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 September 30, 1997
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
of incorporation or organization) Number)
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 November 1, 1997:
Central Illinois Financial Co., Inc. Common Stock 5,140,898
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TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote
of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited, in thousands, except per share data)
<TABLE>
Sept. Dec.
30, 1997 31, 1996
<S> <C> <C>
ASSETS
Cash and due from banks $25,613 $31,195
Federal funds sold 3,200 28,000
Investments in debt and equity securities:
Available-for-sale, at estimated market value 144,603 129,927
Held-to-maturity, estimated market value
of $16,377 at September 30, 1997
and $21,945 at December 31, 1996 16,280 21,870
Non-marketable equity securities 1,550 1,695
Loans, net of allowance for loan losses of $5,723
and $5,587 at September 30, 1997 and
December 31, 1996 respectively 300,508 280,281
Premises and equipment 11,187 10,717
Accrued interest receivable 4,871 4,517
Other assets 7,353 5,961
Total assets $516,544 $515,440
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand - noninterest bearing $53,261 $64,837
Demand - interest bearing 137,078 127,414
Savings 16,518 17,787
Time deposits $100,000 and over 38,221 35,550
Other time 155,971 158,542
Total deposits 401,049 404,130
Federal funds purchased and securities sold
under repurchase agreements 44,137 43,941
Federal Home Loan Bank advances 9,000 9,000
Accrued interest payable 1,580 1,576
Other liabilities 4,631 4,697
Total liabilities 460,397 463,344
Stockholders' equity:
Common stock, $0.01 par value; 6,500,000
shares authorized: 5,206,663 shares issued 52 52
Paid in capital 23,138 23,057
Retained earnings 33,659 29,745
Unrealized gain (loss) on securities
available-for-sale 201 (109)
57,050 52,745
Less: Treasury stock, at cost, 65,765 and
48,720 shares (903) (649)
at September 30, 1997 and December 31,
1996, respectively
Total stockholders' equity 56,147 52,096
Total liabilities and stockholders'
equity $516,544 $515,440
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<S> <C> <C>
Interest income: 1997 1996
Interest and fees on loans $19,582 $19,747
Interest and dividends on investments in debt
and equity securities
Taxable 7,466 4,706
Tax-exempt 228 288
Interest on federal funds sold and interest-bearing
deposits 485 1,549
Total interest income 27,761 26,290
Interest expense:
Deposits 12,238 11,345
Federal funds purchased and securities sold under
repurchase agreements 1,674 1,503
Federal Home Loan Bank advances 447 448
Total interest expense 14,359 13,296
Net interest income 13,402 12,994
Provision for loan losses 325 375
Net interest income after provision for
loan losses 13,077 12,619
Noninterest income:
Trust fees 1,529 1,479
Service charges on deposit accounts 488 537
Gains on sales of debt securities 8 0
Gains on sales of mortgage loans held-for-sale, net 207 197
Other 1,103 1,082
Total noninterest income 3,335 3,295
Noninterest expenses:
Salaries and employee benefits 5,847 5,943
Net occupancy 1,128 1,123
Equipment 673 737
Data processing 551 541
Federal deposit insurance premiums 36 2
Other 2,325 2,653
Total noninterest expenses 10,560 10,999
Income before income taxes 5,852 4,915
Income taxes 1,938 1,605
Net income $3,914 $3,310
Per share data:
Net income $0.75 $0.63
Weighted average shares of common stock and
equivalents outstanding 5,250,130 5,270,834
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1997 and 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<S> <C> <C>
Interest Income: 1997 1996
Interest and fees on loans $6,682 $6,432
Interest and dividends on investments in debt
and equity securities
Taxable 2,470 1,835
Tax-exempt 77 95
Interest on federal funds sold and interest-bearing
deposits 152 243
Total interest income 9,381 8,605
Interest expense:
Deposits 4,208 3,660
Federal funds purchased and securities sold under
repurchase agreements 570 490
Federal Home Loan Bank advances 151 150
Total interest expense 4,929 4,300
Net interest income 4,452 4,305
Provision for loan losses 175 75
Net interest income after provision for
loan losses 4,277 4,230
Noninterest income:
Trust fees 530 382
Service charges on deposit accounts 160 167
