<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from __________ to __________
Commission File Number: 333-57917
CARLINVILLE NATIONAL BANK SHARES, INC.
---------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 37-1125050
---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporated or organization)
WEST SIDE SQUARE, CARLINVILLE, ILLINOIS 62626
---------------------------------------------
(Address of principal executive offices) (Zip Code)
(217) 854-2674
---------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of June 30,
1999, the registrant had outstanding 247,458 shares of common stock, $1.00
par value per share.
<PAGE>
CARLINVILLE NATIONAL BANK SHARES, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I
Item 1. Financial Statements (unaudited) 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
Form 10-Q Signature Page 29
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,653,529 $ 9,385,889
Interest-earning deposits in other financial institutions 161,689 1,000,197
Federal funds sold 7,685,000 15,997,000
Investments in debt and equity securities:
Available-for-sale, at fair value 70,670,538 61,380,481
Held-to-maturity, at amortized cost (approximate fair
value of $10,061,000 and $12,965,442 at June 30, 1999
and December 31, 1998, respectively) 10,292,205 12,605,746
Loans 155,468,487 153,180,069
Less:
Unearned discount (361,211) (580,377)
Reserve for possible loan losses (1,325,813) (1,641,212)
------------- -------------
Net loans 153,781,463 150,958,480
------------- -------------
Bank premises and equipment, net 3,858,485 3,782,400
Accrued interest receivable 3,332,215 3,503,844
Intangible assets 4,686,959 4,860,553
Other assets 3,087,349 2,580,689
------------- -------------
$ 262,209,432 $ 266,055,279
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 20,696,047 $ 24,938,780
Interest-bearing deposits 205,354,530 204,987,156
------------- -------------
Total deposits 226,050,577 229,925,936
Short-term borrowings 5,700,997 4,499,417
Accrued interest payable 1,311,495 1,404,827
Long-term borrowings 1,252,000 1,252,000
Other liabilities 1,029,934 1,218,976
------------- -------------
Total liabilities 235,345,003 238,301,156
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; 310,000 shares
authorized; 262,710 shares issued 262,710 262,710
Surplus 6,165,204 6,165,204
Retained earnings 21,626,678 21,150,744
Accumulated other comprehensive income - unrealized
holding gains and losses on available-for-sale
securities, net of tax (676,575) 496,553
Treasury stock at cost - 15,252 and 13,502 shares at
June 30, 1999 and December 31, 1998, respectively (513,588) (321,088)
-------------- -------------
Total stockholders' equity 26,864,429 27,754,123
-------------- -------------
$ 262,209,432 $ 266,055,279
============== =============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
1
<PAGE>
CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Statements of Income and Comprehensive Income
Three and six months ended June 30, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,285,055 $ 2,569,521 $ 6,593,599 $ 5,061,209
Interest and dividends on debt and equity securities:
Taxable 971,040 710,394 1,885,954 1,443,265
Exempt from Federal income taxes 186,928 177,889 362,806 354,728
Interest on short-term investments 150,713 198,089 340,176 351,192
----------- ----------- ----------- -----------
Total interest income 4,593,736 3,655,893 9,182,535 7,210,394
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits 2,319,627 1,934,606 4,635,300 3,765,148
Interest on short-term borrowings 88,061 103,097 178,794 211,874
Interest on long-term borrowings 20,364 - 40,495 -
----------- ----------- ----------- -----------
Total interest expense 2,428,052 2,037,703 4,854,589 3,977,022
----------- ----------- ----------- -----------
Net interest income 2,165,684 1,618,190 4,327,946 3,233,372
Provision for possible loan losses 285,000 180,000 330,000 210,000
----------- ----------- ----------- -----------
Net interest income after provision
for possible loan losses 1,880,684 1,438,190 3,997,946 3,023,372
----------- ----------- ----------- -----------
Noninterest income:
Service charges on deposit accounts 171,655 138,873 338,058 270,012
Income from fiduciary activities 58,014 46,559 101,927 84,496
Net security sale gains (losses) - 173,426 29,978 308,854
Mortgage banking revenue 26,757 44,399 88,863 68,538
Other noninterest income 109,993 89,359 248,131 178,477
----------- ----------- ----------- -----------
Total noninterest income 366,419 492,616 806,957 910,377
----------- ----------- ----------- -----------
Noninterest expense:
Salaries and employee benefits 933,753 654,002 1,815,185 1,299,428
Occupancy and equipment expense 306,176 192,394 578,724 356,451
Legal and professional fees 43,553 11,922 81,497 29,616
Postage, printing and supplies 101,207 53,785 202,817 128,234
Amortization of intangible assets 99,322 68,698 198,659 137,397
Other noninterest expense 371,771 261,896 704,171 488,891
----------- ----------- ----------- -----------
Total noninterest expense 1,855,782 1,242,697 3,581,053 2,440,017
----------- ----------- ----------- -----------
Income before applicable income taxes 391,321 688,109 1,223,850 1,493,732
Applicable income taxes 132,371 172,772 376,729 398,854
----------- ----------- ----------- -----------
Net income 258,950 515,337 847,121 1,094,878
----------- ----------- ----------- -----------
Other comprehensive income (loss), before tax:
Net unrealized gains (losses) on available-for-sale
securities (1,293,445) (62,568) (1,747,489) 56,815
Reclassification adjustment for gains included in
net income - (173,426) (29,978) (308,354)
----------- ----------- ----------- -----------
Other comprehensive income (loss),
before tax (1,293,445) (235,994) (1,777,467) (251,539)
Income tax related to items of other comprehensive
income (loss) (439,771) (80,243) (604,339) (85,523)
----------- ----------- ----------- -----------
Other comprehensive income (loss),
net of tax (853,674) (155,751) (1,173,128) (166,016)
----------- ----------- ----------- -----------
Total comprehensive income (loss) $ (594,724) $ 359,586 $ (326,007) $ 928,862
=========== =========== =========== ===========
Net income per common share:
Average common shares outstanding 247,458 186,498 248,251 186,498
=========== =========== =========== ===========
Net income per common share $ 1.05 $ 2.76 $ 3.41 $ 5.87
=========== =========== =========== ===========
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
2
<PAGE>
CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Statements of Stockholders' Equity
Six months ended June 30, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
Total
Accumulated stock-
Common Retained Treasury other compre- holders'
stock Surplus earnings stock hensive income equity
---------- ---------- ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 200,000 $ 270,464 $ 19,758,353 $ (321,088) $ 525,906 $ 20,433,635
Net income - - 1,094,878 - - 1,094,878
Cash dividends paid - $1.45 per share - - (270,422) - - (270,422)
Unrealized gains (losses)
on available-for-sale securities,
net of related tax effect - - - - (166,016) (166,016)
--------- ---------- ------------ ---------- ----------- -------------
Balance at June 30, 1998 $ 200,000 $ 270,464 $ 20,582,809 $ (321,088) $ 359,890 $ 21,092,075
========= ========== ============ ========== =========== =============
Balance at December 31, 1998 $ 262,710 $6,165,204 $ 21,150,744 $ (321,088) $ 496,553 $ 27,754,123
Net income - - 847,121 - - 847,121
Cash dividends paid - $1.50 per share - - (371,187) - - (371,187)
Purchase of 1,750 shares for treasury - - - (192,500) - (192,500)
Unrealized gains (losses)
on available-for-sale securities,
net of related tax effect - - - - (1,173,128) (1,173,128)
--------- ---------- ------------ ---------- ----------- -------------
Balance at June 30, 1999 $ 262,710 $6,165,204 $ 21,626,678 $ (513,588) $ (676,575) $ 26,864,429
========= ========== ============ ========== =========== =============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
3
<PAGE>
CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 847,121 1,094,878
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 649,897 329,003
Provision for possible loan losses 330,000 210,000
Decrease in accrued interest receivable 171,629 73,937
Net gains on security sales and calls (29,978) (308,854)
Increase (decrease) in accrued interest payable (93,332) 63,181
Other operating activities, net (198,665) 377,756
------------ -----------
Net cash provided by operating activities 1,676,672 1,839,901
------------ -----------
Cash flows from investing activities:
Proceeds from calls and maturities of and principal payments on debt
securities:
Available-for-sale 10,574,217 13,231,645
Held-to-maturity 2,578,497 2,978,262
Proceeds from sale of securities - 709,312
Purchases of debt and equity securities:
Available-for-sale (21,961,925) (13,831,001)
Held-to-maturity - -
Net increase in loans (3,128,848) (6,782,214)
Purchases of bank premises and equipment, net (384,015) (61,091)
------------ ------------
Net cash used in investing activities (12,322,074) (3,755,087)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits (3,875,359) 6,774,372
Net increase (decrease) in short-term borrowings 786,580 (3,178,984)
Proceeds from note payable 415,000 -
Cash dividends paid (371,187) (270,422)
Purchase of treasury stock (192,500) -
------------ ------------
Net cash provided by (used in) financing activities (3,237,466) 3,324,966
------------ ------------
Net increase (decrease) in cash and cash equivalents (13,882,868) 1,409,780
Cash and cash equivalents at beginning of year 26,383,086 13,232,829
------------ ------------
Cash and cash equivalents at end of year $ 12,500,218 14,642,609
============ ============
Supplemental information - cash paid for:
Interest $ 4,947,921 3,913,841
Income taxes 433,000 204,500
============ ============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
4
<PAGE>
CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES
Notes to Interim Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
Carlinville National Bank Shares, Inc. (the "Company") provides a full range
of banking services to individual and corporate customers throughout
Macoupin, Montgomery, Christian, and Sangamon counties of central Illinois,
through the seven locations of its wholly-owned subsidiary banks, Carlinville
National Bank, Palmer Bank, and Citizens State Bank (the "Banks"). The
Company and Banks are subject to competition from other financial and
nonfinancial institutions providing financial products throughout the central
Illinois area. Additionally, the Company and Banks are subject to the
regulations of certain Federal and state agencies and undergo periodic
examinations by those regulatory agencies. The Company also maintains a
nonbanking subsidiary which operates a tax return preparation service. The
operations of the nonbanking subsidiary are not material to the Company's
consolidated results of operations.
