UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
Commission File Number: 33-90342
CENTRAL ILLINOIS FINANCIAL CO., INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 37-1338484
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
100 WEST UNIVERSITY, CHAMPAIGN, ILLINOIS 61820
(Address of principal executive offices) (Zip Code)
(217) 351-6500
(Registrant's telephone number, including area code)
Indicate by "X" whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Indicate the number of shares outstanding of the registrant's common stock, as
of August 1, 1996:
Central Illinois Financial Co.,
Inc. Common Stock 4,930,654
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TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited, dollars in thousands, except per share data)
<S> <C> <C>
Jun. 30, Dec. 31,
1996 1995
ASSETS
Cash and due from banks $24,060 $26,900
Federal funds sold 16,500 53,800
Debt and equity securities:
Available-for-sale 105,930 75,874
Held-to-maturity (approximate market value of
$17,962 at June 30, 1996 and $21,528 at
December 31, 1995) 17,988 21,430
Mortgage loans held-for-sale 9,876 9,421
Loans, net of allowance for loan
losses of $5,620 and $5,882 at June 30, 1996
and December 31, 1995, respectively 286,817 311,519
Premises and equipment 10,847 10,992
Accrued interest receivable 4,690 4,443
Other assets 6,424 6,207
Total assets $483,132 $520,586
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing demand deposits 57,808 66,693
Interest bearing demand deposits 117,136 107,363
Savings 21,020 23,997
Time deposits $100 and over 28,405 42,839
Other time 158,404 178,265
Total deposits 382,773 419,157
Federal funds purchased and securities sold
under repurchase agreements 35,868 36,273
Federal Home Loan Bank advances 9,000 9,000
Accrued interest payable 1,460 1,964
Other liabilities 4,939 5,784
Total liabilities 434,040 472,178
Stockholders' equity:
Common stock, $0.01 par value; 6,500,000 shares authorized:
4,930,654 shares issued and outstanding 50 50
Paid in capital 19,063 19,066
Retained earnings 31,279 29,180
Net unrealized gain (loss) on securities
available-for-sale (926) 112
49,466 48,408
Treasury Stock, at cost, 28,237 shares in 1996 (374) 0
Total stockholders' equity 49,092 48,408
Total liabilities and stockholders'
equity $483,132 $520,586
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 1996 and 1995
(Unaudited, dollars in thousands, except per share data)
<S> <C> <C>
Interest income: 1996 1995
Loans, including fees
Taxable $13,303 $14,626
Exempt from federal income tax 12 12
Debt and equity securities available-for-sale 2,640 1,716
Debt securities held-to-maturity
Taxable 231 947
Exempt from federal income tax 193 247
Federal funds sold 1,306 236
Total interest income 17,685 17,784
Interest expense:
Deposits 7,685 7,142
Federal funds purchased and securities sold
under repurchase agreements 1,013 882
Federal Home Loan Bank advances 298 296
Total interest expense 8,996 8,320
Net interest income 8,689 9,464
Provision for loan losses 300 75
Net interest income after provision for loan
losses 8,389 9,389
Other income:
Trust fees 1,097 794
Service charges on deposit accounts 370 339
Gains on sale of debt securities 0 2
Gain on sales of mortgage loans held-for-sale,
net 15 11
Other 754 789
Total other income 2,236 1,935
Other expenses:
Salaries and employee benefits 3,980 4,285
Net occupancy 738 612
Equipment 488 591
Data processing 361 228
Federal deposit insurance premiums 1 439
Other 1,947 2,756
Total other expenses 7,515 8,911
Income from continuing operations before
income tax expense 3,110 2,413
Income tax expense 1,011 1,073
Income from continuing operations 2,099 1,340
Income from discontinued operations (net of tax
effect of $293 in 1995) 0 570
Net income $2,099 $1,910
Per share data:
Income from continuing operations $0.42 $0.27
Income from discontinued operations 0.00 0.11
Net income $0.42 $0.38
Weighted average shares outstanding 5,018,200 4,986,125
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended June 30, 1996 and 1995
(Unaudited, dollars in thousands, except per share data)
<S> <C> <C>
Interest income: 1996 1995
Loans, including fees
Taxable $6,493 $7,500
Exempt from federal income tax 6 6
Debt and equity securities available-for-sale 1,433 895
Debt securities held-to-maturity
Taxable 134 437
Exempt from federal income tax 96 122
Federal funds sold 532 132
Total interest income 8,694 9,092
