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 March 31, 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 May 1, 1997:
Central Illinois Financial Co., Inc. Common Stock 4,898,497
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<PAGE>
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 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Unaudited, in thousands, except per share data)
<TABLE>
Mar. 31, Dec. 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and due from banks $18,859 $31,195
Federal funds sold 8,700 28,000
Investments in debt and equity securities:
Available-for-sale, at estimated
market value 141,152 129,927
Held-to-maturity, estimated market
value of $23,845 at March 31, 1997
and $21,945 at December 31, 1996 23,922 21,870
Non-marketable equity securities 1,695 1,695
Mortgage loans held-for-sale 820 1,277
Loans, net of allowance for loan
losses of $5,666 and $5,587 at
March 31, 1997 and December 31, 1996
respectively 293,490 280,281
Premises and equipment 10,497 10,717
Accrued interest receivable 4,727 4,517
Other assets 5,991 5,961
Total assets $509,853 $515,440
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand - noninterest bearing $51,927 $64,837
Demand - interest bearing 136,543 127,414
Savings 18,383 17,787
Time deposits $100 and over 33,516 35,550
Other time 155,511 158,542
Total deposits 395,880 404,130
Federal funds purchased and
securities sold under repurchase
agreements 45,977 43,941
Federal Home Loan Bank advances 9,000 9,000
Accrued interest payable 1,525 1,576
Other liabilities 5,042 4,697
Total liabilities 457,424 463,344
Stockholders' equity:
Common stock, $0.01 par value;
6,500,000 shares authorized:
4,958,891 shares issued 50 50
Paid in capital 19,134 19,123
Retained earnings 34,893 33,681
Unrealized loss on securities
available-for-sale (783) (109)
53,294 52,745
Less: treasury stock, at cost,
60,394 and 46,400 shares at
March 31, 1997 and December 31, 1996,
respectively (865) (649)
Total stockholders' equity 52,429 52,096
Total liabilities and
stockholders' equity $509,853 $515,440
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<S> <C> <C>
Interest income: 1997 1996
Interest and fees on loans $6,350 $6,816
Interest and dividends on investments in debt
and equity securities:
Taxable 2,464 1,304
Tax-exempt 75 97
Interest on federal funds sold and interest-bearing
deposits 217 774
Total interest income 9,106 8,991
Interest expense:
Deposits 3,986 3,927
Federal funds purchased and securities sold under
repurchase agreements 536 544
Federal Home Loan Bank advances 147 149
Total interest expense 4,669 4,620
Net interest income 4,437 4,371
Provision for loan losses 75 150
Net interest income after provision for
loan losses 4,362 4,221
Noninterest income:
Trust fees 496 545
Service charges on deposit accounts 165 187
Gains on sale of debt securities 3 0
Gain (Loss) on sales of mortgage loans
held-for-sale, net 44 (7)
Other 382 368
Total noninterest income 1,090 1,093
Noninterest expense:
Salaries and employee benefits 2,005 2,036
Net occupancy 373 374
Equipment 222 259
Data processing 183 192
Federal deposit insurance premiums 11 1
Other 849 972
Total noninterest expense 3,643 3,834
Income before income taxes 1,809 1,480
Income taxes 597 477
Net income $1,212 $1,003
Per share data:
Net income $0.24 $0.20
Weighted average shares of common stock and
equivalents outstanding 4,997,448 5,019,526
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ending March 31, 1997 and 1996
(Unaudited, in thousands)
<TABLE>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $1,212 $1,003
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 283 284
Amortization of bond premiums, net 7 61
Provision for loan losses 75 150
(Gain) loss on sales of loans, net (44) 7
Loss on sale of premises and equipment, net 3 0
Change in valuation allowance on premises
and equipment 131 0
(Increase) decrease in accrued interest receivable (210) 173
Decrease in accrued interest payable (51) (282)
Increase in other assets (42) (93)
Increase in other liabilities 693 80
Decrease (increase) in mortgage loans
held-for-sale 501 (203)
Stock appreciation rights 11 0
Net cash provided by operating activities 2,569 1,180
Cash flows from investing activities:
Net decrease (increase) in loans (13,284) 21,303
Proceeds from maturity of investments in
debt securities:
Held-to-maturity 3,337 6,588
Available-for-sale 10,000 14,321
Purchases of investments in debt and equity
securities:
Held-to-maturity (5,477) 0
Available-for-sale (22,440) (30,016)
Principal paydowns from mortgage-backed and
mortgage-related securities:
Held-to-maturity 74 109
Available-for-sale 200 620
Purchases of premises and equipment (185) (383)
Net cash (used in) provided by
investing activities (27,775) 12,542
Cash flows from financing activities:
Net decrease in demand and savings deposits (3,185) (5,734)
Net decrease in time deposits $100 and over (2,034) (7,343)
Net decrease in other time deposits (3,031) (8,225)
Net increase in federal funds purchased and
securities sold under repurchase agreements 2,036 3,370
Dividends paid 0 (378)
Treasury stock transactions, net (216) 0
Net cash used in financing activities (6,430) (18,310)
Net decrease in cash and cash
equivalents (31,636) (4,588)
Cash and cash equivalents at beginning of period 59,195 80,700
Cash and cash equivalents at end of period $27,559 $76,112
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $4,720 $4,902
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 March 31, 1997 and for the three-month periods ended March
31, 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 period ended March 31, 1997
are not necessarily indicative of the results which may be expected for the
year ended December 31, 1997.
