<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, 1999
[ ] 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.)
3200 West Iles Avenue, Springfield, Illinois 62707
(Address of principal executive offices)
(217) 787-5111
(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, 1999
Transitional Small Business Disclosure Format: Yes No X
----- -----
<PAGE>
ILLINI CORPORATION
INDEX TO FORM 10-QSB
March 31, 1999
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 20
PART II. OTHER INFORMATION 21
SIGNATURE PAGE 23
EXHIBIT INDEX 24
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
------------ -------------
(dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,847 $ 5,624
Interest-bearing deposits in other banks 27 19
Federal funds sold 335 6,675
------------ ------------
Cash and cash equivalents 4,209 12,318
Debt and marketable equity securities
available for sale, at fair value 56,235 53,276
Loans, net of the allowance for loan losses and unearned income 87,568 85,806
Premises and equipment 7,359 7,250
Accrued interest receivable 1,471 1,390
Other real estate owned 341 366
Other assets 446 359
------------ ------------
$ 157,629 $ 160,765
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing demand deposits 22,035 26,190
Interest-bearing deposits:
NOW and money market accounts 41,209 38,877
Savings deposits 17,783 17,102
Time deposits, $100,000 and over 14,088 15,064
Other time deposits 44,808 45,726
------------ ------------
Total deposits 139,923 142,959
Securities sold under agreements to repurchase 290 290
Accrued interest payable 704 827
Other liabilities 1,552 1,270
------------ ------------
Total liabilities 142,469 145,346
------------ ------------
Shareholders' equity:
Common stock-$10 par value, authorized 800,000 shares;
448,456 shares issued and outstanding 4,485 4,485
Capital surplus 1,886 1,886
Retained earnings 8,561 8,632
Accumulated other comprehensive income 228 416
------------ ------------
Total shareholders' equity 15,160 15,419
------------ ------------
$ 157,629 $ 160,765
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(dollars in thousands)
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,885 $ 1,955
Interest on debt and marketable equity securities:
Taxable 654 633
Tax-exempt 91 104
Interest on short term investments 70 77
---------- ----------
Total interest income 2,700 2,769
---------- ----------
Interest expense:
Interest on deposits:
NOW and money market accounts 341 279
Savings deposits 92 108
Time deposits, $100,000 and over 183 258
Other time deposits 599 643
Interest on borrowings 3 4
---------- ----------
Total interest expense 1,218 1,292
---------- ----------
Net interest income 1,482 1,477
Provision for loan losses 51 51
---------- ----------
Net interest income after provision for loan losses 1,431 1,426
Noninterest income:
Service charges on deposit accounts 290 245
Other fee income 45 38
Mortgage loan servicing fees 64 59
Gain on sale of mortgage loans 24 78
Securities gains 0 7
Other 51 23
---------- ----------
Total noninterest income 474 450
---------- ----------
Noninterest expense:
Salaries and employee benefits 786 867
Net occupancy expense 208 172
Equipment expense 110 86
Data processing 206 164
Supplies 62 54
Communication and transportation 99 98
Marketing and advertising 23 56
Correspondent and processing fees 43 32
Loan and other real estate owned expenses 17 44
Professional fees 205 213
Directors' and regulatory fees 44 48
Other 58 78
---------- ----------
Total noninterest expense 1,861 1,912
Income (loss) before income tax expense (benefit) 44 (36)
Income tax expense (benefit) 3 (67)
---------- ----------
Net income $ 41 $ 31
---------- ----------
---------- ----------
Basic and diluted earnings per share
(based on weighted average common shares outstanding
of 448,456 in 1999 and 1998) $ 0.09 $ 0.07
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Cash flows from operating activities: (dollars in thousands)
Net income $ 41 $ 31
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 282 238
Provision for loan losses 51 51
Securities gains, net ---- (7)
Gain on sale of premises and equipment ---- (1)
Gain on sale of other real estate owned (10) (11)
Increase in accrued interest receivable (81) (73)
Increase (decrease) in accrued interest payable (123) 30
Origination of mortgage loans for sale (3,570) (18,270)
Proceeds from the sale of mortgage loans 3,579 17,655
Other, net 338 433
------------ -------------
Net cash provided by operating activities 507 76
------------ -------------
Cash flows from investing activities:
Proceeds from sales of debt and marketable equity
securities available for sale ---- 1,502
Proceeds from maturities and paydowns of debt and
marketable equity securities available for sale 3,511 2,389
Purchases of in debt and marketable equity securities
available for sale (6,817) (5,582)
Net (increase) decrease in loans (1,851) 1,768
Purchases of premises and equipment (340) (295)
Proceeds from sale of premises and equipment ---- 1
Proceeds from sales of other real estate owned 29 68
------------ -------------
Net cash used in investing activities (5,468) (149)
------------ -------------
Cash flows from financing activities:
Net decrease in non-interest bearing deposit accounts (4,155) (3,161)
Net increase in NOW, money market accounts and savings 3,013 2,380
Net decrease in time deposits $100,000 and over (976) (561)
Net increase (decrease) in other time deposits (918) 2,494
Net decrease in securities sold under agreements to repurchase ---- (425)
Cash dividends paid (112) (112)
------------ -------------
Net cash provided by (used in) financing activities (3,148) 615
------------ -------------
Net increase (decrease) in cash and cash equivalents (8,109) 542
Cash and cash equivalents at beginning of period 12,318 12,193
------------ -------------
Cash and cash equivalents at end of period $ 4,209 $ 12,735
------------ -------------
------------ -------------
Supplemental Information:
Income taxes paid $ 74 $ 7
Interest paid $ 1,341 $ 1,263
------------ -------------
------------ -------------
Other non-cash investing activities:
Transfer of premises and equipment to other real estate owned $ ---- $ 533
------------ -------------
------------ -------------
Transfer of loans to other real estate owned $ 29 $ ----
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to interim consolidated financial statements.