Interest expense:
Deposits 3,758 3,763
Federal funds purchased and securities sold
under repurchase agreements 469 441
Federal Home Loan Bank advances 149 149
Total interest expense 4,376 4,353
Net interest income 4,318 4,739
Provision for loan losses 150 0
Net interest income after provision for
loan losses 4,168 4,739
Other income:
Trust fees 552 392
Service charges on deposit accounts 183 168
Gain on sales of mortgage loans held-for-sale,
net 22 9
Other 386 418
Total other income 1,143 987
Other expenses:
Salaries and employee benefits 1,944 2,109
Net occupancy 364 315
Equipment 229 291
Data processing 178 111
Federal deposit insurance premiums 0 219
Other 966 1,840
Total other expenses 3,681 4,885
Income from continuing operations before
income tax expense 1,630 841
Income tax expense 534 567
Net income $1,096 $274
Per share data:
Net income $0.22 $0.06
Weighted average shares outstanding 5,010,133 4,972,733
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ending June 30, 1996 and 1995
(Unaudited, in thousands)
<S> <C> <C>
1996 1995
Cash flows from operating activities:
Net income $2,099 $1,910
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and amortization 576 591
Debt and equity securities amortization, net 111 (13)
Provision for loan losses 300 75
Debt and equity securities gains 0 (2)
Gain on sales of loans, net (15) (11)
Gain on sale of subsidiary 0 (570)
Loss (gain) on premises and equipment, net 4 (1)
Increase in accrued interest receivable (247) (75)
Increase (decrease) in accrued interest payable (504) 303
Increase in other assets (236) (230)
Increase (decrease) in other liabilities 107 (303)
Increase in mortgage loans held-for-sale (440) (4,031)
Increase in stock appreciation rights 0 71
Net cash provided (used) by operating
activities 1,755 (2,286)
Investing activities:
Net decrease (increase) in loans 24,402 (12,707)
Proceeds from maturity of investments in debt
securities:
Held-to-maturity 8,638 15,996
Available-for-sale 16,655 9,001
Proceeds from sales of investments in debt and
equity securities:
Available-for-sale 0 589
Purchases of investments in debt and equity
securities:
Held-to-maturity (5,500) (7,241)
Available-for-sale (48,856) (15,270)
Principal paydowns from mortgage-backed and
mortgage-related securities
Held-to-maturity 244 358
Available-for-sale 522 603
Purchases of premises and equipment (456) (1,380)
Net cash used by investing activities (4,351) (10,051)
Financing activities:
Net decrease in demand and savings deposits (2,089) (5,331)
Net increase (decrease) in time deposits
$100 and over (13,538) 853
Net increase (decrease) in other time deposits(20,757) 20,747
Net decrease in federal funds purchased and
securities sold under repurchase
agreements (405) (10,271)
Dividends paid (378) (321)
Net Treasury Stock transactions (374) 0
Net change in common stock (3) 3
Net cash provided (used) by financing
activities (37,544) 5,680
Net decrease in cash and cash
equivalents (40,140) (6,657)
Cash and cash equivalents at beginning of period 80,700 36,486
Cash and cash equivalents at end of
period $40,560 $29,829
Additional cash flows information:
Interest paid $9,500 $8,017
Income tax paid 672 1,250
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary for fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles.
In the opinion of management, the Condensed Consolidated Financial
Statements of Central Illinois Financial Co., Inc. (the "Company") and
subsidiaries as of June 30, 1996 and for the three-month and six-month periods
ended June 30, 1996 and 1995 include all adjustments necessary for fair
presentation of the results of those periods. All such adjustments are of a
normal recurring nature.
Results of operations for the six-month period ended June 30, 1996 are not
necessarily indicative of the results which may be expected for the year ended
December 31, 1996.
NOTE 2. BUSINESS COMBINATION
On December 13, 1994, BankIllinois Financial Co. and Central Illinois
Financial Corporation entered into an Agreement and Plan of Merger which
provided for a "merger of equals" between the two companies, structured as a
merger of the two companies into the Company. The merger, which was accounted
for as a pooling of interests, was completed on June 30, 1995. Accordingly,
prior period Condensed Consolidated Financial Statements have been restated as
though the prior entities had been consolidated for all periods presented.