Gains on sales of debt securities 1 0
Gains on sales of mortgage loans held-for-sale, net 88 182
Other 364 353
Total noninterest income 1,143 1,084
Noninterest expenses:
Salaries and employee benefits 1,912 1,958
Net occupancy 374 385
Equipment 226 249
Data processing 194 180
Federal deposit insurance premiums 12 1
Other 757 736
Total noninterest expenses 3,475 3,509
Income before income taxes 1,945 1,805
Income taxes 643 594
Net income $1,302 $1,211
Per share data:
Net income $0.25 $0.23
Weighted average shares of common stock and
equivalents outstanding 5,250,477 5,255,970
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ending September 30, 1997 and 1996
(Unaudited, in thousands)
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $3,914 $3,310
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 848 876
Amortization of bond premiums, net 16 135
Provision for loan losses 325 375
Gain on sales of loans, net (207) (197)
Loss on disposal of premises and equipment, net 135 2
(Increase) Decrease in accrued interest receivable (354) 44
Increase (Decrease) in accrued interest payable 4 (560)
Decrease in other assets 418 1,011
Decrease in other liabilities (225) (76)
Decrease in mortgage loans held-for-sale 105 336
Stock appreciation rights 84 3
Net cash provided by operating activities 5,063 5,259
Cash flows from investing activities:
Net (increase) decrease in loans (22,394) 33,763
Proceeds from maturity of investments in
debt securities:
Held-to-maturity 12,587 11,838
Available-for-sale 27,550 23,438
Proceeds from sales of investments:
Non-Marketable Securities 145 718
Purchases of investments:
Held-to-maturity (7,287) (8,399)
Available-for-sale (43,133) (64,648)
Non-marketable securities 0 (32)
Principal paydowns from mortgage-backed and
mortgage-related securities:
Held-to-maturity 252 353
Available-for-sale 1,398 746
Purchases of premises and equipment (1,422) (667)
Proceeds from sale of premises and equipment 1 0
Net cash used in investing activities (32,303) (2,890)
Cash flows from financing activities:
Net decrease in demand and savings deposits (3,181) (6,935)
Net increase (decrease) in time deposits
$100 and over 2,671 (18,390)
Net decrease in other time deposits (2,571) (22,634)
Net increase in federal funds purchased and
securities sold under repurchase
agreements 196 6,149
Dividends paid 0 (378)
Treasury stock transactions, net (254) (378)
Fractional shares purchased following
stock dividend (3) (3)
Net cash used in financing activities (3,142) (42,569)
Net decrease in cash and cash
equivalents (30,382) (40,200)
Cash and cash equivalents at beginning of period 59,195 80,700
Cash and cash equivalents at end of period $28,813 $40,500
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $14,355 $13,856
Income taxes 1,460 972
Transfer of mortgage loans held-for-sale
to loans 0 8,175
Supplemental disclosures of noncash activities
Transfer of properties from loans to
other real estate 1,842 608
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>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 September 30, 1997 and for the three-month and nine-month
periods ended September 30, 1997 and 1996 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 three-month and nine-month periods ended
September 30, 1997 are not necessarily indicative of the results which may be
expected for the year ended December 31, 1997.
NOTE 2. STOCK DIVIDEND
At its regular board meeting on May 20, 1997, 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 27, 1997, and the
distribution date was June 6, 1997. The accompanying unaudited Condensed
Consolidated Financial Statements have been restated to take the stock
dividend into account.
NOTE 3. NEW ACCOUNTING RULES AND REGULATIONS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS No. 128). SFAS No. 128 requires the presentation of both basic
earnings per share and diluted earnings per share. Basic earnings per share
will be computed by dividing net income by the weighted-average number of
common shares outstanding. Diluted earnings per share will be computed in
the same manner as currently used by the Company in computing earnings per
share. SFAS No. 128 will be effective for the Company's 1997 annual report.
The Company does not believe the adoption of SFAS No. 128 will have a
material impact on the consolidated financial statements.
