<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2000
ILLINI CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 0-13343 37-1135429
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3200 West Iles Avenue, Springfield, Illinois 62707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 217-787-5111
Not Applicable
(Former name or former address, if changed since last report.)
Page 1 of 36
The Exhibit Index is on Page 5
<PAGE>
This Current Report on Form 8-K/A amends and supplements the Current Report
on Form 8-K filed on November 26, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Audited balance sheets as of December 31, 1998 and 1997 and audited
statements of income, shareholders' equity and comprehensive
income, and cash flows for each of the years in the two-year period
ended December 31, 1998 of Farmers State Bank of Camp Point are
filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are
incorporated herein by reference.
Unaudited balance sheet as of September 30, 1999 and unaudited
statements of income and cash flows for the nine-month periods
ended September 30, 1999 and September 30, 1998 of Farmers State
Bank of Camp Point are filed as Exhibit 99.2 to this Current Report
on Form 8-K/A and are incorporated herein by reference.
(b) Pro Forma Financial Information.
Unaudited pro forma combined balance sheet as of September 30, 1999
and unaudited pro forma combined statements of income for the nine-
month period ended September 30, 1999 and for the year ended
December 31, 1998 of Illini Corporation are filed as Exhibit 99.3
to this Current Report on Form 8-K/A and are incorporated herein by
reference.
(c) Exhibits.
2.1 Agreement and Plan of Reorganization between Illini and
Farmers State Bank of Camp Point dated as of March 2, 1999
filed as Exhibit 1 to Schedule 13D of Ernest H. Huls as
filed with the SEC on November 26, 1999 is hereby
incorporated by reference.
10.1 Non-Compete, Standstill and Sale of Personal Goodwill
Agreement dated as of November 19, 1999 by and between
Illini Corporation and Ernest H. Huls filed as Exhibit 10.1
to the Current Report on Form 8-K filed on November 26,
1999, as filed with the SEC (File No. 0-13343) is hereby
incorporated by reference.
99.1 Audited balance sheets as of December 31, 1998 and 1997 and
audited statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years
in the two-year period ended December 31, 1998 of Farmers
State Bank of Camp Point.
Page 2
<PAGE>
99.2 Unaudited balance sheet as of September 30, 1999 and
unaudited statements of income and cash flows for the nine-
month periods ended September 30, 1999 and September 30,
1998 of Farmers State Bank of Camp Point.
99.3 Unaudited pro forma combined balance sheet as of September
30, 1999 and unaudited pro forma combined statements of
income for the nine-month period ended September 30, 1999
and for the year ended December 31, 1998 of Illini
Corporation.
Page 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ILLINI CORPORATION
Dated: January 28, 2000 By: /s/ Burnard K. McHone
----------------------------
Burnard K. McHone
President
Page 4
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Agreement and Plan of Reorganization between Illini and
Farmers State Bank of Camp Point dated as of March 2, 1999
filed as Exhibit 1 to Schedule 13D of Ernest H. Huls as
filed with the SEC on November 26, 1999 is hereby
incorporated by reference.
10.1 Non-Compete, Standstill and Sale of Personal Goodwill
Agreement dated as of November 19, 1999 by and between
Illini Corporation and Ernest H. Huls filed as Exhibit 10.1
to the Current Report on Form 8-K filed on November 26,
1999, as filed with the SEC (File No. 0-13343) is hereby
incorporated by reference.
99.1 Audited balance sheets as of December 31, 1998 and 1997 and
audited statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years
in the two-year period ended December 31, 1998 of Farmers
State Bank of Camp Point.
99.2 Unaudited balance sheet as of September 30, 1999 and
unaudited statements of income and cash flows for the nine-
month periods ended September 30, 1999 and September 30,
1998 of Farmers State Bank of Camp Point.
99.3 Unaudited pro forma combined balance sheet as of September
30, 1999 and unaudited pro forma combined statements of
income for the nine-month period ended September 30, 1999
and for the year ended December 31, 1998 of Illini
Corporation.