NOTE 3. STOCK DIVIDEND
At its regular board meeting on March 12, 1996, the Board of Directors of
the Company declared a one-for-twenty, or five percent, common stock dividend.
The record date of the stock dividend was May 1, 1996, and the distribution
date, May 15, 1996. The accompanying unaudited Condensed Consolidated
Financial
Statements have been restated to take the stock dividend into account.
NOTE 4. NEW ACCOUNTING RULES AND REGULATIONS
During June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Liabilities and Extinguishment of
Liabilities" ("SFAS 125"). SFAS 125 provides accounting and reporting
standards for transfers of financial assets and extinguishments of liabilities.
Those standards are based on consistent application of a financial-components
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approach that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes liabilities when
extinguished. This Statement provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. SFAS 125 is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996,
and it is to be applied prospectively. Earlier or retroactive application is
not permitted. The Company does not anticipate that the adoption of SFAS 125
will have a significant impact on its financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS AND LIABILITIES
Total assets decreased $37,454,000, or 7.2%, from $520,586,000 at December
31, 1995 to $483,132,000 at June 30, 1996. Decreases in cash and due from
banks, federal funds sold, investments in debt securities held-to-maturity, and
loans, offset somewhat by increases in debt and equity securities
available-for-sale, resulted in the decrease in assets.
Federal funds sold decreased $37,300,000, or 69.3%, at June 30, 1996
compared to December 31, 1995. This decrease was a result of excess federal
funds sold being used to purchase equity securities available-for-sale as well
as funding the decrease in deposits.
The decrease in cash and due from banks of $2,840,000, or 10.6%, at June
30, 1996 compared to December 31, 1995 was attributable to a smaller dollar
amount of deposit items in the process of collection at June 30, 1996 compared
to December 31, 1995.
Investments in debt securities held-to-maturity decreased $3,442,000, or
16.1%, at June 30, 1996 compared to December 31, 1995. This decrease was a
result of investments maturing and the proceeds being reinvested in debt and
equity securities available-for-sale, which increased $30,056,000, or 39.6%,
from December 31, 1995 to June 30, 1996.
Net loans decreased $24,509,000, or 7.5%, from December 31, 1995 to June
30, 1996. Included in the decrease was a $5,974,000, or 4.9%, decrease in
commercial, financial, and agricultural loans, a $6,112,000, or 4.5%, decrease
in real estate loans, and a $12,423,000, or 18.2%, decrease in installment and
consumer loans. Management has expended substantial time reviewing the
Company's lending process in the months following the merger. Much of the
decrease in loans can be attributed to management's emphasis on appropriate
loan structure and pricing as well as a very competitive local lending
environment.
Total deposits decreased $36,384,000, or 8.7%, from $419,157,000 at December
31, 1995 to $382,773,000 at June 30, 1996. The decrease includes an
$8,885,000, or 13.3%, decrease in noninterest bearing demand deposits, a
$2,977,000, or 12.4%, decrease in savings deposits, a $14,434,000, or 33.7%,
decrease in time deposits $100,000 and over, and a decrease of $19,861,000, or
11.1%, in other time deposits. These decreases were somewhat offset by an
increase of $9,773,000, or 9.1%, in interest bearing demand deposits. The
decrease in deposits was attributable to management's emphasis on appropriate
pricing in a very competitive market as well as some seasonal run-off. Total
deposits were $410,946,000 at June 30, 1995 compared to $382,773,000 at June
30, 1996.
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CAPITAL
Total stockholders' equity increased $684,000 from December 31, 1995 to
June 30, 1996. The change is summarized as follows:
(IN THOUSANDS)
Stockholders' equity, December 31, 1995 $48,408
Net income 2,099
Purchase of Treasury Stock (374)
Purchase of fractional shares related to stock
dividend (3)
Change in unrealized holding gain (loss) on
investments in debt and equity securities
available-for-sale (1,038)
Stockholders' equity, June 30, 1996 $49,092
Financial institutions are required by regulatory agencies to maintain
minimum levels of capital based on asset size and risk characteristics.
Currently, the Company and its subsidiary, BankIllinois, are required by their
primary regulators to maintain adequate capital based on two measurements: the
total assets leverage ratio and the risk-weighted assets ratio.
