.8 683 9.22
Agriculture 2,157 1.5 48 9.12 2,976 2.0 67 9.03
Residential 26,139 18.0 580 9.00 26,937 17.9 626 9.32
Consumer, net 16,418 11.3 380 9.39 18,036 12.0 431 9.59
Credit card 645 0.5 26 16.12 609 0.4 18 12.03
-------- ------ -------- ------
Total loans 89,617 61.8 2,059 9.32 98,874 65.8 2,264 9.18
Allowance for loan losses (1,237) (0.9) (1,283) (0.9)
-------- ------ -------- ------
Net loans (1) (2) 88,380 60.9 2,059 9.45 97,591 64.9 2,264 9.31
-------- ------ ------ -------- ------ ------
Total interest earning assets 131,891 90.9 2,797 8.60 137,445 91.4 2,878 8.40
-------- ------ -------- ------
Cash and due from banks 4,792 3.3 5,243 3.5
Premises and equipment 5,554 3.8 4,873 3.2
Other real estate owned 719 0.5 484 0.3
Other assets (3) 2,098 1.5 2,344 1.6
-------- ------ -------- ------
TOTAL ASSETS $145,054 100.0% $150,389 100.0%
-------- ------ -------- ------
-------- ------ -------- ------
LIABILITIES
Deposits:
Non interest bearing deposits $ 19,654 13.5% $ % $ 18,754 12.4% $ %
Interest bearing demand 26,455 18.2 175 2.68 28,406 18.9 186 2.63
Savings 18,745 12.9 114 2.48 20,253 13.5 125 2.48
CD's less than $100,000 47,239 32.6 610 5.23 50,496 33.6 728 5.78
-------- ------ -------- ------
Total core deposits 112,093 77.2 899 3.25 117,909 78.4 1,039 3.54
CD's $100,000 and over 15,173 10.5 220 5.89 15,516 10.3 225 5.82
-------- ------ -------- ------
Total deposits 127,266 87.7 1,119 3.57 133,425 88.7 1,264 3.80
Borrowed funds:
Short-term 1,677 1.2 24 5.79 297 0.2 5 6.18
Long-term -- -- -- -- -- -- -- --
-------- ------ ------ -------- ------
Total borrowed funds 1,677 1.2 24 5.79 297 0.2 5 6.18
Total interest bearing liabilities 109,289 75.4 1,143 4.24 114,968 76.5 1,269 4.43
Other liabilities 1,512 1.0 1,941 1.3
-------- ------ -------- ------
Total liabilities 130,455 89.9 135,663 90.2
Stockholders' Equity 14,599 10.1 14,726 9.8
-------- ------ -------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $145,054 100.0% $150,389 100.0%
-------- ------ -------- ------
-------- ------ -------- ------
NET INTEREST MARGIN $1,654 5.09% $1,609 4.69%
PROVISION FOR LOAN LOSSES (75) (0.23)% (140) (0.41)%
------ ------
NET FUNDS FUNCTION 1,579 4.86 % 1,469 4.29 %
------ ----- ------ ------
------ ----- ------ ------
</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 $53,000 in 1997 and $59,000 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.
9
<PAGE>
NET INTEREST INCOME - RATE/VOLUME VARIANCE ANALYSIS
<TABLE>
<CAPTION>
QUARTER ENDING MARCH 31, 1997-1996
---------------------------------------
CHANGES IN VOLUME RATE
INCOME/EXPENSE EFFECT EFFECT
-------------- ------ --------
(dollars in thousands)
<S> <C> <C> <C>
Short-term investments $(23) $ (13) $ (10)
Investment securities:
Taxable 169 113 56
Nontaxable (22) (43) 21
------- ------- --------
Total securities 147 70 77
Loans:
Commercial (32) (140) 108
Agriculture 7 (6) 13
Real Estate:
Commercial (72) (57) (15)
Agriculture (19) (20) 1
Residential (46) (21) (25)
Consumer, net (51) (41) (10)
Credit card 8 2 6
------- ------- --------
Total loans (205) (283) 78
------- ------- --------
Total interest income (81) (226) 145
------- ------- --------
Interest bearing demand (11) (15) 4
Savings (11) (11) 0
CD's less than $100,000 (118) (48) (70)
------- ------- --------
Total core deposits (140) (74) (66)
CD's $100,000 and over (5) (10) 5
------- ------- --------
Total deposits (145) (84) (61)
Borrowed funds:
Short-term borrowings 19 19 0
Long-term borrowings 0 0 0
------- ------- --------
Total borrowed funds 19 19 0
------- ------- --------
Total interest expense (126) (65) (61)
------- ------- --------
Net interest income $ 45 $ (161) $ 206
------- ------- --------
------- ------- --------
</TABLE>
10
<PAGE>
NONINTEREST INCOME
<TABLE>
<CAPTION>
Three months ended
March 31, Change
------------------- -------------------
1997 1996 $ %
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit accounts $248,895 $228,146 $20,749 9.1%
Other fee income 35,853 49,469 (13,616) (27.5)
Mortgage loan servicing fees 45,292 45,000 292 0.6
Gain on sale of mortgage loans 10,773 27,000 (16,052) (60.1)
Securities gains (losses) 4,114 1,250 2,864 229.1
Other income 14,300 7,720 6,580 85.2
-------- -------- -------
$359,227 $358,585 $642 0.2%
-------- -------- ------- ------
-------- -------- ------- ------
</TABLE>
The increase in service charges on deposit accounts was primarily due to
increased fees for overdrafts due to a new method of check processing
implemented February 1, 1997.