The accompanying unaudited interim condensed consolidated financial
statements as of June 30, 1999 and for the three and six months ended June
30, 1999 and 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions outlined in Rule 10-01 of Regulation S-X of the Securities
Exchange Act of 1934. 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
(consisting of normal recurring accruals) considered necessary for a fair
presentation, have been included. Operating results for the periods ended
June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto for the
year ended December 31, 1998 included in the Company's Annual Report on Form
10-K.
NOTE 2 - ACQUISITIONS AND MERGERS
Effective January 24, 1997, the Company purchased 100% of the outstanding
capital stock of Lincoln Trail Bancshares, Inc. ("Lincoln Trail"), which owned
100% of the outstanding common stock of Palmer Bank in Taylorville, Illinois, in
exchange for cash of $3,045,984. The acquisition has been accounted for as a
purchase transaction and, accordingly, the consolidated operations of Lincoln
Trail from January 24, 1997 forward are included in the consolidated results of
operations of the Company. The excess of cost over the fair value of net assets
acquired, which amounted to $2,048,407, is being amortized on a straight line
basis over 15 years.
5
<PAGE>
The fair value of the consolidated net assets acquired from Lincoln Trail at
January 24, 1997 were as follows:
<TABLE>
<S> <C>
Cash and due from banks $ 983,388
Federal funds sold 7,638,000
Investment securities 3,477,228
Loans, net 21,659,223
Premises and equipment 1,055,763
Other assets 560,849
------------
Total assets 35,374,451
------------
Deposits 33,920,247
Other liabilities 456,627
------------
Total liabilities 34,376,874
------------
Net assets acquired 997,577
Cost of acquisition 3,045,984
------------
Excess of cost over fair value of net assets acquired $ 2,048,407
============
</TABLE>
On October 1, 1998, the Company purchased 100% of the outstanding capital
stock of Shipman Bancorp, Inc. ("Shipman") and its wholly-owned subsidiary,
Citizens State Bank in Shipman, Illinois, in exchange for 62,710 shares of
Company common stock and $287,926 of cash. The acquisition has been accounted
for as a purchase transaction and, accordingly, the consolidated operations
of Shipman from October 1, 1998 forward are included in the consolidated
results of operations of the Company. The excess of cost over the fair value
of the net assets acquired, which amounted to $1,224,712, is being amortized
on a straight line basis over 15 years.
The fair value of the consolidated net assets acquired from Shipman at
October 1, 1998 were as follows:
<TABLE>
<S> <C>
Cash and due from banks $ 5,644,590
Federal funds sold 3,979,000
Investment securities 5,223,185
Loans, net 31,567,601
Premises and equipment 963,630
Other assets 1,969,711
------------
Total assets 49,347,717
------------
Deposits 41,463,171
Other liabilities 2,863,882
------------
Total liabilities 44,327,053
------------
Net assets acquired 5,020,664
Cost of acquisition 6,245,376
------------
Excess of cost over fair value of net assets acquired $ 1,224,712
============
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Carlinville National Bank Shares, Inc. (the "Company") provides a full
range of financial services throughout Macoupin, Montgomery, Christian, and
Sangamon counties in central Illinois. The following discussion more fully
explains the changes in financial condition and results of operations for the
first six months of 1999 compared to the first six months of 1998, and for the
second quarter of 1999 compared to the second quarter of 1998. Such information
is provided on a consolidated basis for the Company, its three wholly-owned
banking subsidiaries (Carlinville National Bank, Palmer Bank, and Citizens State
Bank, referred to collectively as the "Banks"), and its wholly-owned nonbanking
subsidiary, Carlinville Tax Service, Inc.
NET INCOME
The Company had net income of $847,121 for the six months ended June 30,
1999, compared with $1,094,878 for the six months ended June 30, 1998,
representing a decrease of $247,757 (22.63%). Net income per common share for
the first six months of 1999 was $3.41 per share, a decrease of $2.46 (41.91%)
over $5.87 per share for the first six months of 1998.
The Company had net income of $258,950 for the three months ended June 30,
1999, which represented a decrease of $256,387 (49.75%) from the $515,337 earned
for the three months ended June 30, 1998. Net income per common share was $1.05
per share for the second quarter of 1999, compared with $2.76 per share for the
second quarter of 1998. The primary reason for the decreases in 1999 was the
increase in the provision for loan losses recorded during the second quarter of
1999, and security sale gains recorded during the first two quarters of 1998.
NET INTEREST INCOME
The Company's net interest income increased by $1,094,574 (33.85%) to $4,327,946
for the first six months of 1999 from the $3,233,372 recorded for the first six
months of 1998. The net interest margin for the two periods was comparable, with
a net interest margin of 3.66% achieved for the first six months of 1999, and
3.64% achieved for the first six months of 1998. The Company's net interest
income for the second quarter of 1999 increased $547,494 (33.83%) to $2,165,684
from the $1,618,190 earned for the second quarter of 1998. The net interest
margins for the second quarters of 1999 and 1998 were 3.65% and 3.57%,
respectively.
The primary reason for the significant increase in the Company's net interest
margin during the first six months of 1999 is the acquisition of Shipman
Bancorp, Inc. ("Shipman") and its wholly-owned subsidiary Citizens State Bank
("Citizens Bank"). This acquisition was completed on October 1, 1998, and the
Company's results of operations include the consolidated operations of Shipman
and Citizens Bank since the acquisition date. On October 1, 1998, Citizens Bank
had total interest earning assets of $41,413,212, and total interest-bearing
liabilities of $39,423,417.
7
<PAGE>
As reflected in the tables below, average earning assets for the first
six months of 1999 increased by $58,509,359 (31.02%) to $247,139,598, from
the $188,630,239 of average earning assets for the first six months of 1998.
The percentage of average earning assets comprised of loans, which is the
Company's highest earning asset, increased to 62.13% for the first six months
of 1999, from 61.29% for the first six months of 1998.
Average earning assets for the second quarter of 1999 increased
$55,630,830 (29.04%) to $247,167,521 from the $191,536,691 of average earning
assets for the second quarter of 1998. The percentage of average earning
assets comprised of loans increased to 62.16% for the second quarter of 1999,
from 61.51% for the second quarter of 1998.
The increase in loans in 1999 resulted primarily from the Shipman
acquisition, and also from the Company's ability to make larger commercial
loans to individuals and small businesses in its market area, with the
increased lending limit available to a larger banking organization resulting
from the Company's recent acquisitions. Additionally, loan growth occurred
from new banking relationships with customers moving their business out of
the larger non-locally-owned consolidated banking institutions in the
Company's market area.
Average taxable investment securities for the first six months of 1999
increased $17,780,797 (37.08%) to $65,737,159 from the average taxable
investment securities for the first six months of 1998 of $47,956,362. At
October 1, 1998, the fair value of the Shipman investment portfolio added to
the Company's consolidated investment portfolio was $5,223,185. The remaining
growth in the taxable investment portfolio resulted from an influx of new
deposits and the reinvestment of excess Federal funds.