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" (SFAS No. 130), was issued in July 1997 by the
Financial Accounting Standards Board. SFAS No. 130 establishes reporting of
comprehensive income for general purpose financial statements. Comprehensive
income is defined as the change in equity of a business enterprise during a
period and all other events and circumstances from nonowner sources. SFAS
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No. 130 is effective for financial statement periods beginning after
December 15, 1997. The Company does not believe the adoption of SFAS No. 130
will have a material impact on the consolidated financial statements.
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131), was issued
in July 1997 by the Financial Accounting Standards Board. SFAS No. 131
requires the Company to disclose the factors used to identify reportable
segments including the basis of organization, differences in products and
services, geographic areas, and regulatory environments. SFAS No. 131
additionally requires financial results to be reported in the financial
statements for each reportable segment. SFAS No. 131 is effective for
financial statement periods beginning after December 15, 1997. The Company
does not believe the adoption of SFAS No. 131 will have a material impact on
the consolidated financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
ASSETS AND LIABILITIES
Total assets increased $1,104,000, or 0.2%, from $515,440,000 at
December 31, 1996 to $516,544,000 at September 30, 1997. Increases in loans,
securities held-for-sale, other assets, premises and equipment, and accrued
interest receivable, offset somewhat by decreases in federal funds sold,
securities held-to-maturity, and cash, resulted in the slight increase in
assets.
Loans increased $20,227,000, or 7.2%, from December 31, 1996 to
September 30, 1997. Included in this change was an increase of $19,326,000,
or 27.9%, in commercial real estate loans, an increase of $2,720,000, or
5.7%, in consumer loans, and an increase of $811,000, or 0.7%, in commercial
loans. Somewhat offsetting these increases was a $2,495,000, or 4.3%,
decrease in residential real estate loans. The increase in loans was due to
strong loan demand in the Company's market area, especially with respect to
commercial real estate loans.
Investments in securities available-for-sale increased $14,676,000, or
11.3%, at September 30, 1997 compared to December 31, 1996. Investments in
securities held-to-maturity decreased $5,590,000, or 25.6%, at September 30,
1997 compared to December 31, 1996. The net increase in investments in debt
and equity securities was a result of management's decision to shift assets
into investment securities that yield a higher rate of return than federal
funds sold.
Other assets increased $1,392,000, or 23.4%, from December 31, 1996 to
September 30, 1997. This increase was primarily due to an increase in other
real estate. Approximately $1,834,000, representing the value of an office
building located near the Bank's main offices, was transferred to other real
estate. During 1997, approximately $220,000 of improvements were completed
on this office building. Somewhat offsetting this increase was the sale of
other real estate totaling $671,000 during the first nine months of 1997.
Premises and equipment increased $470,000, or 4.4%, from December 31,
1996 to September 30, 1997. Included in this change was the purchase of
parking lots located near the Bank's main offices for $420,000. The
remaining additions to premises and equipment included improvements to
existing facilities.
Accrued interest receivable increased $354,000, or 7.8%, from December
31, 1996 to September 30, 1997. This was primarily due to the increase in
loans.
Federal funds sold decreased $24,800,000, or 88.6%, at September 30,
1997 compared to December 31, 1996. This decrease was a result of excess
federal funds sold being used to fund the increase in loans and investments
in debt and equity securities available-for-sale.
The decrease in cash and due from banks of $5,582,000, or 17.9%, at
September 30, 1997 compared to December 31, 1996 was attributable to a
smaller dollar amount of deposit items in process of collection at September
30, 1997 compared to December 31, 1996.
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Total deposits decreased $3,081,000, or 0.8%, from $404,130,000 at
December 31, 1996 to $401,049,000 at September 30, 1997. The decrease
included an $11,576,000, or 17.9%, decrease in noninterest bearing demand
deposits, a $2,571,000, or 1.6%, decrease in other time deposits, and a
$1,269,000, or 7.1%, decrease in savings deposits. These decreases were
somewhat offset by an increase of $9,664,000, or 7.6%, in interest bearing
demand deposits, and a $2,671,000, or 7.5%, increase in time deposits
$100,000 and over. The decrease in deposits was attributable to management's
continued emphasis on appropriate pricing in a competitive market as well as
some seasonal run-off. Total deposits were $401,049,000 at September 30,
1997 compared to $371,198,000 at September 30, 1996, an 8.0% increase.