5
<PAGE>
ILLINI CORPORATION AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
(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,
1998.
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Illini has no instruments which are dilutive.
Results for the three months ended March 31, 1999 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. The determination of the allowance for loan losses is one of the
significant estimates made by management in the preparation of the
consolidated financial statements.
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(dollars in thousands)
<S> <C> <C>
Balance at beginning of period $ 1,368 $ 1,302
Provision charged to expense 51 51
Charge-offs 82 42
Less: recoveries 12 13
--------- ---------
Net charge-offs 70 29
--------- ---------
Balance at end of period $ 1,349 $ 1,324
--------- ---------
--------- ---------
</TABLE>
6
<PAGE>
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 March 31, 1999
and December 31, 1998 is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
(dollars in thousands)
<S> <C> <C>
Nonaccrual loans $ 1,215 $ 1,029
Impaired loans continuing to accrue interest 101 300
-------- --------
Total impaired loans $ 1,316 $ 1,329
-------- --------
-------- --------
Allowance for losses on specific impaired loans $ 33 $ 25
Impaired loans with no specific related allowance
for loan losses 1,253 1,268
Average balance of impaired loans during the period 1,228 1,074
-------- --------
-------- --------
</TABLE>
(3) NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board (FASB) issued SFAS
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS
133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. This statement should not be applied retroactively to
financial statements of prior periods. This statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and
the resulting designation. Illini is currently evaluating the impact of
SFAS 133 on future financial statements and related disclosures.
During 1998, the FASB issued SFAS 134, ACCOUNTING FOR MORTGAGE-BACKED
SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD FOR
SALE BY A MORTGAGE BANKING ENTERPRISE. SFAS 134 is effective for the
first fiscal quarter beginning after December 15, 1998. On the date the
statement is initially applied, an enterprise may reclassify
mortgage-backed securities and other beneficial interest retained after
the securitization of mortgage loans held for sale from the trading
category, except for those with sales commitments in place. Transfers
from the trading category that result from implementing this statement
shall be accounted for in accordance with paragraph 15(a) of SFAS 115.
Since Illini does not securitize mortgage loans held for sale, management
does not expect SFAS 134 will have any impact on its financial condition
or results of operations.
During February 1999, the FASB issued SFAS 135, RESCISSION OF FASB
STATEMENT NO. 75 AND TECHNICAL CORRECTIONS. SFAS 135 is effective for
fiscal years ending after February 15, 1999. This statement rescinds SFAS
No. 75, DEFERRAL OF THE EFFECTIVE DATE OF CERTAIN ACCOUNTING REQUIREMENTS
FOR PENSION PLANS OF STATE AND LOCAL GOVERNMENTAL UNITS. This statement
also amends other existing authoritative literature to make various
technical corrections, clarify meanings, or describe applicability under
changed conditions. Illini is currently evaluating the impact of SFAS 135
on future financial statements and disclosures, but does not currently
believe such impact will be material on future financial statements and
related disclosures.
7
<PAGE>
(4) OTHER COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Under SFAS 130, comprehensive income is divided
into net income and other comprehensive income. Illini adopted SFAS 130
during 1998. For the three-month periods ended March 31, 1999 and 1998,
unrealized gains (losses) on debt and equity securities available for
sale, net of tax, is the Company's only other comprehensive income
component. Comprehensive income for the three-month periods ended March
31, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-----------------------
(dollars in thousands)
<S> <C> <C>
Net income $ 41 $ 31
Other comprehensive income:
Net realized and unrealized gains (losses)
on securities available for sale, net (188) 72
Less adjustment for net securities gains
realized in net income, net ---- (7)
--------- --------
Other comprehensive income (loss) (188) 65
--------- --------
Total comprehensive income (loss) $ (147) $ 96
--------- --------
--------- --------
</TABLE>
(5) ACQUISITION
On March 2, 1999, Illini announced a definitive agreement to acquire all
of the outstanding shares of Farmers State Bank of Camp Point in exchange
for 123,333 shares of Illini's common stock and cash of $3,456,260.