Page 5
<PAGE>
EXHIBIT 99.1
FARMERS STATE BANK OF CAMP POINT
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Farmers State Bank of Camp Point:
We have audited the accompanying balance sheets of Farmers State Bank of Camp
Point (the Company) as of December 31, 1998 and 1997, and the related statements
of income, shareholders' equity and comprehensive income, and cash flows for
each of the years in the two-year period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Farmers State Bank of Camp
Point as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the years in the two-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
St. Louis, Missouri /s/ KPMG LLP
January 14, 2000
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
Assets 1998 1997
--------------- ----------------
<S> <C> <C>
Cash and due from banks $ 853,069 918,008
Interest bearing deposits 17,270 15,642
Federal funds sold 1,000,000 --
--------------- ----------------
Cash and cash equivalents 1,870,339 933,650
Debt and marketable equity securities
available-for-sale, at fair value 15,657,154 15,909,889
Loans, net 14,254,702 14,426,412
Premises and equipment, net 451,477 476,007
Accrued interest receivable 449,393 434,983
Other assets 270,820 94,538
--------------- ----------------
Total assets $ 32,953,885 32,275,479
=============== ================
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 3,288,394 2,915,442
Interest-bearing 24,638,484 24,405,392
--------------- ----------------
Total deposits 27,926,878 27,320,834
Securities sold under agreements to repurchase 289,273 439,797
Accrued interest payable 124,414 135,674
Other liabilities 251,056 214,464
--------------- ----------------
Total liabilities 28,591,621 28,110,769
--------------- ----------------
Commitments and contingencies
Shareholders' equity:
Common stock, $100 par value, 2,400 shares
authorized, issued, and outstanding in 1998 and 1997 240,000 240,000
Surplus 1,760,000 1,760,000
Retained earnings 2,276,811 2,101,106
Accumulated other comprehensive income 85,453 63,604
--------------- ----------------
Total shareholders' equity 4,362,264 4,164,710
--------------- ----------------
Total liabilities and shareholders' equity $ 32,953,885 32,275,479
=============== ================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Statements of Income
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,248,431 1,261,898
Interest and dividends on debt and
marketable equity securities 916,227 888,662
Interest on interest bearing deposits 755 874
Interest on federal funds sold 22,770 40,089
------------ -------------
Total interest income 2,188,183 2,191,523
------------ -------------
Interest expense:
Interest on deposits 1,100,112 1,123,153
Interest on securities sold under agreements to repurchase 21,756 24,402
------------ -------------
Total interest expense 1,121,868 1,147,555
------------ -------------
Net interest income 1,066,315 1,043,968
Provision for loan losses 12,000 20,000
------------ -------------
Net interest income after provision
for loan losses 1,054,315 1,023,968
------------ -------------
Noninterest income:
Service charges on deposits 37,185 38,601
Gain on sale of securities, net 35,410 10,955
Other noninterest income 36,693 32,594
------------ -------------
Total noninterest income 109,288 82,150
------------ -------------
Noninterest expense:
Salaries and employee benefits 344,516 332,356
Occupancy and equipment expense 104,810 101,033
Data processing expense 49,048 48,584
Other noninterest expense 175,091 184,850
------------ -------------
Total noninterest expense 673,465 666,823
------------ -------------
Income before income tax expense 490,138 439,295
Income tax expense 112,833 80,354
------------ -------------
Net income $ 377,305 358,941
============ =============
Basic and diluted earnings per share $ 157.21 149.56
============ =============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Statements of Shareholders' Equity and Comprehensive Income
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
other
compre- Total
Common stock Retained hensive shareholders'
------------------------
Shares Amount Surplus earnings income equity
---------- ----------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,400 $ 240,000 1,760,000 1,878,965 19,760 3,898,725
Comprehensive income:
Net income -- -- -- 358,941 -- 358,941
Other comprehensive income -
change in unrealized gain
on securities available-for-sale,
net of tax -- -- -- -- 43,844 43,844
-------------
Total comprehensive income 402,785
-------------
Dividends paid ($57 per share) -- -- -- (136,800) -- (136,800)
---------- ----------- ----------- ---------- ------------ -------------
Balance at December 31, 1997 2,400 240,000 1,760,000 2,101,106 63,604 4,164,710
Comprehensive income:
Net income -- -- -- 377,305 -- 377,305
Other comprehensive income -
change in unrealized gain
on securities available-for-sale,
net of tax -- -- -- -- 21,849 21,849
-------------
Total comprehensive income 399,154
-------------
Dividends paid ($84 per share) -- -- -- (201,600) -- (201,600)
---------- ----------- ----------- ---------- ------------ -------------
Balance at December 31, 1998 2,400 $ 240,000 1,760,000 2,276,811 85,453 4,362,264
========== =========== =========== ========== ============ =============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Statements of Cash Flows
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 377,305 358,941
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 56,640 44,687
Provision for loan losses 12,000 20,000
Gain on sale of securities (35,410) (10,955)
Increase in accrued interest receivable (14,410) (87,401)
Decrease in accrued interest payable (11,260) (3,166)
Increase in other assets (176,282) (7,015)
Other, net 25,668 (28,307)
------------- --------------
Net cash provided by operating activities 234,251 286,784
------------- --------------
Cash flows from investing activities:
Proceeds from sales of debt and marketable equity securities
available-for-sale 4,470,411 819,938
Proceeds from maturities and principal payments on debt
and marketable equity securities available-for-sale 4,413,119 4,305,835
Purchases of debt and marketable equity securities
available-for-sale (8,578,356) (6,508,252)
Net (increase) decrease in loans 159,710 (340,913)
Purchases of premises and equipment, net (16,366) (34,834)
------------- --------------
Net cash provided by (used in) investing activities 448,518 (1,758,226)
------------- --------------
Cash flows from financing activities:
Net increase in deposits 606,044 1,568,815
Decrease in securities sold under agreements to repurchase (150,524) 19,527
Cash dividends paid (201,600) (136,800)
------------- --------------
Net cash provided by financing activities 253,920 1,451,542
------------- --------------
Net increase (decrease) in cash and cash equivalents 936,689 (19,900)
Cash and cash equivalents at beginning of year 933,650 953,550
------------- --------------
Cash and cash equivalents at end of year $ 1,870,339 933,650
============= ==============
Supplemental information:
Interest paid $ 1,133,128 1,150,721
Income taxes paid 90,794 84,613
============= ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
Farmers State Bank of Camp Point (the Company) provides a full range of
banking services to commercial and individual customers throughout Adams
County, Illinois. The Company, which operates as a single business segment,
is subject to competition from other financial and nonfinancial
institutions providing financial products in this Illinois market.
Additionally, the Company is subject to the regulations of certain federal
and state agencies and undergoes periodic examinations by those regulatory
agencies.
The accounting and reporting policies of the Company conform, in all
material respects, to generally accepted accounting principles within the
banking industry.
The more significant of the Company's accounting policies are set forth
below:
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions, including the determination of the
allowance for loan losses, that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash
equivalents include cash, due from banks, interest-bearing deposits,
and federal funds sold.
Investment Securities
At the time of purchase for the periods covered, all debt and
marketable equity securities were classified as available-for-sale.