The total assets leverage ratio is the ratio of "Tier 1 capital" to total
assets. Tier 1 capital equals total stockholders' equity (before unrealized
holding gain (loss) on investments in available-for-sale debt securities and
unrealized holding gain on investments in available-for-sale equity securities
with readily determinable fair values) less most intangible assets and certain
amounts of deferred tax assets. Average total assets consist of total assets
less most intangible assets and certain amounts of deferred tax assets. Based
on Federal Reserve guidelines, a bank holding company generally is required to
maintain a leverage ratio of 3.0% plus an additional cushion of at least 100 to
200 basis points. The Company's total assets leverage ratio at June 30, 1996
and December 31, 1995 was 10.2% and 9.7%, respectively. The leverage ratio
for BankIllinois for the same periods was 9.8% and 9.2%, respectively well
above the regulatory minimum for both the Company and BankIllinois.
For the Company, the risk-weighted assets ratio equals the sum of Tier 1
capital plus the allowance for loan losses in an amount equal to up to 1.25%
of weighted-risk assets (as described above) by total risk-adjusted assets.
Total risk-adjusted assets are derived by assigning each asset and specific
off-balance-sheet items, such as letters of credit and loan commitments, to
one of four risk categories, and multiplying the items in each category by the
risk factor assigned to such category. The resulting totals are then added,
and that sum is the risk-adjusted assets ratio used in the calculation. The
minimum risk-weighted assets ratio for bank holding companies is 8.0%. The
Company's total risk-weighted assets ratios at June 30, 1996 and December 31,
1995 were 16.7% and 15.0%, respectively significantly higher than the
regulatory minimum. BankIllinois' total risk-weighted assets ratios were also
significantly higher than the regulatory minimum 16.1% and 14.5% at June 30,
1996 and December 31, 1995, respectively.
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Rate Sensitivity of Earning Assets and Interest Bearing Liabilities
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1996
(In thousands)
1-30 31-90 91-180 181-365 Over
Days Days Days Days 1-year Total
Federal funds sold $16,500 $0 $0 $0 $0 $16,500
Debt and equity securities <F1> 2,993 12,686 9,837 26,432 71,970 123,918
Loans <F2>
92,125 15,489 21,928 45,839 126,932 302,313
Total interest earning assets $111,618 $28,175 $31,765 $72,271 $198,902 $442,731
Savings and interest bearing demand
deposits $138,156 $0 $0 $0 $0 $138,156
Time deposits 13,777 31,605 35,346 41,179 64,902 186,809
Federal funds purchased and securities
sold under repurchase agreements 29,356 5,283 498 260 471 35,868
Federal Home Loan Bank advances 0 0 0 0 9,000 9,000
Total interest bearing liabilities $181,289 $36,888 $35,844 $41,439 $74,373 $369,833
Net asset (liability) funding gap ($69,671) ($8,713) ($4,079) $30,832 $124,529 $72,898
Repricing gap 0.62 0.76 0.89 1.74 2.67 1.20
Cumulative repricing gap 0.62 0.64 0.68 0.83 1.20 1.20
<FN>
<F1> Debt and equity securities include securities available-for-sale.
<F2> Loans include mortgage loans held-for-sale.
</FN>
</TABLE>
At June 30, 1996, the Company was liability-sensitive due to the levels of
savings and interest bearing demand deposits, short-term time deposits, federal
funds purchased and securities sold under repurchase agreements. As such, the
effect of a decrease in the interest rate for all interest earning assets and
interest bearing liabilities of 100 basis points would increase annualized net
interest income by approximately $697,000 in the 1-30 days category and $784,000
in the 1-90 days category assuming no management intervention. An increase in
interest rates would have the opposite effect for the same time periods.
LIQUIDITY
The Company was able to meet liquidity needs during the first six months of
1996. A review of the Condensed Consolidated Statement of Cash Flows included
in the accompanying financial statements shows that the Company's cash and cash
equivalents decreased $40,140,000 from December 31, 1995 to June 30, 1996.
This decrease came from net cash used in financing and investing activities
offset by cash provided by operating activities.