Farmers State Bank of Camp Point is headquartered in Camp Point, Illinois
and had assets of approximately $33 million at December 31, 1998. Illini
expects to close the acquisition during the third quarter of 1999.
8
<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 1998
Illini Corporation Annual Report on Form 10-KSB (1998 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
March 31,
---------------------- Percent
EARNINGS 1999 1998 Change
- -------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Total revenue ................................ $ 3,174 $ 3,219 (1.40)%
Net income ................................... 41 31 33.57%
Basic earnings per share ..................... $ 0.09 $ 0.07 33.57%
<CAPTION>
Quarter ended
March 31,
---------------------- Basis Point
KEY RATIOS 1999 1998 Change
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Return on average assets (1) ................. 0.11% 0.08% 0.03%
Return on average equity (1) ................. 1.09% 0.84% 0.25%
Average equity to assets ..................... 9.73% 9.76% (0.03%)
Tier 1 leverage ratio ........................ 9.35% 9.50% (0.15%)
Tier 1 risk-based capital ratio .............. 14.37% 14.53% (0.16%)
Total risk-based capital ratio ............... 15.68% 15.84% (0.16%)
Dividend payout ratio ........................ 270.59% 361.42% (90.83%)
Net interest margin .......................... 4.31% 4.51% (0.20%)
Efficiency ratio ............................. 92.87% 96.49% (3.62%)
</TABLE>
(1) Reported on an annualized basis.
9
<PAGE>
RESULTS OF OPERATION
EARNING ASSETS
Average earning assets of the Corporation for the first three months of 1999
increased 4.57% or $6.3 million to $144.0 million from $137.7 million for the
first three months of 1998.
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.
Average net loans increased to $85.3 million for the three months ended March
31, 1999 compared to $83.8 million for the same period in 1998. The increase of
$1.5 million for the three months ended March 31, 1999 as compared to the same
period for 1998 was primarily due to an increase of $3.3 million in commercial
loans, including commercial real estate loans and $0.9 million in agriculture
loans. The increase was offset by a decline of $2.8 million in consumer loans.
The average yield on the loan portfolio decreased 51 basis points to 8.85% due
to the lower interest rate environment and a change in loan mix for the first
three months of 1999 compared to the first three months of 1998.
Average investment securities increased $4.1 million for the three months ended
March 31, 1999 as compared to the same period in 1998. The average yield of the
investment securities portfolio was 6.02% for the three months ended March 31,
1999, a decrease of 50 basis points as compared to the same period in 1998. The
decrease in yield resulted from management's efforts to shorten the duration of
the investment portfolio to minimize interest rate risk to the Bank.
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 three months ended March 31, 1999 increased 6.63% or $7.9
million to $126.4 million from $118.6 million. The average rate paid on total
interest bearing liabilities decreased 35 basis points when compared to the
three months ended March 31, 1998.
The increase in average core deposits, including noninterest bearing demand
deposits, for the three months ended March 31, 1999 as compared to the same
period in 1998 has provided a low cost funding source for the growth in the loan
portfolio. In addition to federal funds sold, Illini maintains an overnight
federal funds line of credit with an unaffiliated financial institution and an
unused line of credit with the Federal Home Loan Bank of Chicago.
NET INTEREST INCOME/NET INTEREST MARGIN
The operating results of the Corporation are highly dependent on 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 $2.7 million for the
three months ended March 31, 1999, compared to $2.8 million for same period in
1998. Interest expense was $1.2 million for the three months ended March 31,
1999, compared to $1.3 million for the same period in 1998. A slight decrease in
both interest income and interest expense resulted in a consistent net interest
income of $1.5 million. The growth in average
10
<PAGE>
earning assets was offset by the decline in net interest margin of 20 basis
points which resulted in net interest income being flat as compared to 1998.
The Bank's net interest margin for the quarter ended March 31, 1999 of 4.31% was
down from 4.51% reported for the first quarter of 1998. Management anticipates
that the net interest margin will remain lower than preceding periods throughout
the remainder of 1999. The margin is down primarily because of the declining
rate environment consistent throughout the financial industry. Management will
continue to structure the balance sheet to provide insulation for extreme
interest rate changes. Management has begun to focus on increasing the loan
portfolio and maintaining our investment in securities. Management will take
steps throughout 1999 to increase portfolio yields without jeopardizing the
enhanced liquidity that has been gained in prior periods.
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 balances, interest income/expense and yield/rates table on page 12 and a
net interest income-rate/volume variance analysis on page 13.