Unrealized gains and losses, net of tax, are excluded from earnings
and reported as accumulated other comprehensive income, a separate
component of shareholders' equity, until realized. A decline in the
market value of any security below cost that is deemed other than
temporary results in a charge to earnings and the establishment of a
new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest
method. Dividend and interest income is recognized when earned.
Realized gains and losses are included in earnings and are derived
using the specific-identification method for determining the cost of
securities sold.
The Company, as a member of the Federal Home Loan Bank System
administered by the Federal Housing Finance Board, is required to
maintain an investment in the capital stock of the Federal Home Loan
Bank (FHLB) in an amount equal to the greater of 1% of the Company's
total mortgage-related assets at the beginning of each year or 0.3% of
the Company's total assets at the beginning of each year. This
investment is recorded at cost which represents redemption value.
(Continued)
6
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
Loans
Interest on loans is credited to income based upon the principal amount
outstanding. The recognition of interest income is discontinued when, in
management's judgment, the interest will not be collectible in accordance
with the contractual terms of the loan agreement or when either principal
or interest is past due over 90 days, unless the loan is in the process
of collection and considered well secured. Subsequent payments received
on such loans are applied to principal if there is any doubt as to the
collectibility of such principal; otherwise, such receipts are recorded
as interest income. Loans are returned to accrual status when management
believes full collectibility of principal and interest is expected.
A loan is considered impaired when it is probable the Company will be
unable to collect all amounts due - both principal and interest -
according to the contractual terms of the loan agreement. When measuring
impairment, the expected future cash flows of an impaired loan are
discounted at the loan's effective interest rate. Alternatively,
impairment is measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-dependent
loan. Regardless of the historical measurement method used, the Company
measures impairment based on the fair value of the collateral when
foreclosure is probable. Additionally, impairment of a restructured loan
is measured by discounting the total expected future cash flows at the
loan's effective rate of interest as stated in the original loan
agreement. The Company uses its nonaccrual policy for recognizing
interest income on impaired loans.
The Company originates certain loans which are sold in the secondary
mortgage market. These long-term, fixed-rate loans are sold on a note-by-
note basis. Immediately upon locking in an interest rate, the Company
enters into an agreement to sell the mortgage loan without recourse. The
Company allocates the entire cost of loans originated to the mortgage
loans, as the Company does not retain servicing. These loans held for
sale are included in loans, net in the balance sheets.
The allowance for loan losses is available to absorb loan charge-offs.
The allowance is increased by provisions charged to expense and reduced
by loan charge-offs less recoveries. The provision charged to expense is
that amount which management believes is sufficient to bring the balance
of the allowance for loan losses to a level adequate to absorb potential
loan losses, based on their knowledge and evaluation of the current loan
portfolio and the current economic environment in which the borrowers of
the Company operate.
Management believes the allowance for loan losses is adequate to absorb
losses in the loan portfolio. While management uses available information
to recognize loan losses, future additions to the allowance may be
necessary based on changes in economic conditions and changes in the
financial condition of borrowers. Additionally, regulatory agencies, as
an integral part of the examination process, periodically review the
Company's allowance for loan losses. Such agencies may require the
Company to increase its allowance for loan losses based on their
judgments and interpretations about information available to them at the
time of their examinations.
(Continued)
7
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets, which is 40 years for
the building, 7-40 years for building improvements, and 5-20 years for
furniture, fixtures, and equipment. Property additions and betterments
are capitalized, while maintenance and repairs which do not extend the
useful life of the asset are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period which includes the enactment date.
Earnings Per Share
As the Company has no dilutive instruments, basic earnings per share and
dilutive earnings per share are equal. Basic earnings per share is
computed by dividing net income by 2,400, the weighted average number of
common shares outstanding during 1998 and 1997.
Financial Instruments
Financial instruments are defined as cash, evidence of an ownership
interest in any entity, or a contract that both imposes on one entity a
contractual obligation to deliver cash or another financial instrument to
a second entity, and conveys to that second entity a contractual right to
receive cash or another financial instrument from the first entity.
Impairment of Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flow
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured as the amount by
which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income, during 1998. SFAS No. 130
establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all
items required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements,
(Continued)
8
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
and requires an enterprise to (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of
a statement of financial position. The Company reports comprehensive
income in the statements of shareholders' equity and comprehensive
income. The adoption of SFAS No. 130 did not have an effect on the
financial position or results of operations of the Company.
(2) Regulatory Restrictions and Capital Requirements
The Company is subject to various regulatory capital requirements
administered by federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the Company's financial statements. Under
capital adequacy guidelines, the Company must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The capital amounts and classification of the Company are
subject to qualitative judgments by the regulators about components, risk-
weightings, and other factors.
Quantitative measures established by regulations to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in
the following table) of total and Tier I capital to risk-weighted assets,
and of Tier I capital to adjusted average assets. Management believes, as
of December 31, 1998, the Company meets all capital adequacy requirements
to which it is subject.
The Company is also subject to the regulatory framework for prompt
corrective action. The Company's most recent notification from the Federal
Deposit Insurance Corporation categorized it as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Company must maintain minimum total risk-based, Tier
I risk-based, and Tier I to adjusted average assets ratios as set forth in
the following table. There are no obligations or events since their most
recent notification that management believes have changed the Company's
category.