Net cash provided by operating activities reflects net earnings plus or
minus certain noncash and other adjustments to arrive at net cash provided by
operating activities. In the six-month period ended June 30, 1996, net cash
provided by operating activities was $4,041,000 more than the net cash provided
by operating activities for the same period in 1995. The biggest reason for
the increase in 1996 over 1995 was that mortgage loans held-for-sale increased
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by $455,000 during the first six months of 1996 compared to $4,042,000 during
the same period during 1995, a $3,587,000 decrease. In addition, other
liabilities increased $107,000 during the first six months of 1996 compared to
a decrease of $303,000 during the same period in 1995, a $410,000 change. Cash
provided was also positively affected by an increase in net income of $189,000
and an increase in provision for loan losses of $225,000 during the first six
months of 1996 compared to the same period in 1995. Cash provided from
operating activities in 1995 was also somewhat offset by the noncash gain on
disposal of subsidiary of $570,000 included in 1995 net income. Cash provided
by operating activities was offset by an increase in accrued interest
receivable of $247,000, a change of $172,000 from 1995. Cash provided by
operating activities was also offset by a decrease in accrued interest payable
of $504,000 during the first six months of 1996, a change of $807,000 from the
same period in 1995.
Net cash used in investing activities was $4,351,000 in the six-month period
ended June 30, 1996 compared to $10,051,000 for the same period in 1995. This
resulted from a decrease in loans for the first six months of 1996 of
$24,402,000, a $37,109,000 change from an increase of $12,707,000 during the
same period in 1995. This increase was more than offset by purchases of
investments in debt and equity securities of $54,356,000 in the six months
ended June 30, 1996. During the same time period, the Company received
proceeds from maturities of investments in debt securities totaling
$25,293,000. During the first six months of 1995, the Company had purchases of
investments in debt and equity securities of $22,511,000 and proceeds from
maturity of investments in debt securities totaling $24,997,000.
Net cash used in financing activities for the first six months of 1996 was
$37,544,000 compared to $5,680,000 provided during the same period in 1995.
Included in the increase in cash used is a decrease in total deposits of
$36,384,000 during the first six months of 1996 compared to an increase of
$16,269,000 during the same period in 1995. In addition, federal funds
purchased and securities sold under repurchase agreements decreased $405,000 in
1996 compared to a decrease of $10,271,000 in 1995.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is based on management's evaluation of the
loan portfolio in light of national and local economic conditions, changes in
the composition and volume of the loan portfolio, changes in the volume of past
due and nonaccrual loans, and other relevant factors. The allowance for loan
losses, which is reported as a deduction from loans, is available for loan
charge-offs. The allowance is increased by the provision charged to expense
and is reduced by loan charge-offs net of loan recoveries. The balance of the
allowance for loan losses was $5,620,000 at June 30, 1996 compared to
$5,882,000 at December 31, 1995. The allowance for loan losses as a percent of
outstanding loans was 1.9% at June 30, 1996 compared to 1.9% at December 31,
1995. Additionally, the allowance for loan losses as a percent of
nonperforming assets was 132.6% at June 30, 1996 compared to 163.7% at December
31, 1995. The allowance for loan losses as a percent of nonperforming assets
was 113.0% at March 31, 1996. Management has expended substantial time on a
review of the Company's lending process in the months following the merger and
believes that the increase in nonperforming assets since December 31, 1995 is a
result of emphasis placed on early detection of problem assets and is not
necessarily an indication of deterioration in the credit quality of the
Company's loan portfolio.
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The improvement during the second quarter of 1996 was due to a $1.1 million
reduction in nonperforming assets, with approximately $555,000 attributable to
charge-offs. The charge-offs were previously anticipated and management is
confident that problem assets have been effectively identified and that the
allowance for loan losses remains adequate to absorb possible losses in the
portfolio.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Net income for the first six months of 1996 was $2,099,000, a $189,000, or
9.9%, increase from the first six months of 1995. Included in 1995 results was
a $570,000 gain, net of tax, on the sale of discontinued operations and
merger-related expenses of $914,000. Net income per share increased $0.04, or
10.5%, to $0.42 in 1996 from $0.38 in 1995.
Income from continuing operations for the first six months of 1996 was
$2,099,000, a $759,000, or 56.6%, increase compared to the same period in 1995.
Income from continuing operations increased $0.15 per share, or 55.6%, to $0.42
in the first six months of 1996 from $0.27 in the same period of 1995.