11
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELD/RATES
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------------------------------------------
1999 1998
------------------------------------- -----------------------------------
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 $ 6,519 4.1% $ 70 4.37% $ 5,812 3.8% $ 77 5.35%
Investment securities (3)
Taxable 44,838 28.3 654 5.83 40,025 26.0 633 6.32
Tax-exempt (1) 7,393 4.7 132 7.14 8,083 5.3 151 7.49
-------- ----- ------ ----- -------- ----- ------ -----
Total securities 52,231 33.0 786 6.02 48,108 31.3 784 6.52
Loans
Commercial (1) 11,074 7.0 249 9.13 15,336 10.0 358 9.46
Agriculture 7,507 4.7 162 8.77 6,634 4.3 143 8.76
Real estate:
Commercial 33,477 21.1 709 8.58 25,946 16.9 583 9.11
Agriculture 3,266 2.1 73 9.07 2,387 1.5 54 9.25
Residential 21,571 13.6 450 8.46 22,275 14.5 512 9.33
Consumer, net 9,104 5.8 222 9.89 11,890 7.7 286 9.74
Credit card 630 0.4 26 16.87 643 0.4 27 17.18
-------- ------ -------- ------
Total loans 86,629 54.7 1,891 8.85 85,111 55.3 1,963 9.36
Allowance for loan losses (1,363) (0.9) (1,305) (0. 8)
--------- ------ --------
Net loans (1) (2) 85,266 53.8 1,891 9.00 83,806 54.5 1,963 9.50
-------- ----- ------ -------- ----- ------
Total interest- 144,016 90.9 2,747 7.74 137,726 89.6 2,824 8.32
-------- ------ -------- ------
earning assets
Cash and due from banks 4,439 2.8 4,870 3.2
Premises and equipment 7,300 4.6 8,211 5.3
Other real estate owned 345 0.2 525 0.3
Other assets (3) 2,293 1.5 2,483 1.6
-------- ----- -------- -----
TOTAL ASSETS $158,393 100.0% $153,815 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
LIABILITIES
Deposits:
Noninterest-bearing demand $ 22,500 14.2% $ 21,139 13.7%
Interest-bearing demand 41,220 26.0 $ 341 3.35% 32,782 21.3 $ 279 3.46%
Savings 17,310 10.9 92 2.16 17,684 11.5 108 2.47
Time deposits, less than $100,000 45,405 28.7 599 5.35 46,967 30.5 643 5.55
-------- ------ -------- ------
Total core deposits 126,435 79.8 1,032 3.31 118,572 77.0 1,030 3.52
Time deposits, $100,000 and over 14,301 9.0 183 5.20 18,241 11.9 258 5.75
-------- ------ -------- ------
Total deposits 140,736 88.8 1,215 3.50 136,813 88.9 1,288 3.82
Short-term borrowings 310 0.2 3 4.56 307 0.2 4 5.42
Total interest-bearing liabilities 118,546 74.8 1,218 4.17 115,981 75.4 1,292 4.52
Other liabilities 1,937 1.3 1,687 1.1
-------- ----- -------- -----
Total liabilities 142,983 90.3 138,807 90.2
Shareholders' equity 15,410 9.7 15,008 9.8
-------- ----- -------- -----
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $158,393 100.0% $153,815 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
NET INTEREST MARGIN $1,529 4.31% $1,532 4.51%
------ ---- ------ ----
------ ---- ------ ----
</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 periods presented.
(2) Nonaccrual loans are included in the loan balances. Interest income
includes related fee income of $52,000 in 1999 and $64,000 in 1998.
(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(*)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1999
AS COMPARED TO
QUARTER ENDED MARCH 31, 1998
-----------------------------------------
CHANGES IN VOLUME RATE
INCOME/EXPENSE EFFECT EFFECT
-------------- ------ ------
(dollars in thousands)
<S> <C> <C> <C>
Short-term investments $ (7) $ 9 $ (16)
Investment securities:
Taxable 21 75 (54)
Tax-exempt (19) (13) (6)
---------- --------- ----------
Total securities 2 62 (60)
Loans:
Commercial (109) (99) (10)
Agriculture 19 19 0
Real Estate:
Commercial 126 169 (43)
Agriculture 19 20 (1)
Residential (62) (16) (46)
Consumer, net (64) (67) 3
Credit card (1) (1) 0
---------- --------- ----------
Total loans (72) 25 (97)
---------- --------- ----------
Total interest income (77) 96 (173)
---------- --------- ----------
Interest bearing demand 62 72 (10)
Savings (16) (2) (14)
Time deposits, less than $100,000 (44) (22) (22)
---------- --------- ----------
Total core deposits 2 48 (46)
Time deposits, $100,000 and over (75) (56) (19)
---------- --------- ----------
Total deposits (73) (8) (65)
Short-term borrowings (1) 0 (1)
---------- --------- ----------
Total interest expense (74) (8) (66)
---------- --------- ----------
Net interest income $ (3) $ 104 $ (107)
---------- --------- ----------
---------- --------- ----------
</TABLE>
(*) Fully taxable equivalent basis
NOTE: The change in interest which can not be attributed to only a change in
volume or a change in rate, but instead represents a combination of the
two factors, has been allocated to the rate effect.
13
<PAGE>
NONINTEREST INCOME
<TABLE>
<CAPTION>
Three months ended Percent
March 31, Change
-------------------- -------------
1999 1998 1999/1998
--------- --------- -------------
<S> <C> <C> <C>
Service charges on deposit accounts $290 $245 18.4 %
Other fee income 45 38 18.4
Mortgage loan servicing fees 64 59 8.5
Gain on sale of mortgage loans 24 78 (69.2)
Securities gains, net 0 7 (100.0)
Other 51 23 121.7
--------- --------- ------------
$474 $450 5.3 %
--------- --------- ------------
--------- --------- ------------
</TABLE>
The management of the Bank has concentrated efforts on restructuring our product
offerings and enhancing our noninterest income. During 1998, the Bank reviewed
service charges and introduced a new fee structure for 1999. This has been the
primary reason for the increase in service charge income. We expect this trend
to continue during 1999. The increase in other income is also a result of an
increased awareness of earning potential throughout the entire organization.
The decrease in the gain on sale of mortgage loans is primarily due to a
dramatic decrease in volume. The volume in 1998 was significantly higher than
prior periods due to a falling rate environment. The refinancing surge during
1998 contributed to higher gains in our mortgage area and we expect volumes to
decline in 1999.
14
<PAGE>
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Three months ended Percent
March 31, Change
------------------------ ------------
1999 1998 1999/1998
----------- ----------- ------------
<S> <C> <C> <C>
Salaries and employee benefits $786 $867 (9.3) %
Net occupancy expense 208 172 20.9
Equipment expense 110 86 27.9
Data processing 206 164 25.6
Supplies 62 54 14.8
Communication and transportation 99 98 1.0
Marketing and advertising 23 56 (58.9)
Correspondent and processing fees 43 32 34.4
Loan and other real estate owned expenses 17 44 (61.4)
Professional fees 205 213 (3.8)
Directors' and regulatory fees 44 48 (8.3)
Other 58 78 (25.6)
----------- ----------- -----------
$1,861 $1,912 (2.7) %
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Salaries and employee benefits decreased $81,000 or 9.3% for the three months
ended March 31, 1999 when compared to the same period in 1998. This decrease
resulted primarily from reduced staffing costs relating to the reorganization of
the Bank. Net occupancy expense increased slightly for the three months ended
March 31, 1999 when compared to the same period in 1998. The increase in
occupancy expense is a result of an increase in expenses at the West Iles
facility and some branch changes in 1999.
Data processing increased $42,000 or 25.6% for the three months ended March 31,
1999 when compared to the same period in 1998. This increase is primarily
related to year 2000 compliance.
Loan and other real estate owned expenses is greatly reduced for the three
months ended March 31, 1999 from the same period in 1998 due to increased
performance in our loan portfolio combined with an extensive collection effort.
Marketing and advertising was reduced 59% from 1998. Management plans to
increase our marketing efforts, to promote our new sales and service
environment, will begin sometime in the second quarter of 1999.
Professional fees totaling $213,000 for 1998 were significantly above average.
Approximately $141,000 or 66% of this amount represents fees paid to a
consulting firm that was engaged in late 1997 to reengineer the Bank's
operations. In 1999, fees totaling $205,000 remain significantly above average.
Other operating expenses were down $20,000 in the first quarter of 1999 as
compared to the same period in 1998. Management believes our reorganization
contributed to a reduction in other operating expenses by gaining increased
efficiencies with our new staffing levels.
15
<PAGE>
YEAR 2000 ISSUES
Illini Bank is committed to taking the necessary steps to enable both new and
existing systems, applications, and equipment to effectively process
transactions up to and beyond the Year 2000. To that end, Illini Bank is well
underway with its Year 2000 readiness program. Expenses for the first quarter of
1999 were $55,000 and we are accruing $10,000 per month for the remainder of
1999. Because of such ongoing readiness efforts, Year 2000 processing issues and
risks are not expected to have a material adverse impact on the ability of
Illini Bank to continue its general business operations.
Currently, Illini Bank is actively engaged in completing the following
Year 2000 program initiatives:
- - Complete a comprehensive analysis of current functions which might be
impacted by Year 2000 issues, and document the results in a Year 2000
Assessment report.
- - Develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications.
- - Survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from such business
counterparties.
- - Raise organizational awareness not only with top management, but also at
the staff level, and involve relevant business group leaders in reaching
solutions.
The risk of failures of computer applications, systems, and networks due
to improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. Moreover, when aggregated multiple individual malfunctions
and failures relating to Year 2000 issues occur, they can potentially cause
broader, systemic disruptions across industries and economies. The risks arising
from Year 2000 issues which face many companies, including Illini Bank, include
the potential diminished ability to respond to the needs and expectations of
customers in a timely manner, and the potential for inaccurate processing of
information. In recognition of this, Illini Bank began focusing on mission
critical applications in order that programming changes are largely completed,
and that testing was underway as of March 31, 1999.
In addition, Illini Bank has begun developing contingency plans to
complement the Year 2000 readiness efforts already in progress, including backup
and offsite processing of certain information and functions. Illini Bank
anticipates that such contingency plans will provide an additional level of
security to its Year 2000 efforts already underway.