(Continued)
9
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
The actual and required capital amounts and ratios for the Company as of
December 31, 1998 and 1997 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Requirements to
be classified as
Actual Capital requirements well capitalized
------------------------- ------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1998:
Total capital (to risk-
weighted assets) $ 4,427 24.10% $ 1,469 8.00% $ 1,837 10.00%
Tier I capital (to risk-
weighted assets) 4,276 23.28 735 4.00 1,102 6.00
Tier I capital (to
average assets) 4,276 13.20 972 3.00 1,619 5.00
============ =========== ============ =========== ============ ===========
<CAPTION>
Requirements to
be classified as
Actual Capital requirements well capitalized
------------------------- ------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1997:
Total capital (to risk-
weighted assets) $ 4,262 23.13% $ 1,474 8.00% $ 1,843 10.00%
Tier I capital (to risk-
weighted assets) 4,101 22.25 737 4.00 1,106 6.00
Tier I capital (to
average assets) 4,101 12.86 957 3.00 1,594 5.00
============ =========== ============ =========== ============ ===========
</TABLE>
(3) Debt and Marketable Equity Securities
The amortized cost and fair values of debt and marketable equity securities
available-for-sale at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities $ 1,903,365 16,275 -- 1,919,640
U.S. Government corporations
and agencies 4,224,065 55,309 (154) 4,279,220
Obligations of state and political
subdivisions 2,699,632 61,142 (405) 2,760,369
Mortgage-backed securities 6,156,236 22,382 (29,453) 6,149,165
Other 448,776 3,084 -- 451,860
------------ ------------ ------------ -------------
15,432,074 158,192 (30,012) 15,560,254
Marketable equity securities -
Federal Home Loan Bank stock 96,900 -- -- 96,900
------------ ------------- ------------ -------------
$ 15,528,974 158,192 (30,012) 15,657,154
============ ============= ============ =============
</TABLE>
10 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities $ 3,153,182 15,972 (1,046) 3,168,108
U.S. Government corporations
and agencies 4,700,926 17,315 (1,087) 4,717,154
Obligations of state and political
subdivisions 3,305,699 45,209 (2,030) 3,348,878
Mortgage-backed securities 3,334,694 28,114 (10,681) 3,352,127
Other 1,228,583 3,639 -- 1,232,222
------------ ------------ ------------ ------------
15,723,084 110,249 (14,844) 15,818,489
Marketable equity securities -
Federal Home Loan Bank stock 91,400 -- -- 91,400
------------ ------------ ------------ ------------
$ 15,814,484 110,249 (14,844) 15,909,889
============ ============ ============ ============
</TABLE>
The amortized cost and fair values of securities available-for-sale at
December 31, 1998 and 1997, by contractual maturity, are shown below.
Actual maturities may differ from contractual maturities because borrowers
have the right to call or repay obligations with or without prepayment
penalties.
<TABLE>
<CAPTION>
1998 1997
----------------------------- ----------------------------
Amortized Fair Amortized Fair
cost value cost value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,012,517 2,027,826 3,081,682 3,081,473
Due after one year through five years 6,863,698 6,981,358 8,909,215 8,974,548
Due after five years through ten years 399,623 401,905 397,493 410,341
------------ ------------ ------------ ------------
9,275,838 9,411,089 12,388,390 12,466,362
Mortgage-backed securities 6,156,236 6,149,165 3,334,694 3,352,127
Federal Home Loan Bank stock 96,900 96,900 91,400 91,400
------------ ------------ ------------ ------------
$ 15,528,974 15,657,154 15,814,484 15,909,889
============ ============ ============ ============
</TABLE>
Proceeds from sales of debt and marketable equity securities during 1998
and 1997 were $4,470,411 and $819,938, respectively. Gross gains of $37,530
and $11,872 and gross losses of $2,120 and $917, respectively, were
realized on those sales. All sales during 1998 and 1997 were from the
available-for-sale category.
11 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
Debt and marketable equity securities with carrying values aggregating
$4,437,647 and $3,902,248 at December 31, 1998 and 1997, respectively, were
pledged to secure public funds and for other purposes as required or
permitted by law.
(4) Loans
The composition of the loan portfolio at December 31, 1998 and 1997 is as
follows:
1998 1997
-------------- --------------
Commercial $ 5,496,325 4,714,244
Real estate 7,066,451 7,359,337
Installment and others 1,789,626 2,514,189
Loans held for sale 53,200 --
-------------- --------------
14,405,602 14,587,770
Allowance for loan losses 150,900 161,358
-------------- --------------
Loans, net $ 14,254,702 14,426,412
============== ==============
The Company grants commercial, residential mortgage, and installment loans
to customers primarily in their service area of Adams County, Illinois. The
Company has a diversified loan portfolio, with no particular concentration
of credit in any one economic sector in this service area; however, a
substantial portion of the portfolio is concentrated in and secured by real
estate. The ability of the Company's borrowers to honor their contractual
obligations is dependent upon the local economy and its effect on the real
estate market.
Following is a summary of activity for the year ended December 31, 1998, of
loans to executive officers and directors or to entities in which such
individuals had beneficial interest as shareholders, officers, or
directors. Such loans were made in the normal course of business on
substantially the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
persons, and did not involve more than the normal risk of collectibility.
Balance at December 31, 1997 $ 75,595
New loans --
Payments received (6,426)
----------
Balance at December 31, 1998 $ 69,169
==========
12 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
Transactions in the allowance for loan losses for the years ended December
31, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Balance at January 1 $ 161,358 187,628
Provision charged to expense 12,000 20,000
Loans charged-off (53,845) (58,274)
Recoveries of loans previously charged-off 31,387 12,004
------------ ------------
Balance at December 31 $ 150,900 161,358
============ ============
</TABLE>
A summary of impaired loans at December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Nonaccrual loans $ 61,814 133,448
Impaired loans continuing to accrue interest -- --
------------ ------------
Total impaired loans $ 61,814 133,448
============ ============
Allowance for losses on impaired loans $ -- --
Impaired loans with no related allowance for loan losses 61,814 133,448
============ ============
</TABLE>
The average balance of impaired loans during 1998 and 1997 was $114,080 and
$61,531, respectively.