Net interest income was $775,000, or 8.2% less for the first six months of
1996 compared to 1995. Total interest income was $99,000, or 0.6% lower in
1996 compared to 1995, and interest expense increased $676,000, or 8.1%. The
increase in interest expense was primarily due to higher average balances and
interest rates on interest bearing funds.
The decrease in total interest income included a decrease of $1,323,000, or
9.0%, in interest income on loans. This decrease reflects a $27,526,000, or
8.2%, decrease in average loans outstanding during the first six months of 1996
compared to the same period in 1995. The decrease in total interest income on
loans was somewhat offset by increases in interest income on federal funds and
debt and equity securities due to increased funds being invested in these asset
categories.
The provision for loan losses recorded was $300,000 during the first six
months of 1996. This was $225,000, or 300.0%, more than the amount recorded
during the first six months of 1995. Management has expended considerable time
since the merger in 1995 evaluating the credit quality of the Company's loan
portfolio and standardizing its credit analysis procedures and standards. The
provision during the first six months of 1996 was based on management's analysis
of the Bank's loan portfolio and adequacy of allowance for loan losses.
Other income increased $301,000, or 15.6%, during the first six months of
1996 compared to the first six months of 1995. Included in this increase was
an increase of $303,000, or 38.2%, in trust fees.
Total other expenses decreased $1,396,000, or 15.7%, during the first six
months of 1996 compared to the first six months of 1995. Included in the
decrease were decreases in salaries and employee benefits of $305,000,
equipment of $103,000, federal deposit insurance premiums of $438,000 and other
of $809,000. The reduction in salary and employee benefits reflects the
restructuring the Company completed during 1995. Included in the reduction of
equipment expense is a reduction in computer-related equipment expenses related
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<PAGE>
to a portion of the Company's computer operation which is now being
out-sourced. The reduction in federal deposit insurance premiums was a direct
result of a reduction in premium assessments. The reduction in other includes
a $914,000 decrease in merger-related expenses which was somewhat offset by
increased marketing expenses related to an aggressive marketing campaign
initiated in mid-1995.
Somewhat offsetting these decreases were increases in occupancy of $126,000
and data processing fees of $133,000. Included in the increase in net
occupancy were expenses related to a branch opened in mid-1995 as well as costs
incurred as a result of operations being consolidated due to the merger. The
data processing increase was a result of more data processing being out-sourced
in 1996 than in 1995.
Income from discontinued operations decreased to zero due to the conclusion
of a sales agreement relating to the operations that were discontinued. In
1992, the Company divested its interest in a wholly owned subsidiary, and the
total sales price was based upon the annual operating revenues of the former
subsidiary for the period July 1, 1992 through June 30, 1995 up to a maximum
certain dollar amount. All remaining gains on this sale were recognized during
the first quarter of 1995. Thus, no income from discontinued operations was
recognized for the six months ended June 30, 1996.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996
Net income for the second quarter of 1996 was $1,096,000, an $822,000, or
300.0%, increase compared to the same period in 1995. Included in 1995 results
were $914,000 of merger-related expenses. Net income per share increased
$0.16, or 266.7%, to $0.22 in 1996 from $0.06 in 1995.
Net interest income was $421,000, or 8.9% less for the second quarter of
1996 compared to 1995. Total interest income was $398,000, or 4.4% lower in
the second quarter of 1996 compared to the second quarter of 1995, and interest
expense increased $23,000, or 0.5%, during the same periods.
The decrease in total interest income of $398,000 included a decrease of
$1,007,000, or 13.4%, in interest income on loans. This decrease is reflective
of the decrease in average loans outstanding during the second quarter of 1996
compared to the second quarter of 1995. The decrease in interest income on
loans was somewhat offset by increases in interest income on federal funds and
debt and equity securities due to increased funds being invested in these asset
categories.
The provision for loan losses recorded was $150,000 during the second
quarter of 1996. The provision during the second quarter of 1996 was based on
management's analysis of the Bank's loan portfolio and adequacy of allowance
for loan losses. Management has expended considerable time since the merger in
1995 evaluating the credit quality of the Company's loan portfolio and
standardizing its credit analysis procedures and standards.
Other income increased $156,000, or 15.8%, during the second quarter of 1996
compared to the second quarter of 1995. Included in this increase was an
increase of $160,000, or 40.8%, in trust fees.