CAPITAL
Total stockholders' equity increased $4,051,000 from December 31,
1996 to September 30, 1997. The change is summarized as follows:
(IN THOUSANDS)
Stockholders' equity, December 31, 1996 $52,096
Net income 3,914
Purchase of treasury stock (254)
Stock appreciation rights 84
Purchase of fractional shares related to stock dividend (3)
Change in unrealized gain/(loss) on securities
available-for-sale 310
Stockholders' equity, September 30, 1997 $56,147
The Company and BankIllinois, its banking subsidiary, are subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Company's and
BankIllinois' financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, BankIllinois must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Company's and BankIllinois' capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and BankIllinois to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management believes, as
of September 30, 1997, that the Company and BankIllinois meet all capital
adequacy requirements to which they are subject.
As of September 30, 1997, the most recent notification from the State of
Illinois Office of Banks and Real Estate categorized BankIllinois as well
capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, BankIllinois
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must maintain minimum total capital to risk-weighted assets, Tier I capital
to risk-weighted assets, and Tier I capital to average assets ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed BankIllinois' category.
The Company's and BankIllinois' actual capital amounts and ratios are
presented in the following table (in thousands):
<TABLE>
To be well
capitalized under
For capital Prompt corrective
Actual adequacy purposes: action provisions:
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997:
Total capital
(to risk-weighted assets)
Consolidated $60,121 17.9% $26,892 8.0% N/A
BankIllinois $54,094 16.1% $26,814 8.0% $33,518 10.0%
Tier I capital
(to risk-weighted assets)
Consolidated $55,900 16.6% $13,446 4.0% N/A
BankIllinois $49,885 14.9% $13,407 4.0% $20,111 6.0%
Tier I capital
(to average assets)
Consolidated $55,900 10.9% $20,439 4.0% N/A
BankIllinois $49,885 9.8% $20,337 4.0% $25,421 5.0%
</TABLE>
The concept of interest sensitivity attempts to gauge exposure of the
Company's net interest income to adverse changes in market driven interest
rates by measuring the amount of interest-sensitive assets and interest-
sensitive liabilities maturing or subject to repricing within a specified
time period. Liquidity represents the ability of the Company to meet the
day-to-day demands of deposit customers balanced by its investments of these
deposits. The Company must also be prepared to fulfill the needs of credit
customers for loans with various types of maturities and other financing
arrangements. The Company monitors its interest rate sensitivity and
liquidity through the use of static gap reports which measure the difference
between assets and liabilities maturing or repricing within specified time
periods. It is, however, only a static, single-day depiction of the
Company's rate sensitivity structure, which can be adjusted in response to
changes in forecasted interest rates.
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The following table presents the Company's interest rate sensitivity at
various intervals at September 30, 1997:
RATE SENSITIVITY OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
(dollars in thousands)
<TABLE>
1-30 31-90 91-180 181-365 Over
Days Days Days Days 1 Year Total
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest earning assets:
Federal funds sold $ 3,200 -- -- -- -- 3,200
Debt and equity securities <F1> 3,584 14,182 12,227 22,352 110,088 162,433
Loans <F2> 71,171 22,019 21,644 42,156 150,620 307,610
Total earning assets 77,955 36,201 33,871 64,508 260,708 473,243
Interest bearing liabilities:
Savings and interest-bearing
demand deposits $ 153,596 -- -- -- -- 153,596
Time deposits 8,109 19,971 35,451 77,912 52,749 194,192
Federal funds purchased and securities
sold under repurchase agreements 38,496 120 200 271 5,050 44,137
Federal Home Loan Bank advances -- 1,000 1,000 -- 7,000 9,000
Total interest bearing liabilities 200,201 21,091 36,651 78,183 64,799 400,925
Net asset (liability) funding gap ($122,246) 15,110 (2,780) (13,675) 195,909 72,318
Repricing gap 0.39 1.72 0.92 0.83 4.02 1.18
Cumulative repricing gap 0.39 0.52 0.57 0.63 1.18 1.18
<FN>
<F1> Debt and equity securities include securities available-for-sale.
<F2> Loans include mortgage loans held-for-sale.