A summary of interest income on nonaccrual and other impaired loans for 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
Impaired loans
Nonaccrual continuing to
loans accrue interest Total
-------------- ------------------ ---------
<S> <C> <C> <C>
1998:
Income recognized $ -- -- --
Interest income had interest accrued 11,933 -- 11,933
=============== =================== ==========
1997:
Income recognized $ -- -- --
Interest income had interest accrued 14,861 -- 14,861
=============== =================== ==========
</TABLE>
13 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
(5) Premises and Equipment
A summary of premises and equipment at December 31, 1998 and 1997 is
as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Land $ 29,726 29,726
Buildings 599,966 594,930
Furniture, fixtures, and equipment 496,859 485,529
------------ ------------
1,126,551 1,110,185
Less accumulated depreciation 675,074 634,178
------------ ------------
$ 451,477 476,007
============ ============
</TABLE>
Amounts charged to occupancy and equipment expense for depreciation
aggregated $40,896 and $40,386 for the years ended December 31, 1998
and 1997, respectively.
(6) Interest-bearing Deposits
A summary of interest-bearing deposits at December 31, 1998 and 1997
is as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
NOW and money market demand accounts $ 5,962,599 5,300,452
Savings 1,483,982 1,222,518
Other time deposits:
Less than $100,000 13,880,866 13,978,890
$100,000 and over 3,311,037 3,903,532
------------- -------------
$ 24,638,484 24,405,392
============= =============
</TABLE>
Interest expense on deposits for the years ended December 31, 1998 and
1997 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
NOW and money market demand accounts $ 124,344 128,428
Savings 28,635 26,701
Other time deposits:
Less than $100,000 747,193 759,892
$100,000 and over 199,940 208,132
------------- -------------
$ 1,100,112 1,123,153
============= =============
</TABLE>
14 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
The maturities of other time deposits at December 31, 1998 are show below.
Expected maturities may differ from contractual maturities because
depositors may redeem deposits early.
<TABLE>
<S> <C>
Due in three months or less $ 4,624,709
Due in greater than three months through one year 9,027,146
Due in greater than one year through three years 3,426,821
Due in greater than three years 113,227
---------------
$ 17,191,903
===============
</TABLE>
(7) Other Comprehensive Income
The Company's other comprehensive income included the following components:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net realized and unrealized gain (loss) on securities
available-for-sale, net of tax $ 45,620 51,074
Less adjustment for net securities gain (loss) realized in net
income, net of tax 23,771 7,230
------------ ------------
$ 21,849 43,844
============ ============
</TABLE>
(8) Income Taxes
The components of income tax expense for the years ended December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Current expense:
Federal $ 90,833 91,128
Decrease in the beginning of the year balance of the valuation
allowance for deferred tax assets (25,761) --
Deferred 47,761 (10,774)
------------ ------------
$ 112,833 80,354
============ ============
</TABLE>
15 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
A reconciliation of expected income tax expense to Federal income tax
expense, computed by applying the Federal statutory rate of 34% to income
before income tax expense for the years ended December 31, 1998 and 1997 to
reported income tax expense, is as follows:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Income tax expense at statutory rate $ 166,647 149,360
Decrease in income taxes resulting from:
Tax exempt income (43,808) (53,128)
Change in the beginning of the year balance of the
valuation allowance for deferred tax assets (25,761) --
Other, net 15,755 (15,878)
-------------- -------------
Income tax expense $ 112,833 80,354
============== =============
</TABLE>
The tax effect of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit $ -- 31,500
Net operating loss carryforward 80,454 94,411
-------------- -------------
Gross deferred tax assets 80,454 125,911
Less valuation allowance -- (25,761)
-------------- -------------
Deferred tax assets, net 80,454 100,150
-------------- -------------
Deferred tax liabilities:
Premises and equipment, basis (21,199) (22,159)
Accrual to cash conversion for book to tax
accounting methods (113,027) (90,990)
Allowance for loan losses (82,396) (85,234)
Available-for-sale securities market valuation (42,726) (31,802)
Other (8,732) (24,667)
-------------- -------------
Total gross deferred tax liabilities (268,080) (254,852)
-------------- -------------
Net deferred tax liabilities $ (187,626) (154,702)
============== =============
</TABLE>
16 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
At December 31, 1998, the Company has state net operating loss
carryforwards (NOLs) of approximately $1,121,000. The state NOLs for the
Company at December 31, 1998 expire during 2004 through 2010.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. A valuation allowance is
provided on deferred tax assets when it is more likely than not that some
portion of the assets will not be realized. There was no valuation
allowance for deferred tax assets as of December 31, 1998. The net change
in the total valuation allowance for the year ended December 31, 1998 was
a decrease of $25,761.
(9) Employee Benefits
The Company maintains a Profit Sharing Plan for all employees meeting
certain eligibility requirements. The Company makes contributions to the
plan based on an annual election. The annual election amount is allocated
to the participants based on the percentage of their compensation compared
to all participants' compensation. All contributions are one-third, two-
thirds, and 100% vested after one, two, and three years of service,
respectively. Employer contributions to the plan totaled $28,312 and
$25,802 in 1998 and 1997, respectively.