Average taxable investment securities for the second quarter of 1999
increased $20,120,940 (42.48%) to $67,485,868 from the average taxable
investment securities for the second quarter of 1998 of $47,364,928. The
average yield on such investments also declined in the second quarter of
1999, as compared with the second quarter of 1998, dropping 25 basis points
to 5.77%, reflecting the interest rate environment prevalent in the current
bond market. The combination of increased volume and decreased rate on
taxable investment securities for the comparable second quarter periods
resulted in an increase in interest income of $260,646.
The Company's level of Federal funds sold is directly attributable to the
level of securities sold under repurchase agreements maintained with certain
customers of the Carlinville National Bank (the "Carlinville Bank"). These
customers invest on a short-term basis, generally overnight, in securities
sold under repurchase agreements by the Carlinville Bank, thus providing a
return on their excess funds. These funds are invested by the Carlinville
Bank in Federal funds sold to match the maturities of the repurchase
agreements, with the Carlinville Bank generally earning approximately 50
basis points on each transaction. As the excess funds of these customers
fluctuate, so too has the Company's overall level of Federal funds sold. This
general relationship has been modified in recent quarters with the
acquisitions of a branch facility in Hillsboro in 1996 (which added
approximately $24.4 million of deposits), Palmer Bank in 1997, and Shipman in
1998, as well as the influx in new deposits discussed below. Such activities
have provided significantly more liquidity for the Company, as has the lack
of more attractive investment options in the currently volatile bond market.
8
<PAGE>
Following is a summary of the average balances and weighted average
interest rates earned or paid on Federal funds sold and securities sold under
repurchase agreements for the first six months of 1999 and 1998:
<TABLE>
<CAPTION>
First Six Months
------------------------------------------------------
1999 1998
-------------------------- -------------------------
Average Average Average Average
Balance Rate Balance Rate
--------- ------ -------- ------
<S> <C> <C> <C> <C>
Federal funds sold $ 14,108,438 4.66% $ 12,956,437 5.47%
Securities sold under
repurchase agreements 6,836,939 4.38% 7,966,972 4.98%
============ ==== ============ ====
</TABLE>
Company management believes this cash management service will continue
at a consistent level, and the levels of additional Federal funds (over and
above the level of securities sold under repurchase agreements) will
eventually be invested in higher yielding loans and investment securities.
The Company experienced a decrease in its cost of funds for the first six
months of 1999, as compared with the first six months of 1998. The average
cost of funds was 4.56% for the first six months of 1999, and 4.88% for the
first six months of 1998. Average interest-bearing deposits for the first six
months of 1999 increased $49,587,373 (31.83%) to $205,398,197 from the level
of $155,810,824 for the first six months of 1998. Average interest-bearing
deposits for the second quarter of 1999 increased $47,643,039 (30.12%) to
$205,819,211 from the level of $158,176,172 for the second quarter of 1998.
Total interest-bearing deposits of Shipman added to the Company's
consolidated deposit base at October 1, 1998 were $37,564,417.
The remaining growth in deposits has resulted from depositors moving from
financial institutions which have been sold or are in process of being sold
to larger, non-locally based financial institutions, as customers are seeking
more personal service than that offered by the larger banking institutions.
The wave of large bank mergers occurring in the Company's market area during
the past several years has provided the Company the opportunity to expand its
deposit base, as many banking customers have found the level of personal
service at the larger non-locally-owned consolidated banks diminished, and
have sought banking relationships with community banks such as the Company's
subsidiary banks. This influx of deposits has occurred even as the Company
has reduced the rates paid on deposits. The Company's increased liquidity has
allowed for the reduction of interest rates paid on deposits during the first
six months of 1999, as well as serving to slow the recently growing
percentage of deposits comprised of higher rate certificates of deposits.
This percentage had been increasing significantly during the past two years;
however, as indicated in the following table, this percentage has actually
decreased for the first six months and second quarter of 1999, when compared
with the corresponding periods of 1998. Following is an analysis of the
change in average deposit composition for the first six months of 1999 and
1998, and the second quarters of 1999 and 1998:
9
<PAGE>
<TABLE>
<CAPTION>
As a Percentage of Average Deposits
First Six Months
-----------------------------------
1999 1998
------ ------
<S> <C> <C>
Noninterest-bearing deposits 9.86% 9.63%
Interest-bearing transaction accounts 15.17 14.58
Savings accounts 13.30 12.79
Certificates of deposit:
$100,000 and over 8.73 10.27
Under $100,000 52.94 52.73
------- -------
100.00% 100.00%
======= =======
<CAPTION>
Second Quarters
-----------------------------------
1999 1998
------ ------
<S> <C> <C>
Noninterest-bearing deposits 9.69% 9.60%
Interest-bearing transaction accounts 15.18 14.39
Savings accounts 13.65 12.77
Certificates of deposit:
$100,000 and over 8.44 10.56
Under $100,000 53.04 52.68
------- -------
100.00% 100.00%
======= =======
</TABLE>
In addition to the interest paid on securities sold under repurchase
agreements, the Company also incurred interest on other short-term borrowings
of $30,218 and $15,194 for the first six months of 1999 and 1998,
respectively, and $18,368 and $7,270 for the second quarters of 1999 and
1998, respectively. These borrowings consist of borrowings under the Federal
Reserve Bank's treasury, tax and loan note option and a short-term line of
credit used by the Company to fund holding company operations. Additionally,
during the first six months of 1997, the Company borrowed $1,750,000 from an
unaffiliated financial institution for approximately three months to
temporarily assist in funding the Palmer Bank acquisition. This short-term
borrowing was repaid from dividends paid by the Carlinville Bank to the
Company in April, 1997.
Long-term borrowings consist of borrowings by Citizens Bank from the
Federal Home Loan Bank in Chicago, which are matched against certain
long-term mortgage loans financed by Citizens Bank for its own portfolio.
Interest expense of $40,495 and $20,364 was incurred on such borrowings
during the first six months and second quarter of 1999, respectively.
10
<PAGE>
The following tables show the condensed average balance sheets for the
periods reported and the percentage of each principal category of assets,
liabilities and stockholders' equity to total assets. Also shown is the average
yield on each category of interest-earning assets and the average rate paid on
each category of interest-bearing liabilities for each of the periods reported.
<TABLE>
<CAPTION>
First Six Months of 1999
----------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
-------- -------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1) (2) (3) $ 153,538,998 57.40% $ 6,619,086 8.69%
Investment securities, at amortized cost:
Taxable 65,737,159 24.57 1,885,954 5.79
Nontaxable (3) 13,398,095 5.01 498,905 7.51
Interest-earning deposits in other
financial institutions 356,908 0.13 14,025 7.92
Federal funds sold 14,108,438 5.28 326,151 4.66
------------- -------- ----------
Total earning assets 247,139,598 92.39 9,344,121 7.62
------------- -------- ---------- ====
Nonearning assets:
Cash and due from banks 6,725,655 2.51
Reserve for possible loan losses (1,524,625) (0.57)
Premises and equipment 3,866,507 1.45
Available-for-sale investment
market valuation 311,826 0.12
Other assets 10,979,016 4.10
------------- --------
Total nonearning assets 20,358,379 7.61
------------- --------
Total assets $ 267,497,977 100.00%
============= ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 34,552,317 12.92% 404,606 2.36%
Savings 30,317,580 11.33 464,498 3.09
Time deposits of $100,000 or more 19,899,452 7.44 517,719 5.25
Other time deposits 120,628,848 45.10 3,248,477 5.43
Securities sold under repurchase
agreements 6,836,939 2.56 148,576 4.38
Other short-term borrowings 1,053,023 0.39 30,218 5.79
Long-term borrowings 1,252,000 0.46 40,495 6.52
------------- -------- ----------
Total interest-bearing liabilities 214,540,159 80.20 4,854,589 4.56
---------- ====
Noninterest-bearing deposits 22,472,685 8.40
Other liabilities 2,811,947 1.05
------------- --------
Total liabilities 239,824,791 89.65
SHAREHOLDERS' EQUITY 27,673,186 10.35
------------- --------
Total liabilities and shareholders' equity $ 267,497,977 100.00%
============= ========
Net interest income/net yield
on earning assets $ 4,489,532 3.66%
=========== ====
</TABLE>
(Continued)
11
<PAGE>
<TABLE>
<CAPTION>
First Six Months of 1998
----------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
-------- -------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1) (2) (3) $ 115,608,864 56.78% $ 5,095,997 8.89%
Investment securities, at amortized cost:
Taxable 47,956,362 23.55 1,443,265 6.07
Nontaxable (3) 12,108,576 5.95 489,750 8.16
Federal funds sold 12,956,437 6.36 351,192 5.47
------------- -------- -----------
Total earning assets 188,630,239 92.64 7,380,204 7.89
------------- -------- ----------- ====
Nonearning assets:
Cash and due from banks 4,958,055 2.44
Reserve for possible loan losses (1,045,284) (0.51)
Premises and equipment 2,373,451 1.17
Available-for-sale investment
market valuation 733,974 0.36
Other assets 7,964,438 3.90
------------- --------
Total nonearning assets 14,984,634 7.36
------------- --------
Total assets $ 203,614,873 100.00%
============= ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 25,146,410 12.35% 328,744 2.64%
Savings 22,056,317 10.83 357,026 3.26
Time deposits of $100,000 or more 17,701,531 8.69 492,547 5.61
Other time deposits 90,906,566 44.65 2,586,831 5.74
Securities sold under repurchase
agreements 7,966,972 3.91 196,680 4.98
Other short-term borrowings 549,924 0.28 15,194 5.57
------------- -------- -----------
Total interest-bearing liabilities 164,327,720 80.71 3,977,022 4.88
------------ ====
Noninterest-bearing deposits 16,602,187 8.15
Other liabilities 1,687,460 0.83
------------- --------
Total liabilities 182,617,367 89.69
SHAREHOLDERS' EQUITY 20,997,506 10.31
------------- --------
Total liabilities and shareholders' equity $ 203,614,873 100.00%
============= ========
Net interest income/net yield
on earning assets $ 3,403,182 3.64%
=========== ====
</TABLE>
(Continued)
12
<PAGE>
<TABLE>
<CAPTION>
Second Quarter of 1999
----------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
-------- -------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1) (2) (3) $ 153,632,351 57.50% $ 3,300,090 8.62%
Investment securities, at amortized cost:
Taxable 67,485,868 25.26 971,040 5.77
Nontaxable (3) 13,871,131 5.19 258,314 7.47
Interest-earning deposits in other
financial institutions 138,997 0.05 2,410 6.95
Federal funds sold 12,039,174 4.51 148,303 4.94
------------- -------- -----------
Total earning assets 247,167,521 92.51 4,680,157 7.59
------------- -------- ----------- ====
Nonearning assets:
Cash and due from banks 6,644,579 2.49
Reserve for possible loan losses (1,441,694) (0.54)
Premises and equipment 3,887,640 1.46
Available-for-sale investment
market valuation 105,697 0.04
Other assets 10,823,355 4.04
------------- --------
Total nonearning assets 20,019,577 7.49
------------- --------
Total assets $ 267,187,098 100.00%
============= ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 34,612,102 12.95% 205,993 2.39%
Savings 31,097,683 11.64 243,486 3.14
Time deposits of $100,000 or more 19,224,803 7.20 248,797 5.19
Other time deposits 120,884,623 45.24 1,621,351 5.38
Securities sold under repurchase
agreements 6,548,595 2.45 69,693 4.27
Other short-term borrowings 1,130,813 0.42 18,368 6.52
Long-term borrowings 1,252,000 0.47 20,364 6.52
------------- -------- -----------
Total interest-bearing liabilities 214,750,619 80.37 2,428,052 4.53
----------- ====
Noninterest-bearing deposits 22,085,170 8.27
Other liabilities 2,665,329 1.00
------------- --------
Total liabilities 239,501,118 89.64
SHAREHOLDERS' EQUITY 27,685,980 10.36
------------- --------
Total liabilities and shareholders' equity $ 267,187,098 100.00%
============= ========
Net interest income/net yield
on earning assets $ 2,252,105 3.65%
=========== ====
</TABLE>
(Continued)
13
<PAGE>
<TABLE>
<CAPTION>
Second Quarter of 1998
----------------------------------------------------------
Percent Interest Average
Average of Total Income/ Yield/
Balance Assets Expense Rate
-------- -------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1) (2) (3) $ 117,807,366 57.12% $ 2,590,280 8.82%
Investment securities, at amortized cost:
Taxable 47,364,928 22.97 710,394 6.02
Nontaxable (3) 12,169,254 5.90 245,747 8.10
Federal funds sold 14,195,143 6.88 198,089 5.60
------------- -------- -----------
Total earning assets 191,536,691 92.87 3,744,510 7.84
------------- -------- ----------- ====
Nonearning assets:
Cash and due from banks 4,891,998 2.37
Reserve for possible loan losses (982,096) (0.48)
Premises and equipment 2,348,140 1.14
Available-for-sale investment
market valuation 636,400 0.31
Other assets 7,814,755 3.79
------------- --------
Total nonearning assets 14,709,197 7.13
------------- --------
Total assets $ 206,245,888 100.00%
============= ========
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts $ 25,183,069 12.21% 160,162 2.55%
Savings 22,350,759 10.84 184,395 3.31
Time deposits of $100,000 or more 18,460,106 8.95 260,666 5.66
Other time deposits 92,182,238 44.70 1,329,383 5.78
Securities sold under repurchase
agreements 7,770,376 3.77 95,827 4.95
Other short-term borrowings 514,435 0.24 7,270 5.67
------------- -------- ----------
Total interest-bearing liabilities 166,460,983 80.71 2,037,703 4.91
---------- ====
Noninterest-bearing deposits 16,792,492 8.14
Other liabilities 1,886,934 0.92
------------- --------
Total liabilities 185,140,409 89.77
SHAREHOLDERS' EQUITY 21,105,479 10.23
------------- --------
Total liabilities and shareholders' equity $ 206,245,888 100.00%
============= ========
Net interest income/net yield
on earning assets $ 1,706,807 3.57%
=========== ====
</TABLE>
- ---------------------
(1) Interest includes loan fees.
(2) Average balances include nonaccrual loans. The income on such loans is
included in interest, but is recognized only upon receipt.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable income
has been adjusted upward by the amount of Federal income tax that would
have been paid if the income would have been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost to carry
nontaxable loans and securities.
14
<PAGE>
The following tables set forth, on a tax-equivalent basis for the
periods indicated, a summary of the changes in interest income and interest
expense resulting from changes in volumes and changes in yields/rates.
<TABLE>
<CAPTION>
FIRST SIX MONTH PERIODS
---------------------------------------------------------------------------------
Amount of Increase (Decrease)
---------------------------------------------------------------------------------
Change From 1998 Change From 1997
to 1999 Due to to 1998 Due to
------------------------------------- -------------------------------------
Volume Yield/ Volume Yield/
(1) Rate (2) Total (1) Rate (2) Total
-------- -------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 1,639,954 $ (116,865) $ 1,523,089 $ 641,020 $ 30,193 $ 671,213
----------- ---------- ----------- --------- --------- ----------
Investment securities:
Taxable 512,146 (69,457) 442,689 (186,229) - (186,229)
Nontaxable 49,894 (40,739) 9,155 (15,389) (23,865) (39,254)
----------- ---------- ----------- --------- --------- ----------
Total interest securities 562,040 (110,196) 451,844 (201,618) (23,865) (225,483)
----------- ---------- ----------- --------- --------- ----------
Interest-earning deposits in
financial institutions 14,025 - 14,025 - - -
Federal funds sold 29,655 (54,696) (25,041) 18,584 19,374 37,958
----------- ---------- ----------- --------- --------- ----------
Total interest income 2,245,674 (281,757) 1,963,917 457,986 25,702 483,688
----------- ---------- ----------- --------- --------- ----------
INTEREST EXPENSE:
Interest bearing transaction
accounts 113,508 (37,646) 75,862 (3,587) (2,752) (6,339)
Savings 126,981 (19,509) 107,472 22,394 19,332 41,726
Time deposits of $100,000
or more 58,263 (33,091) 25,172 135,521 15,873 151,394
Other time deposits 807,719 (146,073) 661,646 97,746 132,092 229,838
----------- ---------- ----------- --------- --------- ----------
Total deposits 1,106,471 (236,319) 870,152 252,074 164,545 416,619
Securities sold under
repurchase agreements (26,010) (22,094) (48,104) (20,563) 14,631 (5,932)
Other short-term borrowings 14,402 622 15,024 (37,241) 4,815 (32,426)
Long-term borrowings 40,495 - 40,495 - - -
----------- ---------- ----------- --------- --------- ----------
Total interest expense 1,135,358 (257,791) 877,567 194,270 183,991 378,261
----------- ---------- ----------- --------- --------- ----------
Net interest income $ 1,110,316 $ (23,966) $ 1,086,350 $ 263,716 $(158,289) $ 105,427
=========== =========== =========== ========= ========= ==========
</TABLE>
(Continued)
15
<PAGE>
<TABLE>
<CAPTION>
SECOND QUARTER PERIODS
---------------------------------------------------------------------------------
Amount of Increase (Decrease)
---------------------------------------------------------------------------------
Change From 1998 Change From 1997
to 1999 Due to to 1998 Due to
------------------------------------- -------------------------------------
Volume Yield/ Volume Yield/
(1) Rate (2) Total (1) Rate (2) Total
-------- -------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 769,886 $ (60,076) $ 709,810 $ 276,296 $ (42,781) $ 233,515
----------- ---------- ----------- --------- --------- ----------
Investment securities:
Taxable 291,221 (30,575) 260,646 (92,043) (42,646) (134,689)
Nontaxable 32,642 (20,075) 12,567 (2,010) (20,160) (22,170)
----------- ---------- ----------- --------- --------- ----------
Total interest securities 323,863 (50,650) 273,213 (94,053) (62,806) (156,859)
----------- ---------- ----------- --------- --------- ----------
Interest-earning deposits in
financial institutions 2,410 - 2,410 - - -
Federal funds sold (28,033) (21,753) (49,786) 38,647 28,261 66,908
----------- ---------- ----------- --------- --------- ----------
Total interest income 1,068,126 (132,479) 935,647 220,890 (77,326) 143,564
----------- ---------- ----------- --------- --------- ----------
INTEREST EXPENSE:
Interest bearing transaction
accounts 56,461 (10,630) 45,831 (748) (16,336) (17,084)
Savings 68,984 (9,893) 59,091 8,189 14,855 23,044
Time deposits of $100,000
or more 10,448 (22,317) (11,869) 75,207 10,315 85,522
Other time deposits 389,301 (97,333) 291,968 34,788 69,672 104,460
----------- ---------- ----------- --------- --------- ----------
Total deposits 525,194 (140,173) 385,021 117,436 78,506 195,942
Securities sold under
repurchase agreements (13,948) (12,186) (26,134) (8,443) (2,283) (10,726)
Other short-term borrowings 9,864 1,234 11,098 (8,815) (1,528) (10,343)
Long-term borrowings 20,364 - 20,364 - - -
----------- ---------- ----------- --------- --------- ----------
Total interest expense 541,474 (151,125) 390,349 100,178 74,695 174,873
----------- ---------- ----------- --------- --------- ----------
Net interest income $ 526,652 $ 18,646 $ 545,298 $ 120,712 $(152,021) $ (31,309)
=========== ========== =========== ========= ========= ==========
</TABLE>
- --------------------------------
(1) Change in volume multiplied by yield/rate of prior year.