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<PAGE>
Total other expenses decreased $1,204,000, or 24.6%, during the second
quarter of 1996 compared to the second quarter of 1995. Included in the
decrease were decreases in salaries and employee benefits of $165,000,
equipment of $62,000, federal deposit insurance premiums of $219,000 and other
of $874,000. The reduction in salary and employee benefits reflects the
restructuring the Company completed during 1995. Included in the reduction of
equipment expense is a reduction in computer-related equipment expenses related
to a portion of the Company's computer operation which is now being
out-sourced. The reduction in federal deposit insurance premiums was a direct
result of a reduction in premium assessments. The reduction in other includes
a $914,000 decrease in merger-related expenses which was somewhat offset by
increased marketing expenses related to an aggressive marketing campaign
initiated in mid-1995.
Somewhat offsetting these decreases were increases in occupancy of $49,000
and data processing fees of $67,000. Included in the increase in net occupancy
were expenses related to a branch opened in mid-1995 as well as costs incurred
as a result of operations being consolidated due to the merger. The data
processing increase was a result of more data processing being out-sourced in
1996 than in 1995.
Page 15
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The are no material pending legal proceedings to which the Company or its
subsidiaries is 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
MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders was held on May 13, 1996:
ELECTION OF DIRECTORS
Messrs. David J. Downey, Van A. Dukeman, Gene A. Salmon and James A.
Sullivan were elected to serve as Class I directors of the Company (term
expires in 1999) at the Annual Meeting. Continuing as Class II directors
(term expires in 1997) are Messrs. Robert J. Cochran and Gregory B.
Lykins). Continuing as Class III directors (term expires in 1998) are
Messrs. Roy V. VanBuskirk, August C. Meyer Jr., George T. Shapland and
Dean R. Stewart.
MATTERS VOTED UPON AT THE MEETING
In addition to the election of directors, the stockholders approved the
adoption of the Central Illinois Financial Co., Inc. 1996 Stock Incentive
Plan. The voting on each item at the Annual Meeting was as follows:
ELECTION OF DIRECTORS FOR WITHHELD TOTAL
David J. Downey 4,036,507.88 9,895 4,046,402.88
Van A. Dukeman 4,036,507.88 9,895 4,046,402.88
Gene A. Salmon 4,036,507.88 9,895 4,046,402.88
James A. Sullivan 4,045,809.88 593 4,046,402.88
Adoption of 1996
Stock Incentive FOR AGAINST ABSTAIN VOTES TOTAL
Plan 3,877,419.31 105,931.69 63,141.87 None 4,046,492.87
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports
None
Page 16
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL ILLINOIS FINANCIAL CO., INC.
Date: August 12, 1996
By: /s/ David B. White
Executive Vice President
Page 17
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 24,060
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 16,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 105,930
<INVESTMENTS-CARRYING> 17,988
<INVESTMENTS-MARKET> 17,962
<LOANS> 296,693<F1>
<ALLOWANCE> 5,620
<TOTAL-ASSETS> 483,132
<DEPOSITS> 382,773
<SHORT-TERM> 35,868
<LIABILITIES-OTHER> 6,399
<LONG-TERM> 9,000
0
0
<COMMON> 50
<OTHER-SE> 49,042
<TOTAL-LIABILITIES-AND-EQUITY> 483,132
<INTEREST-LOAN> 13,315
<INTEREST-INVEST> 3,064
<INTEREST-OTHER> 1,306
<INTEREST-TOTAL> 17,685
<INTEREST-DEPOSIT> 7,685
<INTEREST-EXPENSE> 8,996
<INTEREST-INCOME-NET> 8,689
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,515
<INCOME-PRETAX> 3,110
<INCOME-PRE-EXTRAORDINARY> 2,099
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,099
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
<YIELD-ACTUAL> 7.74
<LOANS-NON> 2,473
<LOANS-PAST> 795
<LOANS-TROUBLED> 171
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,882
<CHARGE-OFFS> 738
<RECOVERIES> 176
<ALLOWANCE-CLOSE> 5,620
<ALLOWANCE-DOMESTIC> 5,257
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 363
<FN>
<F1>Net of allowance for loan losses of $5,620.
</FN>
</TABLE>