The decline in other fee income was primarily due to a reduction in fees for
account research. A new data processing system was installed by the Bank in
February 1997 which provides imaging of all check documents, and any fees for
balance acquire research have been waived after the conversion.
The decline in the gain on the sale of mortgage loans was due to a reduced
margin between mortgage rates offered to customers and those realized at the
time of sale in order to be more competitive and expand market share.
The increase in other noninterest income was primarily due to an increase in
income from checks sold to depositors.
11
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Three months ended
March 31, Change
------------------- -------------------
1997 1996 $ %
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and employee benefits $846,585 $837,375 $9,210 1.1%
Net occupancy expense 178,181 164,130 14,051 8.6
Equipment expense 79,290 75,998 3,292 4.3
Data processing 177,081 136,663 40,418 29.7
Supplies 32,057 36,011 (3,954) (11.0)
Communication and transportation 98,168 74,556 23,612 31.7
Marketing and advertising 60,952 65,622 (4,670) (7.1)
Correspondent and processing fees 33,959 29,333 4,626 15.8
Loan and OREO expenses 23,829 12,460 11,369 91.2
Professional fees 178,924 97,929 80,995 82.7
Directors' and regulatory fees 43,769 41,359 2,410 5.8
Other operating expenses 66,335 65,536 799 1.2
---------- ---------- --------
$1,819,130 $1,636,972 $192,158 11.8%
---------- ---------- -------- ------
---------- ---------- -------- ------
</TABLE>
Net occupancy expense increased $14,000 for the three months ended March 31,
1997 compared to the same period in the prior year due primarily to leasing
additional office space for the banking center in Lincoln, which will move to
the planned new location in May 1997.
Data processing expense increased $40,000 for the three months ended March 31,
1997 compared to the same period in the prior year due to nonrecurring costs
associated with the conversion of the Bank's data processing system from a third
party provider to an in-house system.
Communication and transportation expense increased $24,000 for the three months
ended March 31, 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.
Loan and other real estate owned expenses increased $11,000 for the three months
ended March 31, 1997 as compared to the same period in the prior year due to
expenses of holding and disposing of other real estate owned. Other real estate
owned has increased to $709,000 at March 31, 1997 as compared to $478,000 at
March 31, 1996.
Professional fees increased $81,000 for the three months ended March 31, 1997
compared to the same period last year due to legal and financial advisory
expenses.
INCOME TAXES
The income tax benefit of $81,000 is due to a net operating loss for regular tax
purposes and a $30,000 reduction in deferred tax liability at March 31, 1997
compared to December 31, 1996. The provision for income taxes was 6.4% of
pretax income for the three months ended March 31, 1996.
12
<PAGE>
LOANS AND INVESTMENTS
Loans totaled $88.8 million at March 31, 1997, a decline of $4.6 million, or
4.9%, from $93.4 million at December 31, 1996. The decline in loans was
primarily due to a $1.9 million reduction in agricultural loans, a $1.6 million
decline in consumer loans, a $1.2 million decline in residential real estate
loans, and a $1 million decline in commercial and industrial loans since
December 31, 1996.
The decline in loans has allowed for growth in the investment securities
portfolio, which totaled $46.3 million at March 31, 1997, an increase of $5.9
million from December 31, 1996. The increase in the investment portfolio is
primarily due to a $3.6 million increase in obligations of U.S. sponsored
agencies and a $1.9 million increase in mortgage backed securities since
December 31, 1996.