(2) Change in yield/rate multiplied by volume of prior year.
NOTE: The change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
16
<PAGE>
PROVISION FOR POSSIBLE LOAN LOSSES
A significant determinant of the Company's operating results is the level
of loan losses and the provision for possible loan losses charged to operations.
During the first six months of 1999, the Company recorded a provision for
possible loan losses of $330,000, with $285,000 of this amount recorded in the
second quarter of 1999. The Company recorded a provision of $210,000 and
$180,000 during the first six months and second quarter of 1998, respectively.
Following is a summary of the activity in the Company's reserve for possible
loan losses for the first six months of 1999 and 1998, and the second quarters
of 1999 and 1998:
<TABLE>
<CAPTION>
First Six Months Second Quarter
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 1,641,212 $ 1,098,038 $ 1,493,474 $ 1,056,181
Provision for possible loan losses
charged to operations 330,000 210,000 285,000 180,000
Charge-offs during period (705,812) (457,494) (493,365) (361,634)
Recoveries during period 60,413 64,826 40,704 40,823
------------ ------------ ------------ ------------
Balance at end of period $ 1,325,813 $ 915,370 $ 1,325,813 $ 915,370
============ ============ ============ ============
</TABLE>
In determining an adequate balance in the reserve for possible loan losses,
management places its emphasis as follows: evaluation of the loan portfolio with
regard to potential future exposure on loans to specific customers and
industries, including a formal internal loan review function; re-evaluation of
each nonperforming loan or loan classified by supervisory authorities; and an
overall review of the remaining portfolio in light of past loan loss experience.
Any problems or loss exposure estimated in these categories, after considering
the underlying collateral values securing such loans, was provided for in the
total current period reserve.
During the first six months of 1999, the Company incurred $705,812 of
loan charge-offs, with $154,701 at the Carlinville Bank, $208,163 at Citizens
Bank, and $342,948 at Palmer Bank. The charge-offs at the Carlinville Bank
and Citizens Bank were comprised of previously identified problem loans for
which collection efforts have largely been exhausted. At Palmer Bank, the
Company continues to experience problems with loans that had been made prior
to the Company's acquisition of the Bank in 1997. Company management
continues to monitor the problem loans at Palmer Bank and believes that an
adequate reserve for possible loan losses has been established to cover all
known and expected losses in that Bank's portfolio, based on the composition
of the portfolio and the collateral values available. When the Company
acquired Palmer Bank on January 24, 1997 the Bank was undercapitalized, due
primarily to a significant level of problem loans in the Palmer Bank
portfolio made prior to the Company's acquisition. Prior to the acquisition,
Palmer Bank increased its reserve for possible loan losses to $1,183,535 or
5.18% of the net outstanding loans in the portfolio on the acquisition date.
In the ensuing months, as Company and Palmer Bank management began to work
through these problem loans, $968,372 of charge-offs were recorded at Palmer
Bank, with $115,275 of recoveries received, for the year ended December 31,
1997. The level of nonaccrual loans at Palmer Bank at December 31, 1997 was
$545,949, compared with $1,494,585 on the acquisition date. Nonaccrual loans
at Palmer Bank at June 30, 1999 and 1998 were $787,000 and $283,000,
respectively.
17
<PAGE>
The reserve for possible loan losses at June 30, 1999 was 0.85% of net
outstanding loans. Nonperforming loans totaled approximately $2,276,000 at
June 30, 1999, resulting in a reserve coverage of nonperforming loans of
58.25%. Total nonperforming loans at December 31, 1998 totaled $1,772,786,
with a reserve coverage on that date of 92.58%. Company management believes
the reserve for possible loan losses allocated for such loans is adequate
when the underlying collateral values on such credits are considered.
The Company had no loans to any foreign countries at June 30, 1999, nor
did it have any concentration of loans to any industry, other than the
agricultural industry on June 30, 1999. The Company has also refrained from
financing speculative transactions such as highly leveraged corporate
buyouts. Additionally, the Company had no other interest-earning assets which
were considered to be risk element assets at June 30, 1999.
At June 30, 1999, the Company had loans outstanding to the agricultural
sector of approximately $49,562,000, which comprised 31.88% of the Company's
total loan portfolio. Additionally, the Company's direct financing leases
involve agricultural equipment which is being leased to local farmers. The
Company's agricultural credits are concentrated in Macoupin, Montgomery,
Christian and Sangamon counties in central Illinois, and are generally
fully-secured with either growing crops, farmland, livestock, and/or
machinery and equipment. Additionally, the Company's lending personnel work
with their agricultural borrowers to monitor cash flow capabilities.
NONINTEREST INCOME
Total noninterest income for the first six months of 1999 decreased
$103,420 (11.36%) to $806,957 from the $910,377 recorded for the first six
months of 1998. Total noninterest income for the second quarter of 1999
decreased $126,197 (25.62%) to $366,419 from the $492,616 recorded for the
second quarter of 1998. The decreases in noninterest income in the first six
months and second quarter of 1999 were primarily the result of security sales
occurring during the first and second quarter of 1998. Net security gains
totaled $308,854 and $173,426 for the first six months and second quarter of
1998, respectively. During the first six months of 1999, the Company did not
sell any securities, and recorded gains on securities with early calls of
$29,978. During the first quarter of 1998, the Company recorded gains on
securities with early calls of $1,000, and $134,428 on the partial sale of a
mutual fund investment. In late 1995 and throughout 1996, the Company
invested a total of $1,000,000 in a mutual fund comprised of regional bank
stocks. With the banking consolidation and strong market performance by
regional banks occurring during the past few years, this fund appreciated
significantly. By year-end 1996, the fund had appreciated to $1,215,719. By
June 1997, the fund had appreciated further to $1,446,915, and shortly
thereafter, the Company sold a portion of the fund to invest $450,000 in a
similar fund, recording a gain of $170,483 in the process. During the first
quarter of 1998, the Company sold $330,000 of the fund investment and
injected the proceeds into Palmer Bank to increase its capital, recording a
$134,428 gain on the sale. In the second quarter of 1998, the Company sold an
additional $375,000 of the funds, again injecting the proceeds into Palmer
Bank to increase its capital, recording a gain of $169,614. The regional bank
stock mutual fund investments are included in the Company's
available-for-sale securities and, at June 30, 1999, had a fair value and
amortized cost of $1,184,271 and $862,055, respectively.