The foregoing discussion of Year 2000 issues is based on current estimates
of the management of Illini Bank as to the amount of time and costs necessary to
remediate and test our systems. Such estimates are based on the facts and
circumstances existing at this time, and were derived utilizing multiple
assumptions of future events, including, but not limited to, the continued
availability of certain resources, third-party modification plans and
implementation success, and other factors. However, there can be no guarantee
that these estimates will be achieved, and actual costs and results could differ
materially from the costs and results currently anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, the impact of third-party systems
interacting with Illini Bank systems, the planning and modification success
attained by the business counterparties of Illini Bank, and similar
uncertainties.
16
<PAGE>
CREDIT QUALITY
Gross loans totaled $88.9 million at March 31, 1999, an increase of $1.7
million, or 1.95%, from $87.2 million at December 31, 1998, while the allowance
for loan losses has remained relatively consistent at $1.3 million at March 31,
1999 and December 31, 1998, respectively. The allowance as a percent of total
loans and nonperforming loans decreased as management has maintained the
allowance for loan losses at a steady balance and loans and nonperforming loans
have increased. Declining consumer and residential real estate loan balances
have been substantially offset by increases in commercial and agricultural
loans.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
----------- -----------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES: (dollars in thousands)
Balance at beginning of period $1,368 $1,302
Provision charged to expense 51 51
Charge-offs 82 42
Less: recoveries 12 13
----------- -----------
Net charge-offs 70 29
----------- -----------
----------- -----------
Balance at end of period $1,349 $1,324
----------- -----------
----------- -----------
NET CHARGE-OFF RATIOS (1):
Commercial 0.54 % 0.20 %
Real Estate 0.06 (0.01)
Installment 1.26 0.25
Credit Cards 1.51 6.14
Totals 0.33 % 0.14 %
</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 has remained unchanged at $51,000 for the three months
ended March 31, 1999 as compared to the comparable period in the prior year. Net
charge-offs increased to $70,000 for the three months ended March 31, 1999 as
compared to $29,000 for the comparable period in the prior year.
Management feels that credit quality systems and controls implemented in 1996
and 1997, along with the creation of a formalized credit administration function
in 1998, have resulted in significantly improved credit quality. Illini has a
1.52% allowance to ending loans ratio as of March 31, 1999 and 1.57% and 1.56%
for the periods ending December 31, 1998 and March 31, 1998, respectively. The
net charge-off ratio for the three months ended March 31, 1999 was 0.33%
compared to 0.16% and 0.29% for years ended December 31, 1998 and 1997,
respectively.
Total impaired loans remained consistent at $1.3 million for March 31, 1999 and
December 31, 1998. At March 31, 1999, allowance for loan losses on impaired
loans totaled $33,000 compared to $25,000 at December 31, 1998. Of the total
impaired loans at March 31, 1999 and December 31, 1998, $101,000 and $300,000
were loans continuing to accrue interest.
17
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
CREDIT QUALITY 1999 1998 1998
- ------------------------------------------------ -------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Loans delinquent over 90 days, still accruing interest $ 0 $ 0 $ 0
Nonaccrual 1,215 1,029 594
Other real estate owned 341 366 1,004
------ ------ ------
Total nonperforming assets $1,556 $1,395 $1,598
------ ------ ------
------ ------ ------
KEY RATIOS:
Nonperforming loans to ending loans 1.37 % 1.18 % 0.70 %
90 days delinquent to ending loans 0.00 0.00 0.00
Allowance to ending loans 1.52 1.57 1.56
Allowance to nonperforming loans 111.03 132.99 222.90
</TABLE>
Illini's loan underwriting guidelines and 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.
As discussed in the Corporation's 1998 Form 10-KSB and previous Form 10-QSB
reports, management has implemented several initiatives to improve credit
quality. These steps included a new officer driven problem loan identification
system, a revamped allowance for losses adequacy determination process, a new
loan policy, and improved reporting systems (credit quality and production).
Management is committed to continuing these initiatives and is supplementing
these efforts in 1999 by engaging an outside firm to perform a comprehensive
review of the Bank's loan portfolio to assess its credit quality and the
effectiveness of management's loan quality systems and controls.
18
<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 March 31, 1999, Tier 1 risk based capital, total risk-based capital
and leverage capital ratios were 14.37%, 15.68% and 9.35%, respectively. As of
March 31, 1999, 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 Board of Directors of the Corporation considers the capital
strength of the Corporation and Illini Bank in determining the appropriate level
of cash dividends to be paid to shareholders. The dividend payout ratio for the
three months ended March 31, 1999 was 270.59%, versus 361.42% for the three
months ended March 31, 1998, respectively. The total dollar amount of dividends
through March 31, 1999 is unchanged from the same period in 1998.
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
Corporation's 1998 Form 10-KSB, beginning on page 14. 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.