(10) Other Noninterest Expense
Other noninterest expense for the years ended December 31, 1998 and 1997 is
as follows:
1998 1997
---------- ----------
Professional services $ 33,601 44,073
Directors' fees 24,900 24,900
Advertising 6,530 6,652
Postage and supplies 33,574 35,233
Other 76,486 73,992
---------- ----------
$ 175,091 184,850
========== ==========
17 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
(11) Commitments and Contingencies
During the normal course of business, there have been no legal claims that
have arisen which, in the opinion of management, will result in any
material liability to the Company.
(12) Disclosures About Financial Instruments
The Company issues financial instruments with off-balance sheet risk in the
normal course of the business of meeting the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments may involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheets.
The contractual amounts of these instruments reflect the extent of
involvement the Company has in such particular classes of financial
instruments.
The exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of such
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as they do for on-balance sheet
financial instruments included in the balance sheets. Following is a
summary of off-balance sheet financial instruments at December 31, 1998 and
1997, respectively:
1998 1997
---------- ----------
Financial instruments whose contractual
amounts represent:
Commitments to extend credit $1,671,383 1,315,348
Standby letters of credit 11,200 10,000
---------- ----------
Total off-balance sheet financial instruments $1,682,583 1,325,348
========== ==========
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. At December 31, 1998, $535,745
represents fixed rate loan commitments. Since certain of the commitments
may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the borrower.
Collateral held varies, but is generally residential or income-producing
commercial property, inventory, accounts receivable, or equipment.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. These
guarantees are primarily issued to support public and private borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.
18 (Continued)
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Notes to Financial Statements
December 31, 1998 and 1997
(13) Subsequent Event
On March 2, 1999, Illini Corporation (Illini) announced a definitive
agreement to acquire all of the outstanding shares of the Company in
exchange for 123,333 shares of Illini's common stock and cash of
$3,256,260. Illini is headquartered in Springfield, Illinois and had assets
of approximately $175 million at September 30, 1999. The acquisition closed
on November 19, 1999.
19 (Continued)
<PAGE>
EXHIBIT 99.2
FARMERS STATE BANK OF CAMP POINT
Balance Sheet
September 30, 1999
(Unaudited)
Assets
Cash and due from banks $ 939,678
Interest bearing deposits 20,704
-----------
Cash and cash equivalents 960,382
Debt and marketable equity securities
available-for-sale, at fair value 16,782,371
Loans, net 13,024,152
Premises and equipment, net 417,067
Accrued interest receivable 412,349
Other assets 55,269
-----------
Total assets $31,651,590
===========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 2,635,281
Interest-bearing 24,144,987
-----------
Total deposits 26,780,268
===========
Securities sold under agreements to repurchase 300,428
Accrued interest payable 109,824
Other liabilities 134,657
-----------
Total liabilities 27,325,177
-----------
Commitments and contingencies -
Shareholders' equity:
Common stock, $100 par value, 2,400 shares
authorized, issued, and outstanding 240,000
Surplus 1,760,000
Retained earnings 2,470,387
Accumulated other comprehensive loss (143,974)
-----------
Total shareholders' equity 4,326,413
-----------
Total liabilities and shareholders' equity $31,651,590
===========
See accompanying note to unaudited financial statements.
1
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Statements of Income
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 868,145 937,159
Interest and dividends on debt and
marketable equity securities 710,502 693,088
Interest on federal funds sold 23,648 14,595
------------ ------------
Total interest income 1,602,295 1,644,842
------------ ------------
Interest expense:
Interest on deposits 761,872 826,642
Interest on securities sold under agreements to repurchase 11,215 18,007
------------ ------------
Total interest expense 773,087 844,649
------------ ------------
Net interest income 829,208 800,193
Provision for loan losses 44,500 12,000
------------ ------------
Net interest income after provision for loan losses 784,708 788,193
------------ ------------
Noninterest income:
Service charges on deposits 29,885 28,404
Gain on sale of securities, net 6,087 31,025
Other noninterest income 42,802 28,689
------------ ------------
Total noninterest income 78,774 88,118
------------ ------------
Noninterest expense:
Salaries and employee benefits 250,203 246,065
Occupancy and equipment expense 86,728 84,802
Data processing expense 36,314 37,031
Other noninterest expense 136,551 127,710
------------ ------------
Total noninterest expense 509,796 495,608
------------ ------------
Income before income tax expense 353,686 380,703
Income tax expense 89,600 70,250
------------ ------------
Net income $ 264,086 310,453
============ ============
Basic and diluted earnings per share $ 110.04 129.36
============ ============
</TABLE>
See accompanying note to unaudited financial statements.
2
<PAGE>
FARMERS STATE BANK OF CAMP POINT
Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 264,086 310,453
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 86,428 50,347
Provision for loan losses 44,500 12,000
Gain on sale of securities (6,087) (31,025)
(Increase) decrease in accrued interest receivable 37,044 (35,225)
Increase (decrease) in accrued interest payable (14,590) 2,936
(Increase) decrease in other assets 215,551 (119,772)
Other, net (1,689) (11,197)
------------ ------------
Net cash provided by operating activities 625,243 178,517
------------ ------------
Cash flows from investing activities:
Proceeds from sales of debt and marketable equity securities
available-for-sale 298,500 3,839,301
Proceeds from maturities and principal payments on debt
and marketable equity securities available-for-sale 2,923,988 3,400,108
Purchases of debt and marketable equity securities
available-for-sale (4,733,330) (6,814,667)
Net decrease in loans 1,186,050 433,711
Purchases of premises and equipment, net (4,443) (8,190)
------------ ------------
Net cash (used in) provided by investing activities (329,235) 850,263
------------ ------------
Cash flows from financing activities:
Net decrease in deposits (1,146,610) (596,801)
Net increase (decrease) in securities sold
under agreements to repurchase 11,155 (154,245)
Cash dividends paid (70,510) (141,600)
------------ ------------
Net cash used in financing activities (1,205,965) (892,646)
------------ ------------
Net increase (decrease) in cash and cash equivalents (909,957) 136,134
Cash and cash equivalents at beginning of period 1,870,339 933,650
------------ ------------
Cash and cash equivalents at end of period $ 960,382 1,069,784
============ ============
Supplemental information -- interest paid $ 810,131 809,424
============ ============
</TABLE>
See accompanying note to unaudited financial statements.