18
<PAGE>
Excluding the effects of security sale and call gains, the Company's
total noninterest income actually increased $175,456 and $47,229 in the first
six months and second quarter of 1999, respectively, as compared with the
corresponding periods of 1998. The primary reason for this increase was the
acquisition of Shipman on October 1, 1998. This acquisition was accounted for
as a purchase and thus, the operations of Shipman have been included in 1999
operations, but are excluded from the consolidated income statement for the
first six months of 1998. Total noninterest income for Shipman for the first
six months and second quarter of 1999 includes the following components:
<TABLE>
<CAPTION>
First Six Second
Months of Quarter
1999 1999
----------- ---------
<S> <C> <C>
Service charge on deposits $ 73,895 $ 39,117
Mortgage banking revenue 53,719 17,249
Other noninterest income 60,014 21,328
---------- ----------
$ 187,628 $ 77,694
========== ==========
</TABLE>
NONINTEREST EXPENSE
Noninterest expense for the first six months of 1999 increased $1,141,036
(46.76%) to $3,581,053 from the $2,440,017 recorded for the first six months of
1998. Noninterest expense for the second quarter of 1999 increased $613,085
(49.34%) to $1,855,782 from the $1,242,697 recorded for the second quarter of
1998. Of these increases in noninterest expenses, $732,646 for the first six
months of 1999 and $360,244 for the second quarter of 1999 were attributable to
Shipman, which had the following noninterest expense components for these
periods:
<TABLE>
<CAPTION>
First Six Second
Months of Quarter
1999 1999
----------- ---------
<S> <C> <C>
Salaries and employee benefits $ 355,860 179,201
Occupancy and equipment expense 99,625 51,029
Legal and professional fees 6,932 5,058
Postage, printing and supplies 31,111 13,849
Amortization of intangible assets 61,261 30,623
Other noninterest expense 177,857 80,484
---------- ----------
$ 732,646 360,244
========== ==========
</TABLE>
Excluding Shipman's noninterest expenses, the Company's noninterest
expenses for the first six months and second quarter of 1999 increased
$408,390 and $252,841, respectively, when compared with the corresponding
periods of 1998. Salaries and employee benefits increased $159,897 and
$100,550 during the first six months and second quarter of 1999,
respectively, over the expenses incurred in the corresponding periods for
1998, due primarily to normal merit increases. Occupancy and equipment
expenses increased $122,648 and $62,753 during the first six months and
second quarter of 1999, respectively, over the expenses incurred in the
corresponding periods for 1998, due to the increased equipment purchased in
1998 to convert all of the Banks to a new in-house computer system. Legal and
professional fees increased $44,949 and $26,573 during the first six months
and second quarter of 1999, respectively, over the expenses incurred in the
corresponding periods of 1998, due to costs incurred in consolidating the
activities of the Company's acquisitions.
19
<PAGE>
INCOME TAXES
Applicable income taxes for the first six months of 1999 decreased
$22,125 (5.55%) to $376,729 from the $398,854 recorded for the first six
months of 1998. The effective tax rates for the first six months of 1999 and
1998 were 30.78% and 26.70%, respectively. Applicable income taxes for the
second quarter of 1999 decreased $40,401 (23.38%) to $132,371 from the
$172,772 recorded for the second quarter of 1998. The effective tax rates for
the second quarters of 1999 and 1998 were 33.83% and 25.11%, respectively.
The changes in the levels of effective tax rates related primarily to the
level of state tax-exempt U.S. agency securities on hand and the interest
earned on the securities for the particular periods.
FINANCIAL CONDITION
The Company's total assets decreased $3,845,847 (1.45%) to $262,209,432
at June 30, 1999, from $266,055,279 at December 31, 1998. This decrease was
due primarily to a reduction of noninterest-bearing deposits of $4,242,733.
Total deposits decreased $3,875,359 (1.69%) to $226,050,577 at June 30,
1999 from $229,925,936 at December 31, 1998. Total deposits at December 31,
1998 included a high level of public funds (particularly from Macoupin
County), and an increased deposit level resulting from the timing of social
security deposits. These social security deposits are normally paid on the
third day of each month; however, when the third day is a nonbusiness day (as
was January 3, 1999), the payments revert back to the previous business day,
which in this case was December 31, 1998.
Short-term borrowings increased $1,201,580 (26.71%) to $5,700,997 at
June 30, 1999 from $4,499,417 at December 31, 1998. These balances tend to
have significant fluctuations depending upon the cash levels of the customers
which use the cash management facilities of the Carlinville Bank through the
purchase of securities under repurchase agreements. The level of Federal
funds sold generally tracks with the level of securities sold under
repurchase agreements; however, Federal funds sold actually decreased
$8,312,000 (51.96%) at June 30, 1999 to $7,685,000 from $15,997,000 at
December 31, 1998. Federal funds sold levels were inflated at December 31,
1998 by the increased level of deposits resulting from the timing of social
security deposits. Additionally, excess Federal funds were used to fund loan
growth and additional investment security purchases.
Investment securities increased $6,976,516 (9.43%) to $80,962,743 at
June 30, 1999 from $73,986,227 at December 31, 1998. Proceeds from maturities
and calls of and principal payments on debt securities were $13,152,714 for
the first six months of 1999, while new investments purchased in the first
six months of 1999 totaled $21,961,925. The total fair value of the Company's
investment portfolio at June 30, 1999 was approximately $80,732,000, or
98.45% of the portfolio's book value on that date. The market valuation of
the Company's investment securities portfolio at December 31, 1998 was 100.5%
of the portfolio's book value. The Company experienced a decline in the fair
value of its available-for-sale securities during the first six months and
second quarter of 1999, as the market valuations for such securities during
these periods declined $1,747,467 and $1,293,445, respectively, resulting
from a shift in the volatile
20
<PAGE>
bond market. The majority of this market decline occurred near the end of the
second quarter with speculation as to the Federal Reserve's expected increase
in interest rates (which occurred on June 30, 1999). This decline also
affects accumulated other comprehensive income, as the net decline in market
valuation of available-for-sale securities is included, net of related tax,
in accumulated other comprehensive income within the Company's stockholders'
equity.
Total loans increased $2,288,418 (1.49%) to $155,468,487 at June 30,
1999 from $153,180,069 at December 31, 1998. Given the Company's
concentration of agricultural loans, the level of agricultural production
loans generally increases throughout the year, until crops and livestock are
sold late in the year.
The Company's capitalization remained at a strong level at June 30,
1999. Total capital was $26,864,429 or 10.25% of total assets at June 30,
1999, as compared with 10.43% at December 31, 1998. The reduction in the
percentage of capital to total assets resulted primarily from the reduction
in accumulated other comprehensive income due to the decline in the valuation
of available-for-sale investment securities.
The Federal Reserve Board has established risk-based capital guidelines
for bank holding companies, which require bank holding companies to maintain
minimum levels of "Tier 1 Capital" and "Total Capital." Tier 1 Capital
consists of common and qualifying preferred stockholders' equity and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
50% of investments in unconsolidated subsidiaries. Total Capital consists of,
in addition to Tier 1 Capital, mandatory convertible debt, preferred stock
not qualifying as Tier 1 Capital, subordinated and other qualifying term debt
and a portion of the reserve for possible loan losses, less the remaining 50%
of qualifying total capital. Risk-based capital ratios are calculated with
reference to risk-weighted assets, which include both on-and off-balance
sheet exposures. The minimum required ratio for qualifying Total Capital is
8%, of which at least 4% must consist of Tier 1 Capital.
In addition, Federal Reserve Board guidelines require bank holding
companies to maintain a minimum ratio of Tier 1 Capital to average total
assets (net of goodwill) of 3.0%. The Federal Reserve Board guidelines state
that all of these capital ratios constitute the minimum requirements for the
most highly-rated banking organizations, and other banking organizations are
expected to maintain capital at higher levels.
As of June 30, 1999, the Company and each of its banking subsidiaries
were in compliance with the Tier 1 Capital ratio requirement and all other
applicable regulatory capital requirements, as calculated in accordance with
risk-based capital guidelines. The Company's Tier 1, Total Capital and
Leverage Ratios were 13.27%, 14.14% and 8.73%, respectively, at June 30, 1999.