</FN>
</TABLE>
At September 30, 1997, 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 $1,222,000 in
the 1-30 days category and $1,071,000 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 nine
months of 1997. A review of the condensed consolidated statements of cash
flows included in the accompanying financial statements shows that the
Company's cash and cash equivalents decreased $30,382,000 from December 31,
1996 to September 30, 1997. This decrease came from net cash used in
investing and financing activities somewhat offset by cash provided by
operating activities.
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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 $5,723,000 at September 30, 1997
compared to $5,587,000 at December 31, 1996. Although the allowance for loan
loss balance rose by $136,000 from December 31, 1996 to September 30, 1997,
the allowance for loan losses as a percentage of total loans decreased
slightly from 1.95% to 1.86%, as total loans increased during 1997.
The allowance for loan losses as a percentage of nonperforming loans was
139% at September 30, 1997 compared to 212% at December 31, 1996. This
reduction was due to the $1,373,000 increase in loans 90 days past due and
still accruing and an increase of $202,000 in non-accrual loans. The
increase in loans 90 days past due and still accruing was due primarily to an
increase in commercial real estate loans of $998,000 from properties which
are in the process of foreclosure and a $193,000 increase in single-family
real estate delinquencies of more than 90 days. The increase of $202,000 in
non-accrual loans was due largely to credit card fraud charges of $383,000,
the addition of $441,000 to commercial loan non-accruals, and a reduction of
$372,000 in commercial real estate as an apartment building was sold by the
owner. An additional provision of $100,000 was applied to the allowance for
loan losses in August 1997 in anticipation of losses due to credit card
fraud. Management believes that problem assets have been effectively
identified and that the allowance for loan losses is adequate to absorb
possible losses in the portfolio.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Net income for the first nine months of 1997 was $3,914,000, a $604,000,
or 18.2%, increase from the first nine months of 1996. Net income per share
increased $0.12, or 19.0%, to $0.75 in the first nine months of 1997 from
$0.63 in the same period of 1996.
Net interest income was $408,000, or 3.1% higher for the first nine
months of 1997 compared to 1996. Total interest income was $1,471,000, or
5.6% higher in 1997 compared to 1996, and interest expense increased
$1,063,000, or 8.0%. The increase in interest income was primarily due to an
increase in average earning assets. The increase in interest expense was
primarily due to an increase in average interest bearing liabilities as well
as higher interest rates.
The increase in total interest income included an increase of
$2,760,000, or 58.6%, on taxable investments in debt and equity securities.
The increase in interest income on securities was somewhat offset by
decreases in interest income on federal funds sold of $1,064,000, or 68.7%,
which resulted from moving funds into higher yielding investment
alternatives. Also offsetting the increase in investment income was a
decrease in total loan interest income of
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<PAGE>
$165,000, or 0.8% due to a continued focus on maintaining a loan portfolio
that is both profitable and high quality.
The provision for loan losses was $325,000 during the first nine months
of 1997. This was $50,000, or 13.3%, less than the amount recorded during
the first nine months of 1996. 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 nine months of 1997 was based on management's
analysis of the Bank's loan portfolio and adequacy of the allowance for loan
losses.
Total noninterest income increased $40,000, or 1.2%, during the first
nine months of 1997 compared to the first nine months of 1996. Included in
this increase was an increase of $50,000, or 3.4%, in trust fees, a $21,000,
or 1.9%, increase in other income, a $10,000, or 5.1%, increase in gains on
sales of mortgage loans held-for-sale, and an $8,000 increase in gains on
sales of debt securities. Somewhat offsetting these increases was a decrease
of $49,000, or 9.1%, in service charges on deposit accounts.