NOTE 2. NEW ACCOUNTING RULES AND REGULATIONS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
Per Share." SFAS 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 used by the Company in computing earnings per share.) SFAS 128 will
be effective for the Company's 1997 annual report. If SFAS 128 had been in
effect during the first quarter of 1997, basic earnings per share would have
been $0.24 per share and diluted earnings per share would have been $0.24 per
share.
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<PAGE>ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
ASSETS AND LIABILITIES
Total assets decreased $5,587,000, or 1.1%, from $515,440,000 at
December 31, 1996 to $509,853,000 at March 31, 1997. Decreases in cash and
due from banks, federal funds sold, and mortgage loans held-for-sale, offset
somewhat by increases in loans, securities available-for-sale, and securities
held-to-maturity, resulted in the decrease in assets.
Federal funds sold decreased $19,300,000, or 68.9%, at March 31, 1997
compared to December 31, 1996. This decrease was a result of excess federal
funds sold being used to purchase securities available-for-sale as well as
fund an increase in loans.
The decrease in cash and due from banks of $12,336,000, or 39.5%, at
March 31, 1997 compared to December 31, 1996 was attributable to a smaller
dollar amount of deposit items in process of collection at March 31, 1997
compared to December 31, 1996.
Investments in securities available-for-sale increased $11,225,000, or
8.6%, at March 31, 1997 compared to December 31, 1996. Investments in
securities held-to-maturity increased $2,052,000, or 9.4%, at March 31, 1997
compared to December 31, 1996. These increases were a result of management's
decision to shift assets into investment securities that yield a higher rate
of return than federal funds sold.
Loans increased $13,209,000, or 4.7%, from December 31, 1996 to March
31, 1997. Included in this change was an increase of $14,587,000, or 21.1%,
in commercial real estate and an increase of $1,342,000, or 2.3%, in
residential real estate. Somewhat offsetting these increases were a
$2,204,000, or 2.0%, decrease in commercial loans and a $437,000, or 0.9%,
decrease in consumer loans. The increase in loans was due to strong loan
demand, especially in the commercial real estate area.
Total deposits decreased $8,250,000, or 2.0%, from $404,130,000 at
December 31, 1996 to $395,880,000 at March 31, 1997. The decrease included a
$12,910,000, or 19.9%, decrease in noninterest bearing demand deposits, a
$2,034,000, or 5.7%, decrease in time deposits $100,000 and over, and a
decrease of $3,031,000, or 1.9%, in other time deposits. These decreases
were offset by an increase of $9,129,000, or 7.2%, in interest bearing demand
deposits and an increase of $596,000, or 3.4%, in savings deposits. The
decrease in deposits was attributable to management's continued emphasis on
appropriate pricing in a competitive market as well as seasonal run-off.
Total deposits were $397,855,000 at March 31, 1996 compared to $395,880,000
at March 31, 1997.