21
<PAGE>
Federal law provides the Federal banking regulators with broad power to
take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or ""critically
undercapitalized," which are defined by the regulators as follows:
<TABLE>
<CAPTION>
Minimum Capital Ratios
------------------------------------------------------
Total Tier 1
Risk-Based Risk-Based Leverage
Ratio Ratio Ratio
------------ ------------ ----------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8 4 4
Undercapitalized less than 8 less than 4 less than 4
Significantly undercapitalized less than 6 less than 3 less than 3
Critically undercapitalized * * *
</TABLE>
* A critically undercapitalized institution is defined as having a
tangible equity to total assets ratio of 2% or less
Depending upon the capital category to which an institution is assigned,
the regulators' corrective powers include: requiring the submission of a
capital restoration plan; placing limits on asset growth and restrictions on
activities; requiring the institution to issue additional capital stock
(including additional voting stock) or to be acquired; restricting
transactions with affiliates; restricting the interest rate the institution
may pay on deposits; ordering a new election of directors of the institution;
requiring that senior executive officers or directors be dismissed;
prohibiting the institution from accepting deposits from correspondent banks;
requiring the institution to divest certain subsidiaries; prohibiting the
payment of principal or interest on subordinated debt; and ultimately,
appointing a receiver of the institution. The capital category of an
institution also determines in part the amount of the premiums assessed
against the institution for FDIC insurance. At June 30, 1999, each of the
Company's banking subsidiaries were considered "well capitalized."
LIQUIDITY AND RATE SENSITIVITY
Management of rate-sensitive earning assets and interest-bearing
liabilities remains a key to the Company's profitability. Management's
objective is to produce the optimal yield and maturity mix consistent with
interest rate expectations and projected liquidity needs.
Liquidity is a measurement of the Company's ability to meet the
borrowing needs and the deposit withdrawal requirements of its customers. The
composition of assets and liabilities is actively managed to maintain the
appropriate level of liquidity in the balance sheet. Management is guided by
regularly-reviewed policies when determining the appropriate portion of total
assets which should be comprised of readily-marketable assets available to
meet conditions that are reasonably expected to occur.
Liquidity is primarily provided to the Company through earning assets,
including Federal funds sold and maturities and principal payments in the
investment portfolio, all funded through continued deposit growth. Secondary
sources of liquidity available to the Company include the sale of securities
included in the available-for-sale category (with a carrying value of
$70,670,538
22
<PAGE>
at June 30, 1999), and borrowing capabilities through the Federal Reserve
Bank's seasonal borrowing privilege of $4.1 million maintained at the
Carlinville Bank. Additionally, maturing loans also provide liquidity on an
ongoing basis. Accordingly, the Company believes it has the liquidity
necessary to meet unexpected deposit withdrawal requirements or increases in
loan demand. The Company also maintains a short-term line of credit with an
unaffiliated financial institution of $2,500,000, of which $1,685,000 was
available at June 30, 1999.
Each of the Company's banking subsidiaries controls its own
asset/liability mix within the constraints of its individual policies and
loan and deposit structure, with overall guidance from the Company.
The asset/liability management process, which involves structuring the
consolidated balance sheet to allow approximately equal amounts of assets and
liabilities to reprice at the same time, is a dynamic process essential to
minimizing the effect of fluctuating interest rates on net interest income.
The following table reflects the Company's consolidated interest rate gap
(rate-sensitive assets minus rate-sensitive liabilities) analysis as of June
30, 1999, individually and cumulatively, through various time horizons (in
thousands of dollars):
<TABLE>
<CAPTION>
Remaining Maturity if Fixed Rate;
Earliest Possible Repricing Interval if Floating Rate
-------------------------------------------------------------
3 Over 3 Over 1
months months year
or through through Over 5
less 12 months 5 years years Total
---------- --------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 42,365 $ 35,353 $ 73,149 $ 4,601 $ 155,468
Investment securities 4,193 5,576 34,214 36,980 80,963
Other interest-earning assets 7,847 - - - 7,847
--------- ---------- --------- -------- ---------
Total interest-earnings assets $ 54,405 $ 40,929 $ 107,363 $ 41,581 $ 244,278
========= ========== ========= ======== =========
Interest-bearing liabilities:
Savings, and interest bearing
transaction accounts $ 65,759 $ - $ - $ - $ 65,759
Time certificates of deposit of
$100,000 or more 7,737 6,722 4,757 - 19,216
All other time deposits 23,781 56,291 40,308 - 120,380
Nondeposit interest-bearing
liabilities 5,701 62 295 895 6,953
--------- ---------- --------- -------- ---------
Total interest-bearing
liabilities $ 102,978 $ 63,075 $ 45,360 $ 895 $ 212,308
========= ========== ========= ======== =========
Gap by period $ (48,573) $ (22,146) $ 62,003 $ 40,686 $ 31,970
========= ========== ========= ======== =========
Cumulative gap $ (48,573) $ (70,719) $ (8,716) $ 31,970 $ 31,970
========= ========== ========= ======== =========
Ratio of interest-sensitive
assets to interest-sensitive
liabilities 0.53x 0.65x 2.37x 46.46x 1.15x
========= ========== ========= ======== =========
Cumulative ratio of interest-
sensitive assets to interest-
sensitive liabilities 0.53x 0.57x 0.96x 1.15x 1.15x
========= ========== ========= ======== =========
</TABLE>
23
<PAGE>
As indicated in this table, the Company operates on a short-term basis
similar to most other financial institutions, as its liabilities, with
savings and interest-bearing transaction accounts included, could reprice
more quickly than its assets. However, the process of asset/liability
management in a financial institution is dynamic. Company management believes
its current asset/liability management program will allow adequate reaction
time for trends in the marketplace as they occur, allowing maintenance of
adequate net interest margins. Additionally, the Company's historical
analysis of customer savings and interest-bearing transaction accounts
indicates that such deposits have certain "core deposit" characteristics and
are not as susceptible to changes in the marketplace.
YEAR 2000 COMPLIANCE
The Company utilizes and is dependent upon data processing hardware
systems and banking application software to conduct its business. The data
processing hardware systems and banking application software include those
developed and maintained by the Company's data processing hardware providers
and purchased banking application software which is run on in-house computer
networks. The Year 2000 has posed a unique set of challenges to those
industries reliant on information technology. As a result of methods employed
by early programmers, many software applications and operational programs may
be unable to distinguish the Year 2000 from the Year 1900. If not effectively
addressed, this problem could result in the production of inaccurate data, or
in the worst cases, the inability of the systems to continue to function
altogether. Financial institutions are particularly vulnerable due to the
industry's dependence on electronic data processing systems. In 1997, the
Company started the process of identifying the hardware and software issues
required to be addressed to assure Year 2000 compliance. The Company began by
assessing the issues related to the Year 2000 and the potential for those
issues to adversely affect the Company's operations and those of its
subsidiaries.
Since that time, the Company has established a Year 2000 management
committee to deal with this issue. The management committee meets with and
utilizes various representatives from key areas throughout the organization
to aid in analysis and testing. It is the mission of this committee to
identify areas subject to complications related to the Year 2000 and to
initiate remedial measures designed to eliminate any adverse effects on the
Company's operations. The committee has identified all mission-critical
software and hardware that may be adversely affected by the Year 2000 and has
required vendors to represent that the systems and products provided are or
will be Year 2000 compliant.
The Company licenses all software used in conducting its business from
third party vendors. None of the Company's software has been internally
developed. The Company has developed a comprehensive list of all software,
all hardware and all service providers used by the Company. Every vendor has
been contacted regarding the Year 2000 issue, and the Company continues to
closely track the progress each vendor is making in resolving the problems
associated with the issue. The Company's vendor of primary software
(Information Technologies, Inc. (ITI)) has maintained that its products have
been Year 2000 compliant since their inception. Nevertheless, testing
standards were formulated and comprehensive testing was successfully
performed on the ITI software in the fourth quarter of 1998. In addition, the
Company continues to monitor all other major vendors of services to the
Company for Year 2000 issues in order to avoid shortages of supplies and
services in the coming months. The Company has not had any material delay
regarding its information systems projects as a result of the Year 2000
project.
24
<PAGE>
The Company's main commercial banking relationship is with United
Missouri Bank in St. Louis (UMB). UMB correspondence indicates substantial
progress with Year 2000 readiness.
There are several third party utilities with which the Company has an
important relationship, i.e., PNG Communications (phone service), and
Illinois Power (electricity and natural gas). The Company has not identified
any practical, long-term alternatives to relying on these companies for basic
utility services. In the event that the utilities significantly curtailed or
interrupted their services to the Company, it would have a significant
adverse effect on the Company's ability to conduct its business.
The Company is also in the process of testing such things as vault
doors, alarm systems, networks, etc. and is not aware of any significant
problems with such systems.
The Company decided to consolidate computer processing among its three
banks and benefit from economies of scale and from savings derived through
conversion to check imaging. In the process, Year 2000 testing on new
equipment was actually simplified. Costs specific to Year 2000 remediation
and testing are therefore not anticipated to be material. At the present
time, no situations that will require material cost expenditures to become
fully compliant have been identified. However, the Year 2000 problem is
pervasive and complex and can potentially affect any computer process.