During the second quarter of 1998, Illini completed a comprehensive analysis of
its asset/liability function, including a review of its funds management policy
and its principal measure of liquidity. The Bank implemented a new measure of
liquidity measurement, called "Basic Surplus," which redefines liquid assets as
the total assets held by the Bank which can be converted to cash in thirty days
or less, reduced by short term liabilities. As of January 31, 1999, the Bank's
core liquidity was $28 million, or 17.8% of total assets.
Management believes the new formula provides an accurate measurement of
liquidity and provides management with a comprehensible and consistent tool to
develop pricing and profitability strategies. Based on the new measurement and
as compared to peer banks, management believes the liquidity position of the
Bank is strong.
At March 31, 1999, large liability dependence was 8.48%, an increase from 4.76%
at December 31, 1998. The increase in large liability dependence is due to a
decrease in short-term investments of $6.6 million to $2.3 million at March 31,
1999 compared to $8.9 million at December 31, 1998. The Bank did not have any
federal funds purchased or other short term borrowings as of March 31, 1999 or
December 31, 1998.
19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative financial instruments include futures, forwards, interest rate swaps,
option contracts, and other financial instruments with similar characteristics.
The Bank currently does not enter into futures, forwards, swaps, or options.
However, the Bank is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. Commitments generally have fixed expiration dates
and require collateral from the borrower if deemed necessary by the Bank.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party up to a stipulated
amount and within specified terms and conditions. Commitments to extend credit
and standby letters of credit are not recorded as an asset or liability by the
Bank until and unless the instrument is exercised.
The Bank's exposure to market risk and interest rate risk is reviewed by the
Asset/Liability Committee. Management realizes certain risks are inherent, such
as the uncertainty of market interest rates, and that its goal is to identify
and manage such risks. The primary tool management uses to monitor and manage
interest rate risk is a static gap report. The Bank has no market risk sensitive
instruments held for trading purposes.
The Bank's interest rate and market risk profile has not materially changed from
the year ended December 31, 1998. Please refer to the Corporation's 1998 Form
10-KSB for further discussion of the Corporation's market and interest rate
risk.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
On or about July 17, 1998, Ida R. Noll filed a 14 count complaint
against Illini Corporation and all members of Illini Corporation's Board of
Directors except William Walschleger Jr. in the Seventh Judicial Circuit,
Sangamon County, Illinois. On September 28, 1998, Judge Carmody dismissed the
complaint and granted Plaintiff 21 days in which to file an amended complaint.
The Plaintiff filed her amended pleading on October 19, 1998. This pleading was
also dismissed, but Plaintiff was granted leave to file a second amended
complaint. Illini and the directors recently answered the second amended
complaint. The second amended complaint arises out of Illini Corporation's
adoption of a Shareholder Rights Agreement on June 20, 1997, Illini
Corporation's subsequent adoption of a First Amendment to the Rights Agreement
on July 1, 1998, and the Plaintiff's assertion that she became an "acquiring
person" under the Rights Agreement on April 16, 1998. The Plaintiff seeks
declaratory and injunctive relief from Illini and the directors regarding the
alleged triggering of the Rights Agreement and the enforceability and validity
of the First Amendment to the Rights Agreement. The Plaintiff also seeks
compensatory and punitive damages against the directors arising out of the
directors' alleged breaches of fiduciary duty committed in connection with the
Rights Agreement and the First Amendment to the Rights Agreement. The Plaintiff
seeks recovery of her attorneys' fees and costs in connection with her action.
Ida Noll asserted that her attorneys' fees through October 23, 1998 were
approximately $50,000 and that her expenses at that time were approximately
$5,000. Illini and the directors intend to vigorously contest and oppose the
allegations made by Ida R. Noll, and the parties are just beginning discovery in
the case.
The Company adopted a Shareholder Rights Agreement on June 20, 1997
and named Illinois Stock Transfer Company ("ISTC") as its rights agent
thereunder. The Company was notified in May, 1998 of a threatened complaint
against ISTC by an Illini shareholder. The shareholder, Mary K. Quinn, who owns
21 shares of stock in Illini, filed suit against ISTC on June 9, 1998 in the
Seventh Judicial Circuit Court, Sangamon County, Illinois. Quinn seeks to compel
ISTC to distribute rights certificates to Illini's shareholders and further
seeks to certify all Illini shareholders as a class. Ms. Quinn asserts that Ida
R. Noll became an acquiring person under the Rights Agreement on April 16, 1998,
and that the Rights Agreement was triggered. ISTC is being represented in the
litigation by Howard & Howard, which vigorously contests Quinn's assertions that
Ida R. Noll is an acquiring person, that the Rights Agreement has been
triggered, and that ISTC has a duty to distribute rights certificates.