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<PAGE>
CAPITAL
Total stockholders' equity increased $333,000 from December 31,
1996 to March 31, 1997. The change is summarized as follows:
(IN THOUSANDS)
Stockholders' equity, December 31, 1996 $52,096
Net income 1,212
Purchase of treasury stock (216)
Stock appreciation rights 11
Change in unrealized (loss) on securities
available-for-sale (674)
Stockholders' equity, March 31, 1997 $52,429
The Company and BankIllinois 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 March 31, 1997, that the Company and BankIllinois meet all capital
adequacy requirements to which they are subject.
As of March 31, 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 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.
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<PAGE>
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 March 31, 1997:
Total capital
(to risk-weighted assets)
Consolidated $57,270 17.4% $26,287 8.0% N/A
BankIllinois $53,802 16.4% $26,247 8.0% $32,808 10.0%
Tier I capital
(to risk-weighted assets)
Consolidated $53,143 16.2% $13,144 4.0% N/A
BankIllinois $49,682 15.1% $13,123 4.0% $19,685 6.0%
Tier I capital
(to average assets)
Consolidated $53,143 10.4% $20,456 4.0% N/A
BankIllinois $49,682 9.8% $20,372 4.0% $25,465 5.0%
</TABLE>
The concept of interest sensitivity attempts to gauge exposure of
BankIllinois' 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 BankIllinois to
meet the day-to-day demands of deposit customers balanced by its investments
of these deposits. BankIllinois must also be prepared to fulfill the needs
of credit customers for loans with various types of maturities and other
financing arrangements. BankIllinois 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.
BankIllinois' asset and liability management policy addresses interest
rate sensitivity and liquidity in terms of operating ranges for BankIllinois'
gap ratios and establishes maximum limits on the size of gaps. The policy
states that the cumulative ratio of rate-sensitive assets to rate-sensitive
liabilities for the 12-month period should fall within a range of 0.80-1.00
to 1.20-1.00.
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<PAGE>
The following table presents the Company's interest rate sensitivity at
various intervals at March 31, 1997:
<TABLE>
RATE SENSITIVITY OF EARNING ASSETS AND INTEREST BEARING LIABILITIES
(dollars in thousands)
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:
Federal funds sold $8,700 $-- $-- $-- $-- $8,700
Debt and equity securities <F1> 6,097 10,790 16,140 28,244 105,498 166,769
Loans <F2> 79,021 25,391 23,702 38,275 127,921 294,310
Total interest earning assets 93,818 36,181 39,842 66,519 233,419 469,779
Interest bearing liabilities:
Savings and interest-bearing
demand deposits $154,926 $-- $-- $-- $-- $154,926
Time deposits 14,541 22,718 21,630 37,147 92,991 189,027
Federal funds purchased and securities
sold under repurchase agreements 40,228 5,113 166 320 150 45,977
Federal Home Loan Bank advances -- -- -- 2,000 7,000 9,000
Total interest bearing liabilities 209,695 27,831 21,796 39,467 100,141 398,930
Net asset (liability) funding gap (115,877) 8,350 18,046 27,052 133,278 70,849
Repricing gap 0.45 1.30 1.83 1.69 2.33 1.18
Cumulative repricing gap 0.45 0.55 0.65 0.79 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 March 31, 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 $1,159,000 in the 1-30 days
category and $1,075,000 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 three
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 $31,636,000 from December 31,
1996 to March 31, 1997. This decrease came from net cash used in financing
and investing activities offset by cash provided by operating activities.
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<PAGE>
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 three-month period ended March 31, 1997, net
cash provided by operating activities was $1,389,000 more than the net cash
provided by operating activities for the same period in 1996. The primary
reason for the increase in 1997 over 1996 was that mortgage loans
held-for-sale decreased by $501,000 during the first three months of 1997
compared to an increase of $203,000 during the same period during 1996, a
$704,000 decrease. Other liabilities increased $693,000 during the first
three months of 1997, compared to an increase of $80,000 during the same
period in 1996, a $613,000 change. In addition, accrued interest payable
decreased $51,000 during the first three months of 1997 compared to a
decrease of $282,000 during the same period in 1996, a $231,000 change. A
change in the valuation allowance on premises and equipment of $131,000
during the first three months of 1997 also positively affected cash provided
by operating activities. The allowance is for the anticipated loss on the
closing of the Champaign Money Market branch in May 1997. Cash provided by
operating activities was also positively affected by an increase in net
income of $209,000 and negatively affected by a decrease in provision for
loan losses to $75,000 during the first three months of 1997 from $150,000
during the same period in 1996. Cash provided by operating activities was
somewhat offset by an increase in accrued interest receivable of $210,000
during the first three months of 1997 compared to a decrease of $173,000
during the same period in 1996, a change of $383,000.