CREDIT QUALITY
Illini Corporation's process for monitoring loan quality includes detailed
monthly analysis of delinquencies, non-performing assets, and potential problem
loans. Management extensively monitors credit through appraisals, assessment of
financial condition of borrowers, restrictions of out-of-area lending, and
avoidance of loan concentrations.
The provision for loan losses decreased to $75,000 for the three months ended
March 31, 1997 as compared to $140,000 for the comparable period in the prior
year. Net charge-offs decreased to $116,000 for the three months ended March
31, 1997 as compared to $290,000 for the comparable period in the prior year. A
problem agricultural credit was responsible for $200,000 of the net charge-offs
for the three months ended March 31, 1996. At March 31, 1997, impaired loan
totaled $1,346,000, for which an allowance for loan losses of $257,000 has been
allocated.
13
<PAGE>
THREE MONTHS ENDED
CREDIT QUALITY $(dollars in thousands) MARCH 31,
- ------------------------------------------ 1997 1996
------------------
Ending allowance for loan losses $1,216 $1,096
------------------
Nonperforming assets:
Nonaccrual 1,039 2,011
OREO 709 478
------ ------
Total nonperforming assets $1,748 $2,489
------ ------
------ ------
Loans delinquent over 90 days $96 $13
------ ------
Gross charge-offs 132 319
Less: recoveries 16 29
------ ------
Net charge-offs $116 $290
------ ------
------ ------
NET CHARGE-OFFS TO AVERAGE LOANS (1)
Commercial 0.36% 3.71%
Real Estate 0.39 0.10
Installment 1.11 1.76
Credit Cards 2.52 2.21
Totals 0.53% 1.18%
(1) Ratios are presented on an annualized
basis
KEY RATIOS
Allowance to ending loans 1.37% 1.15%
Nonperforming assets to ending loans 1.97 2.60
Allowance to nonperforming loans 117.0 54.5
90 days delinquent to ending loans 0.11 0.01
LIQUIDITY AND CAPITAL
At March 31, 1997, large liability dependence was 14.9%, an increase from 13.7%
at December 31, 1996. The increase in the large liability dependence is due to
a net increase in all short-term borrowings of $1.9 million to $6.5 million at
March 31, 1997 as compared to $4.6 million at December 31, 1996. The increase
in short-term borrowings has been used to fund purchases in the investment
securities portfolio.
At March 31, 1997, risk based Tier 1 capital, total risk based capital, and
leverage ratios were 14.49%, 15.70%, and 9.98%, respectively. All of these
ratios are significantly above regulatory minimum capital requirements.
14
<PAGE>
PART II. OTHER INFORMATION
ILLINI CORPORATION AND SUBSIDIARY
March 31, 1997
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) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended March
31, 1997.
15
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
March 31, 1997
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 May 15, 1997
- -------------------------------------------- ------------
Burnard K. McHone Date signed
President
/s/ Mark R. Edmiston May 15, 1997
- -------------------------------------------- ------------
Mark R. Edmiston Date signed
Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,747,196
<INT-BEARING-DEPOSITS> 86,512
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,399,306
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 88,788,313
<ALLOWANCE> 1,216,625
<TOTAL-ASSETS> 147,865,044
<DEPOSITS> 125,814,454
<SHORT-TERM> 6,485,000
<LIABILITIES-OTHER> 1,305,930
<LONG-TERM> 0
0
0
<COMMON> 4,484,560
<OTHER-SE> 9,775,100
<TOTAL-LIABILITIES-AND-EQUITY> 147,865,044
<INTEREST-LOAN> 2,048,261
<INTEREST-INVEST> 655,571
<INTEREST-OTHER> 8,319
<INTEREST-TOTAL> 2,712,151
<INTEREST-DEPOSIT> 1,118,989
<INTEREST-EXPENSE> 1,142,919
<INTEREST-INCOME-NET> 1,569,232
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 4,114
<EXPENSE-OTHER> 1,819,130
<INCOME-PRETAX> 34,329
<INCOME-PRE-EXTRAORDINARY> 34,329
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,762
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<YIELD-ACTUAL> 5.09
<LOANS-NON> 1,039,000
<LOANS-PAST> 96,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,346,000
<ALLOWANCE-OPEN> 1,257,000
<CHARGE-OFFS> 132,000
<RECOVERIES> 16,000
<ALLOWANCE-CLOSE> 1,216,000
<ALLOWANCE-DOMESTIC> 1,014,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 202,000
</TABLE>