On June 9, 1998, Quinn filed a Motion to Certify the Class, which was
granted on December 29, 1998. On January 13, 1999, Quinn filed an Amended
Complaint adding Illini Corporation as a defendant to her action. Illini is
represented in the litigation by Howard & Howard. Both Illini and ISTC have
answered the Amended Complaint and have denied that Ida R. Noll is an acquiring
person. Quinn asserts that she is entitled to recover her attorneys' fees from
Illini and ISTC, which the defendants deny. The parties are currently engaged in
discovery. Quinn has filed a Motion for Summary Judgment that asks the Court to
determine as a matter of law that Ida R. Noll became an acquiring person on
April 16, 1998 and that the Rights Agreement was triggered as a result and that
Illini and ISTC have a duty to distribute rights certificates to all
shareholders as of April 16, 1998 except for Ida R. Noll. Illini will oppose
Quinn's Motion for Summary Judgment, which is scheduled for hearing on June 18,
1999.
On or about May 6, 1999, counsel for Mary Quinn advised Illini's
counsel of their intention to seek an injunction that would preclude Illini from
completing its acquisition of the Farmers Bank of Camp Point, an Illinois
corporation, pending further order of the Court. Quinn has subsequently filed a
Memorandum of Law in Support of her Motion for Preliminary Injunction, but has
not yet served a copy of the underlying motion upon Illini's counsel. Quinn's
Memorandum of Law alleges that the class (consisting of all Illini's
shareholders as of April 16, 1998 except for Ida R. Noll) would be irreparably
harmed if the Camp Point merger closed prior to there being a determination on
the merits of her suit. Quinn alleges the merger would reduce the number of
authorized but unissued shares of Illini stock that would be available in the
event that the Court declared that the
21
<PAGE>
Rights Agreement was triggered.
Because only a portion of Quinn's pleadings related to the injunction
have been served to date upon Illini's counsel, Illini's counsel have not
completed their assessment of Quinn's requested relief. Illini feels strongly,
however, that the completion of the Camp Point transaction is in the best
interests of all of Illini's shareholders, and that any effort by Quinn or
anyone else to delay or block it is contrary to those interests. Illini
therefore intends to contest Quinn's Motion for Injunctive Relief vigorously,
which is set for hearing on July 1, 1999.
On or about April 22, 1999, Ida R. Noll filed a new lawsuit against
Illini Corporation, Illinois Stock Transfer Company, Ernest H. Huls and Farmers
State Bank of Camp Point in the Seventh Judicial Circuit Court, Sangamon County,
Illinois. The suit seeks specific performance of the Rights Agreement, alleging
that Ernest Huls became an acquiring person under the Rights Agreement by reason
of his right to receive shares of Illini common stock pursuant to an Agreement
and Plan of Reorganization between Illini and the Farmers State Bank of Camp
Point. Ida Noll seeks to compel Illini and ISTC to distribute rights
certificates to all shareholders of Illini except for Mr. Huls. Illini strongly
disputes Ida Noll's assertion that Ernest Huls has become an acquiring person
under the Rights Agreement. Illini was served with this complaint on April 27,
1999 and its response is due by May 27, 1999. Illini intends to move to dismiss
this complaint on the grounds that the facts alleged do not establish as a
matter of law that Mr. Huls is an acquiring person. Illini also observes that
the allegations of this complaint are completely inconsistent with and
contradict Ida Noll's allegations in her previously filed complaint against
Illini and its directors regarding whether Ida Noll became an acquiring person
on April 16, 1998 and whether the First Amendment to the Rights Agreement
adopted on June 30, 1998 is valid and enforceable.
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: The Corporation filed a Form 8-K on March 4,
1999 to announce that it had entered into a definitive agreement
for the acquisition by the Corporation of all of the outstanding
shares of Farmers State Bank of Camp Point. The Form 8-K also
disclosed the Corporation's retention of Legacy Securities
Corporation as an advisor to the Corporation and an amendment to
the Corporation's Bylaws.
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 May 14, 1999
- --------------------------------------- -------------
Burnard K. McHone Date signed
President
By: /s/ Deann Hager May 14, 1999
- --------------------------------------- -------------
Deann Hager Date signed
Controller
23
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,847
<INT-BEARING-DEPOSITS> 117,888
<FED-FUNDS-SOLD> 335
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,235
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 88,917
<ALLOWANCE> 1,349
<TOTAL-ASSETS> 157,629
<DEPOSITS> 139,923
<SHORT-TERM> 290
<LIABILITIES-OTHER> 2,256
<LONG-TERM> 0
0
0
<COMMON> 4,485
<OTHER-SE> 10,675
<TOTAL-LIABILITIES-AND-EQUITY> 157,629
<INTEREST-LOAN> 1,885
<INTEREST-INVEST> 745
<INTEREST-OTHER> 70
<INTEREST-TOTAL> 2,700
<INTEREST-DEPOSIT> 1,215
<INTEREST-EXPENSE> 1,218
<INTEREST-INCOME-NET> 1,482
<LOAN-LOSSES> 51
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,861
<INCOME-PRETAX> 44
<INCOME-PRE-EXTRAORDINARY> 44
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
<YIELD-ACTUAL> 4.31
<LOANS-NON> 1,215
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 382
<ALLOWANCE-OPEN> 1,368
<CHARGE-OFFS> 82
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 1,349
<ALLOWANCE-DOMESTIC> 497
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 852
</TABLE>