Accordingly, no assurance can be given that Year 2000 compliance can be
achieved without additional unanticipated expenditures and uncertainties that
might affect future financial results.
It is not possible at this time to quantify the estimated future costs
due to possible business disruption caused by vendors, suppliers, customers,
and even the possible loss of electric power or phone service; however, such
costs could be substantial.
The Company is committed to a plan for achieving compliance, focusing
not only on its own data processing systems, but also on its loan customers.
The management committee has taken steps to educate and assist its customers
with identifying their Year 2000 compliance problems. In addition, the
management committee has proposed policy and procedure changes to help
identify potential risks to the Company and to gain an understanding of how
customers are managing the risks associated with the Year 2000. The Company
is assessing the impact, if any, the Year 2000 will have on its credit risk
and loan underwriting. In connection with potential credit risk related to
the Year 2000 issue, the Company has contacted its large commercial loan
customers regarding their level of preparedness for the Year 2000.
The Company has developed contingency plans for various Year 2000
problems and continues to revise those plans based on testing results and
vendor notifications.
ACCOUNTING PRONOUNCEMENTS
Certain accounting rule changes which will or have gone into effect
recently, as promulgated by the Financial Accounting Standards Board (FASB),
will have an effect on the Company's financial reporting process. These
accounting rule changes, issued in the form of Financial Accounting Standards
(FAS) include the following:
25
<PAGE>
- FAS 133 - In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (FAS 133), which
establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other
contracts, and for hedging activities. FAS 133 defines a derivative
instrument as a financial instrument or other contract with all three
of the following characteristics:
a. It has (1) one or more underlyings and (2) one or more notional
amounts or payment provisions or both. These terms determine the
amount of the settlement or settlements and, in some cases,
whether or not a settlement is required. An underlying is a
specified interest rate, security price, commodity price, foreign
exchange rate, index of prices or rates, or other variable. An
underlying may be a price or rate of an asset or liability but is
not the asset or liability itself. A notional amount is a number
of currency units specified in the contract. The settlement of a
derivative instrument with a notional amount is determined by
interaction of that notional amount with the underlying. A
payment provision specifies a fixed or determinable settlement to
be made if the underlying behaves in a specified manner.
b. It requires no initial net investment or an initial net
investment than would be required for other types of contracts
that would be expected to have a similar response to changes in
market factors.
c. Its terms require or permit net settlement, it can readily be
settled by a means outside the contract, or it provides for
delivery of an asset that puts the recipient in a position not
substantially different than net settlement.
FAS 133 requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those
instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable
cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.
The accounting for changes in the fair value of a derivative (that is,
the gains and losses) depends on the intended use of the derivative and
the resulting designation. The Company and Banks have not engaged in
any hedging activities during the three months ended March 31, 1999 and
1998. For a derivative not designated as a hedging instrument, the gain
or loss is recognized in earnings in the period of change.
FAS 133 was originally supposed to be effective for all fiscal quarters
of fiscal years beginning after June 15, 1999; however, the FASB has
deferred this effective date for an additional year. Company management
believes the implementation of FAS 133 will not have a material impact
on the Company's consolidated financial position, results of
operations, or liquidity. At June 30, 1999, the only financial
instruments meeting the
26
<PAGE>
above definition of a derivative instrument are fixed rate loan
commitments and standby letters of credit. The fair values of
commitments to extend credit and standby letters of credit are
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements,
the likelihood of the counterparties drawing on such financial
instruments, and the present credit worthiness of such counterparties.
The Company believes such commitments have been made on terms which are
competitive in the markets in which it operates and are relatively
short-term in nature; however, no premium or discount is offered
thereon and, accordingly, the Company has not assigned a value to such
instruments.
EFFECTS OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of a bank holding company is
substantially different from that of an industrial company, in that virtually
all assets and liabilities of a bank holding company are monetary in nature.
Accordingly, changes in interest rates may have a significant impact on a
banking holding company's performance. Interest rates do not necessarily move
in the same direction, or in the same magnitude, as the prices of other goods
and services.
Inflation, however, does have an important impact on the growth of total
assets in the banking industry, often resulting in a need to increase equity
capital at higher than normal rates to maintain an appropriate
equity-to-assets ratio. One of the most important effects that inflation has
had on the banking industry has been to reduce the proportion of earnings
paid out in the form of dividends.
Although it is obvious that inflation affects the growth of total
assets, it is difficult to measure the impact precisely. Only new assets
acquired each year are directly affected, so a simple adjustment of asset
totals by use of an inflation index is not meaningful. The results of
operations also have been affected by inflation, but again, there is no
simple way to measure the effect on the various categories of income and
expense.
Interest rates in particular are significantly affected by inflation,
but neither the timing nor the magnitude of the changes coincide with changes
in the consumer price index. Additionally, changes in interest rates on some
types of consumer deposits may be delayed. These factors, in turn, affect the
composition of sources of funds by reducing the growth of deposits that are
less interest-sensitive, and increasing the need for funds that are more
interest-sensitive.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward-looking statements within the
meaning of Section 17A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends
such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in the Private Securities Reform Act
of 1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies
27
<PAGE>
and expectations of the Company, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project" or similar
expressions. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse affect on the operations and future prospects of the Company
and the subsidiaries include, but are not limited to, changes in: interest
rates, general economic conditions, legislative/regulatory changes, monetary and
fiscal policies of the U.S. Government, including policies of the U.S. Treasury
and the Federal Reserve Board, the quality or composition of the loan or
investment portfolios, demand for loan products, deposit flows, competition,
demand for financial services in the Company's market area and accounting
principles, policies and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements.
Further information concerning the Company and its business, including
additional factors that could materially affect the Company's financial
results, is included in the Company's filings with the Securities and
Exchange Commission.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party other than ordinary routine litigation incidental to
their respective businesses.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 27, 1999, the annual meeting of stockholders was held. At the meeting
James T. Ashworth, Judith E. Baker, Roger Capps, Shawn Davis, James H. Frank,
Joel L. Russell, Nancy L. Ruyle, Fred Smith, Jr. And Richard C. Walden were
elected to serve as directors with terms expiring in 2000.
There were 247,458 issued and outstanding shares of Common Stock at the time of
the annual meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27. Financial Data Schedule
Reports on Form 8-K
None
28
<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 thereunto duly authorized.
CARLINVILLE NATIONAL BANK SHARES, INC.
(Registrant)
/s/ James T. Ashworth
-----------------------------------------------
James T. Ashworth
President and Principal Executive, Financial and
Accounting Officer
Date: August 13, 1999
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFO EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET OF CARLINVILLE NATIONAL BANK SHARES, INC. AND SUBSIDIARIES AS OF
6-30-99 AND THE CONSOLIDATED STMTS OF INCOME AND COMPREHENSIVE INCOME,
STOCKHOLDER'S EQUITY, AND CASH FLOWS FOR THE 3 AND 6 MOS ENDED JUNE 30, 1999 AND
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,653,529
<INT-BEARING-DEPOSITS> 161,689
<FED-FUNDS-SOLD> 7,685,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,670,538
<INVESTMENTS-CARRYING> 10,292,205
<INVESTMENTS-MARKET> 10,061,000
<LOANS> 155,468,487
<ALLOWANCE> 1,325,813
<TOTAL-ASSETS> 262,209,432
<DEPOSITS> 226,050,577
<SHORT-TERM> 5,700,997
<LIABILITIES-OTHER> 2,341,429
<LONG-TERM> 1,252,000
0
0
<COMMON> 262,710
<OTHER-SE> 26,601,719
<TOTAL-LIABILITIES-AND-EQUITY> 262,209,432
<INTEREST-LOAN> 6,593,599
<INTEREST-INVEST> 2,248,760
<INTEREST-OTHER> 340,176
<INTEREST-TOTAL> 9,182,535
<INTEREST-DEPOSIT> 4,635,300
<INTEREST-EXPENSE> 4,854,589
<INTEREST-INCOME-NET> 4,327,946
<LOAN-LOSSES> 330,000
<SECURITIES-GAINS> 29,978
<EXPENSE-OTHER> 3,581,053
<INCOME-PRETAX> 1,223,850
<INCOME-PRE-EXTRAORDINARY> 847,121
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 847,121
<EPS-BASIC> 3.41
<EPS-DILUTED> 3.41
<YIELD-ACTUAL> 7.59
<LOANS-NON> 2,168,000
<LOANS-PAST> 108,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 15,145,000
<ALLOWANCE-OPEN> 1,641,212
<CHARGE-OFFS> 705,812
<RECOVERIES> 60,413
<ALLOWANCE-CLOSE> 1,325,813
<ALLOWANCE-DOMESTIC> 1,225,813
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 100,000
</TABLE>