Total noninterest expenses decreased $439,000, or 4.0%, during the first
nine months of 1997 compared to the first nine months of 1996. Included in
the decrease were decreases in salaries and employee benefits of $96,000, or
1.6%, equipment of $64,000, or 8.7%, and other expenses of $328,000, or
12.4%. The reduction in salary and employee benefits reflected continued
efficiency improvements which resulted in lowering the Company's number of
employees. Included in the reduction of equipment expense was lower
depreciation costs and the absence of costs to relocate equipment which was
incurred in early 1996. The decrease in other expenses was the result of
lower expenses for marketing, office supplies, directors' fees (directors are
currently being compensated by a stock option plan adopted during the second
quarter of 1997 in lieu of cash payments as had occurred in 1996) and overall
reductions due to improved efficiency. Included in 1997 other expenses were
$132,000 of expenses due to the closing of the Champaign Money Market branch
on May 10th.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
Net income for the third quarter of 1997 was $1,302,000, a $91,000, or
7.5%, increase compared to the same period in 1996. Net income per share
increased $0.02, or 8.7%, to $0.25 in 1997 from $0.23 in 1996.
Net interest income was $147,000, or 3.4% higher for the third quarter
of 1997 compared to 1996. Total interest income was $776,000, or 9.0% higher
in the third quarter of 1997 compared to the third quarter of 1996, and
interest expense increased $629,000, or 14.6%. The increase in interest
income was primarily due to an increase in average earning assets. The
increase in interest expense was due to an increase in average interest
bearing liabilities as well as higher average interest rates.
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<PAGE>
The increase in total interest income included an increase of $635,000,
or 34.6%, on taxable investments in debt and equity securities, and an
increase of $250,000, or 3.9% on interest and fees on loans. Somewhat
offsetting these increases were decreases in interest income on federal funds
sold of $91,000, or 37.4%, which resulted from moving funds into higher
yielding investment alternatives.
The provision for loan losses was $175,000 during the third quarter of
1997. This was $100,000, or 133.3%, more than the amount recorded during the
third quarter of 1996. This increase included $100,000 in anticipation of
credit card fraud 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.
The provision during the third quarter of 1997 was based on management's
analysis of the Bank's loan portfolio and adequacy of the allowance for loan
losses.
Total noninterest income increased $59,000, or 5.4%, during the third
quarter of 1997 compared to the third quarter of 1996. Included in this
increase was an increase of $148,000, or 38.7%, in trust fees. Somewhat
offsetting this increase was a decrease of $94,000 in gains on sales of
mortgage loans held-for-sale.
Total noninterest expenses decreased $34,000, or 1.0%, during the third
quarter of 1997 compared to the third quarter of 1996. Included in the
decrease were reductions in salaries and employee benefits of $46,000, or
2.3%, and equipment of $23,000, or 9.2%. The reduction in salary and
employee benefits reflected continued efficiency improvements which resulted
in lowering the Company's number of employees. Lower depreciation expense
contributed to the decrease in equipment expense. Somewhat offsetting these
decreases was an increase in other expenses of $21,000, or 2.9%.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report contains certain forward-looking statements within the
meaning of Section 27A 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 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 its
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
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<PAGE>
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.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There 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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports
None
Page 17
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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: November 14, 1997
By: /s/ David B. White
Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 19,166
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,109
<INVESTMENTS-CARRYING> 23,759
<INVESTMENTS-MARKET> 23,797
<LOANS> 292,618<F1>
<ALLOWANCE> 5,689
<TOTAL-ASSETS> 508,333
<DEPOSITS> 394,630
<SHORT-TERM> 43,924
<LIABILITIES-OTHER> 6,410
<LONG-TERM> 9,000
0
0
<COMMON> 52
<OTHER-SE> 54,317
<TOTAL-LIABILITIES-AND-EQUITY> 508,333
<INTEREST-LOAN> 12,900
<INTEREST-INVEST> 5,147
<INTEREST-OTHER> 333
<INTEREST-TOTAL> 18,380
<INTEREST-DEPOSIT> 8,030
<INTEREST-EXPENSE> 9,430
<INTEREST-INCOME-NET> 8,950
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 7,108
<INCOME-PRETAX> 3,907
<INCOME-PRE-EXTRAORDINARY> 3,907
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,612
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 7.84
<LOANS-NON> 1,526
<LOANS-PAST> 2,099
<LOANS-TROUBLED> 155
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,587
<CHARGE-OFFS> 212
<RECOVERIES> 164
<ALLOWANCE-CLOSE> 5,689
<ALLOWANCE-DOMESTIC> 5,689
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes mortgages available-for-sale and net of allowance
for loan losses
of $5,689.
</FN>
</TABLE>