3
<PAGE>
Farmers State Bank of Camp Point
Note to Unaudited Financial Statements
September 30, 1999 and 1998
Note A Basis of Presentation
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included.
4
<PAGE>
EXHIBIT 99.3
Pro Forma Consolidated Financial Information
On November 19, 1999, Illini Corporation (the "Company") consummated its
previously announced agreement to acquire all of the outstanding shares of
Farmers State Bank of Camp Point ("Farmers State Bank") through the merger of
Farmers State Bank with a wholly-owned subsidiary of the Company. As a result of
the merger, the stockholders of Farmers State Bank received a total of 123,333
shares of Company common stock and cash in the amount of $3,256,260. The source
of funds used to pay the cash portion of the purchase price was the Company's
working capital acquired through dividends from the Company's wholly-owned
subsidiary bank, Illini Bank, and borrowings from an unaffiliated financial
institution.
The three tables appearing on the following pages present financial information
on a pro forma consolidated basis. The first table sets forth as of September
30, 1999:
. The historical consolidated balance sheet of the Company.
. The pro forma consolidated balance sheet of the Company after giving effect
to the acquisition of Farmers State Bank. The pro forma consolidated balance
sheet assumes the acquisition was consummated on September 30, 1999.
The second and third tables set forth for the nine months ended September 30,
1999 and year ended December 31, 1998:
. The historical consolidated income statement of the Company.
. The pro forma consolidated income statement of the Company after giving
effect to the acquisition of Farmers State Bank. The pro forma consolidated
income statement assumes the acquisition was consummated on January 1, 1999
and January 1, 1998, respectively.
<PAGE>
Illini Corporation
Pro Forma Consolidated Balance Sheet
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Farmers
State Bank Purchase Illini
Illini of Camp Adjustments Corporation
------------------------------
Assets Corporation Point Adds Subtracts Pro Forma
- ---------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash and due from banks $ 7,496 960 1,000 1 50 4
3,256 2 6,150
Interest bearing deposits 5 0 5
Debt and marketable equity securities 44,392 16,782 61,174
Loans, net of the allowance for loan losses 112,748 13,024 125,772
Premises and equipment 7,066 417 252 3 7,735
Goodwill and other intangibles 116 0 2,072 3 2,188
Other assets 3,037 468 401 3
87 3 3,017
------------- ------------- ------------- ------------- -------------
Total Assets $ 174,860 31,651 3,324 3,794 206,041
============= ============= ============= ============= =============
Liabilities and Stockholders' Equity
- ----------------------------------------------
Deposits $ 157,222 26,780 184,002
Federal funds purchased 835 0 835
Securities sold under agreements to repurchase 190 300 490
Note payable 1,000 1 1,000
Other liabilities 1,916 245 150 4 2,311
------------- ------------- ------------- ------------- -------------
Total liabilities 160,163 27,325 1,150 0 188,638
Common stock 4,485 240 1,233 6 240 5 5,718
Additional paid in capital 1,886 1,760 1,473 7 1,760 5 3,359
Undivided profits 8,646 2,470 2,470 5 8,646
Accumulated other comprehensive income (loss) (320) (144) 144 5 (320)
------------- ------------- ------------- ------------- -------------
Total stockholders' equity 14,697 4,326 2,850 4,470 17,403
------------- ------------- ------------- ------------- -------------
Total liabilities and stockholders' equity $ 174,860 $ 31,651 $ 4,000 $ 4,470 $ 206,041
============= ============= ============= ============= =============
</TABLE>
See footnotes to pro forma consolidated balance sheet.
<PAGE>
Illini Corporation
Footnotes to Pro Forma Consolidated Balance Sheet
September 30, 1999
1. Loan originated on December 1, 1999 with an unaffiliated financial
institution for $1,000,000 with an interest rate equal to the prime rate
adjusted from time to time maturing on December 1, 2000.
2. Cash consideration funded with $2,256,000 of existing cash and $1,000,000
loan from an unaffiliated financial institution.
3. Goodwill calculated as follows (in thousands):
Consideration: Cash $3,256
Stock 123,333 shares
$29.25
X 75% (25% discount) {B}
Fair value of stock distributed 2,706
Acquisition related expenses {A} 601
------
6,563
Stockholders' equity of Farmers State Bank 4,326
------
Cost over book value 2,237
Fair Value Allocations:
Premises and equipment {C} 252
Deferred taxes {C} (87)
------
Goodwill $2,072
{A} $200 of the $601 relates to the Non-Compete, Standstill and Sale
of Personal Goodwill Agreement entered into with Ernest Huls.
{B} The $29.25 value of Illini Corporation common stock is based on
listing of stock price on NASDAQ pink sheets. The discount which is
based on restrictions placed on the stock was determined by an
independent valuation.
{C} The fair value allocations are based on fair values at closing
date.