Net cash used in investing activities was $27,775,000 for the
three-month period ended March 31, 1997 compared to cash provided of
$12,542,000 for the same period in 1996. Loans increased $13,284,000 during
the three-month period ended March 31, 1997, compared to a $21,303,000
decrease in loans during the same period in 1996. Purchases of investments
in debt and equity securities available-for-sale were $22,440,000 compared to
purchases of $30,016,000 during the same period in 1996, a change of
$7,576,000. Purchases of investments in debt and equity securities
held-to-maturity during the first three months of 1997 used $5,477,000 of
cash to compared to no purchases during the same period in 1996. These uses
of cash were somewhat offset by proceeds from maturities of investments in
debt securities available-for-sale of $10,000,000 during the first three
months of 1997 compared to $14,321,000 for the same period in 1996, a change
of $4,321,000. Also offsetting the uses of cash were proceeds from maturity
of investments in held-to-maturity debt securities of $3,337,000 during the
first three months of 1997 compared to $6,588,000 during the same period in
1996, a change of $3,251,000.
Net cash used in financing activities for the first three months of 1997
was $6,430,000 compared to cash used of $18,310,000 during the same period in
1996. Included in the decrease in cash used was a decrease in total deposits
of $8,250,000 during the first three months of 1997 compared to a decrease of
$21,302,000 during the same period in 1996, a change of $13,052,000. The
decrease in deposits in 1997 was somewhat offset by an increase in federal
funds purchased and securities sold under repurchase agreements of $2,036,000
in 1997. Federal funds purchased and securities sold under repurchase
agreements increased $3,370,000 during the same period in 1996.
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<PAGE>
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 $5,666,000 at March 31, 1997
compared to $5,587,000 at December 31, 1996. Although the allowance for loan
loss balance rose by $79,000 from December 31, 1996 to March 31, 1997, the
allowance for loan losses as a percentage of total loans decreased slightly
from 1.95% to 1.89% as total loans increased during the first quarter.
The allowance for loan losses as a percentage of nonperforming loans was
109% at March 31, 1997 compared to 212% at December 31, 1996. This reduction
was due to the addition of loans totaling $2,648,489 secured by an office
building and parking lots located near the Bank's main offices to non-accrual
status during the first quarter. These loans had been previously identified
by management as potential problem assets and a specific allocation had been
assigned to absorb any anticipated loss. In April 1997, both the loans on
the office building and parking lots were removed from the non-accrual loan
category. During April, the Bank exercised an option to acquire the parking
lots and has recorded an increase in premises and equipment of $420,000
during the second quarter. In addition, approximately $1,834,000,
representing the loan balance on the office building, net of deferred gain
offset somewhat by additional costs was transferred to other real estate.
The Bank is actively attempting to lease and/or sell the office building.
Management remains 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 THREE MONTHS ENDED MARCH 31, 1997
Net income for the first three months of 1997 was $1,212,000, a
$209,000, or 20.8%, increase from the first three months of 1996. Net income
per share increased $0.04, or 20.0%, to $0.24 in the first three months of
1997 from $0.20 in the same period of 1996.
Net interest income was $66,000, or 1.5% higher for the first three
months of 1997 compared to 1996. Total interest income was $115,000, or 1.3%
higher in 1997 compared to 1996, and interest expense increased $49,000, or
1.1%. The increase in interest income was primarily due to an increase in
average earning assets as well as a shift of assets into higher yielding
investments. The increase in interest expense was primarily due to higher
interest rates on interest bearing liabilities.
The increase in total interest income included an increase of $980,000,
or 83.7%, on securities available-for-sale and an increase of $186,000, or
191.8%, on taxable securities held
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<PAGE>-to-maturity. The increase in interest income on securities was
somewhat offset by decreases in interest income on federal funds sold of
$557,000, or 72.0%, which was reflective of moving funds into higher yielding
investment alternatives. Also offsetting the increase in investment income
was a decrease in total loan interest income of $466,000, or 6.8% due to
continued focus on maintaining a loan portfolio that is both profitable and
high quality.