4. $50,000 was paid to Ernest Huls at closing and $150,000 to be paid to Huls
over three years in connection with the Non-Compete, Standstill, and Sale
of Personal Goodwill Agreement.
5. Elimination of Farmers State Bank equity at consolidated level.
6. 123,333 shares at $10 par value.
7. Fair value of shares issued minus $1,233,330 par value.
<PAGE>
Illini Corporation
Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Farmers
State Bank Purchase Illini
Illini of Camp Adjustments Corporation
-------------------------------
Corporation Point Adds Subtracts Pro Forma
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income $ 8,614 1,602 95 1 10,121
Interest expense 3,802 773 64 2 4,639
------------- ------------- ------------- ------------- -------------
Net interest income 4,812 829 (64) 95 5,482
Provision for loan losses 203 45 248
------------- ------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 4,609 784 (64) 95 5,234
Noninterest income:
Service charges on deposits 959 30 989
Fee income 318 20 338
Gain on sale of securities, net 7 6 13
Other noninterest income 166 24 190
------------- ------------- ------------- ------------- -------------
Total noninterest income 1,450 80 0 0 1,530
Noninterest expense:
Salaries and employee benefits 2,261 250 2,511
Occupancy and equipment expense 923 87 7 3 1,017
Data processing expense 538 36 574
Supplies 143 8 151
Communication and transportation 315 21 336
Correspondent and processing fees 180 37 217
Professional fees 823 15 838
Directors' and regulatory fees 129 23 152
Amortization of goodwill and other intangibles 8 0 104 4 112
Other noninterest expense 304 33 337
------------- ------------- ------------- ------------- -------------
Total noninterest expense 5,624 510 111 0 6,245
Net income before taxes 435 354 (175) 95 519
Provision for income taxes 84 90 61 5 113
------------- ------------- ------------- ------------- -------------
Net income $ 351 $ 264 ($175) $34 $ 406
============= ============= ============= ============= =============
Basic and diluted earnings per share $ 0.78 $ 0.71
============= =============
Weighted average shares outstanding 448,456 571,789
============= =============
</TABLE>
See footnotes to pro forma consolidated income statement.
<PAGE>
Illini Corporation
Footnotes to Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1999
1. Represents lost interest income due to cash payments of $2,306,000
($3,256,000 plus $50,000 less $1,000,000 financed through an unaffiliated
financial institution) for the acquisition at an assumed interest rate of
5.5% for the liquidated assets.
2. Represents interest expense incurred on the $1,000,000 loan with an
unaffiliated financial institution equal to the prime rate adjusted from
time to time maturing on December 1, 2000 (8.5%).
3. A purchase accounting adjustment was recorded to building totaling $225,000
with an amortization period of 25 years.
4. The pro forma goodwill is $2,072,000 with an amortization period of 15
years.
5. The income tax benefit associated with taxable income statement adjustments
is computed at an effective tax rate of 37%.
<PAGE>
Illini Corporation
Pro Forma Consolidated Income Statement
Year Ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Farmers
State Bank Purchase Illini
Illini of Camp Adjustments Corporation
------------------------------
Corporation Point Adds Subtracts Pro Forma
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income $ 10,987 2,188 127 1 13,048
Interest expense 5,180 1,122 85 2 6,387
------------- ------------- ------------- ------------- -------------
Net interest income 5,807 1,066 (85) 127 6,661
Provision for loan losses 204 12 216
------------- ------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 5,603 1,054 (85) 127 6,445
Noninterest income:
Service charges on deposits 1,065 37 1,102
Fee income 436 29 465
Gain on sale of securities, net 8 35 43
Gain on sale of other real estate owned, net 460 0 460
Other noninterest income 306 8 314
------------- ------------- ------------- ------------- -------------
Total noninterest income 2,275 109 0 0 2,384
Noninterest expense:
Salaries and employee benefits 3,218 345 3,563
Occupancy and equipment expense 1,045 105 9 3 1,159
Data processing expense 708 49 757
Supplies 200 13 213
Communication and transportation 396 29 425
Correspondent and processing fees 144 23 167
Professional fees 875 21 896
Directors' and regulatory fees 192 31 223
Amortization of goodwill and other intangibles 36 0 138 4 174
Other noninterest expense 363 57 420
------------- ------------- ------------- ------------- -------------
Total noninterest expense 7,177 673 147 0 7,997
Net income before taxes 701 490 (232) 127 832
Provision for income taxes 71 113 82 5 102
------------- ------------- ------------- ------------- -------------
Net income $ 630 $ 377 ($232) $ 45 $ 730
============= ============= ============= ============= =============
Basic and diluted earnings per share $ 1.40 $ 1.28
============= =============
Weighted average shares outstanding 448,456 571,789
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</TABLE>
See footnotes to pro forma consolidated income statement.
<PAGE>
Illini Corporation
Footnotes to Pro Forma Consolidated Income Statement
Year Ended December 31, 1998
1. Represents lost interest income due to cash payments of $2,306,000
($3,256,000 plus $50,000 less $1,000,000 financed through an unaffiliated
financial institution) for the acquisition at an assumed interest rate of
5.5% for the liquidated assets.
2. Represents interest expense incurred on the $1,000,000 loan with an
unaffiliated financial institution equal to the prime rate adjusted from
time to time maturing on December 1, 2000 (8.5%).
3. A purchase accounting adjustment was recorded to building totaling $225,000
with an amortization period of 25 years.
4. The pro forma goodwill is $2,072,000 with an amortization period of 15
years.
5. The income tax benefit associated with taxable income statement adjustments
is computed at an effective tax rate of 37%.