The provision for loan losses recorded was $75,000 during the first
three months of 1997. This was $75,000, or 50.0%, less than the amount
recorded during the first three 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 three months of 1997 was based
on management's analysis of the Bank's loan portfolio and adequacy of
allowance for loan losses.
Total other income decreased $3,000, or 0.3%, during the first three
months of 1997 compared to the first three months of 1996. Included in this
decrease were decreases of $49,000, or 9.0%, in trust fees, and $22,000, or
11.8%, in service charges on deposit accounts. Somewhat offsetting those
decreases was an increase of $51,000 in gains on sales of mortgage loans
held-for-sale.
Total other expenses decreased $191,000, or 5.0%, during the first three
months of 1997 compared to the first three months of 1996. Included in the
decrease were decreases in salaries and employee benefits of $31,000,
equipment of $37,000, and other expenses of $123,000. 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, the absence
of costs to relocate equipment which was incurred in early 1996, and reduced
maintenance agreement costs. The decrease in other expenses was the result
of lower expenses for marketing, office supplies, and overall reductions due
to improved efficiency. Included in first quarter 1997 other expenses was
$131,000 of expense in anticipation of a loss on the closing of the Champaign
Money Market branch on May 10th.
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,
Page 13
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<PAGE> 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.
RECENT REGULATORY DEVELOPMENTS
Various bills have been introduced in the Congress that would allow bank
holding companies to engage in a wider range of non-banking activities,
including greater authority to engage in securities and insurance activities.
While the scope of permissible non-banking activities and the conditions
under which the new powers could be exercised varies among the bills, the
expanded powers generally would be available to a bank holding company only
if the bank holding company and its bank subsidiaries remain well-capitalized
and well-managed. The bills also impose various restrictions on transactions
between the depository institution subsidiaries of bank holding companies and
their nonbank affiliates. These restrictions are intended to protect the
depository institutions from the risks of the new non-banking activities
permitted to such affiliates.
Additionally, legislation has been introduced in Illinois that would
generally allow banks to engage in insurance activities, subject to various
conditions, including restrictions on the manner in which insurance products
are marketed to bank customers and requirements that banks selling insurance
provide certain disclosures to customers. The Illinois legislature is also
considering legislation that would prohibit out-of-state banks from acquiring
a bank located in Illinois unless the Illinois-based bank has been in
existence and continuously operated for a period of at least five years.
At this time, the Company is unable to predict whether any of the
pending bills will be enacted and, therefore, is unable to predict the impact
such legislation may have on the operations of the Company and the Bank.
Page 14
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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
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 15
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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: May 15, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,859
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 142,847
<INVESTMENTS-CARRYING> 23,922
<INVESTMENTS-MARKET> 23,845
<LOANS> 294,310<F1>
<ALLOWANCE> 5,666
<TOTAL-ASSETS> 509,853
<DEPOSITS> 395,880
<SHORT-TERM> 45,977
<LIABILITIES-OTHER> 6,567
<LONG-TERM> 9,000
0
0
<COMMON> 50
<OTHER-SE> 52,379
<TOTAL-LIABILITIES-AND-EQUITY> 509,853
<INTEREST-LOAN> 6,350
<INTEREST-INVEST> 2,539
<INTEREST-OTHER> 217
<INTEREST-TOTAL> 9,106
<INTEREST-DEPOSIT> 3,986
<INTEREST-EXPENSE> 4,669
<INTEREST-INCOME-NET> 4,437
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 3,643
<INCOME-PRETAX> 1,809
<INCOME-PRE-EXTRAORDINARY> 1,809
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,212
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 7.74
<LOANS-NON> 4,258
<LOANS-PAST> 958
<LOANS-TROUBLED> 158
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,587
<CHARGE-OFFS> 81
<RECOVERIES> 85
<ALLOWANCE-CLOSE> 5,666
<ALLOWANCE-DOMESTIC> 5,666
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes mortgages available-for-sale and net of allowance for loan losses
of $5,666.
</FN>
</TABLE>