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, 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 August 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 7
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 18
SIGNATURES 19
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited, in thousands, except per share data)
June 30,
<TABLE>
<S> <C> <C>
1997 1996
ASSETS
Cash and due from banks $19,166 $31,195
Federal funds sold 8,500 28,000
Investments in debt and equity securities:
Available-for-sale, at estimated market value 139,559 129,927
Held-to-maturity, estimated market value of
$23,797 at June 30, 1997 and $21,945
at December 31, 1996 23,759 21,870
Non-marketable equity securities 1,550 1,695
Mortgage loans held-for-sale 1,909 1,277
Loans, net of allowance for loan losses of $5,689
and $5,587 at June 30, 1997 and
December 31, 1996 respectively 290,709 280,281
Premises and equipment 11,037 10,717
Accrued interest receivable 4,726 4,517
Other assets 7,418 5,961
Total assets $508,333 $515,440
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand - noninterest bearing $54,599 $64,837
Demand - interest bearing 134,886 127,414
Savings 17,662 17,787
Time deposits $100 and over 31,753 35,550
Other time 155,730 158,542
Total deposits 394,630 404,130
Federal funds purchased and securities sold
under repurchase agreements 43,924 43,941
Federal Home Loan Bank advances 9,000 9,000
Accrued interest payable 1,526 1,576
Other liabilities 4,884 4,697
Total liabilities 453,964 463,344
Stockholders' equity:
Common stock, $0.01 par value; 6,500,000
shares authorized:
5,206,663 shares issued 52 52
Paid in capital 23,090 23,057
Retained earnings 32,357 29,745
Unrealized loss on securities available-for-sale (227) (109)
55,272 52,745
Less: treasury stock, at cost, 65,765 and
48,720 shares at June 30, 1997 and
December 31, 1996, respectively (903) (649)
Total stockholders' equity 54,369 52,096
Total liabilities and stockholders'
equity $508,333 $515,440
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 1997 and 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<S> <C> <C>
Interest income: 1997 1996
Interest and fees on loans 12,900 13,315
Interest and dividends on investments in debt and
equity securities:
Taxable 4,996 2,871
Tax-exempt 151 193
Interest on federal funds sold and interest-bearing
deposits 333 1,306
Total interest income 18,380 17,685
Interest expense:
Deposits 8,030 7,685
Federal funds purchased and securities sold under
repurchase agreements 1,104 1,013
Federal Home Loan Bank advances 296 298
Total interest expense 9,430 8,996
Net interest income 8,950 8,689
Provision for loan losses 150 300
Net interest income after provision
for loan losses 8,800 8,389
Noninterest income:
Trust fees 999 1,097
Service charges on deposit accounts 328 370
Gains on sale of debt securities 7 0
Gains on sales of mortgage loans held-for-sale, net 119 15
Other 762 743
Total noninterest income 2,215 2,225
Noninterest expense:
Salaries and employee benefits 3,935 3,985
Net occupancy 754 738
Equipment 447 488
Data processing 357 361
Federal deposit insurance premiums 24 1
Other 1,591 1,931
Total noninterest expense 7,108 7,504
Income before income taxes 3,907 3,110
Income taxes 1,295 1,011
Net income $2,612 $2,099
Per share data:
Net income $0.50 $0.40
Weighted average shares of common stock and
equivalents outstanding 5,248,607 5,269,110
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended June 30, 1997 and 1996
(Unaudited, in thousands, except per share data)
<TABLE>
<S> <C> <C>
Interest income: 1997 1996
Interest and fees on loans $6,550 $6,499
Interest and dividends on investments in debt
and equity securities:
Taxable 2,532 1,567
Tax-exempt 76 96
Interest on federal funds sold and interest-
bearing deposits 116 532
Total interest income 9,274 8,694
Interest expense:
Deposits 4,044 3,758
Federal funds purchased and securities sold
under repurchase agreements 568 469
Federal Home Loan Bank advances 149 149
Total interest expense 4,761 4,376
Net interest income 4,513 4,318
Provision for loan losses 75 150
Net interest income after provision for
loan losses 4,438 4,168
Noninterest income:
Trust fees 503 552
Service charges on deposit accounts 163 183
Gains on sale of debt securities 4 0
Gains on sales of mortgage loans held-for-sale, net 75 22
Other 380 375
Total noninterest income 1,125 1,132
Noninterest expense:
Salaries and employee benefits 1,929 1,949
Net occupancy 381 364
Equipment 225 229
Data processing 174 169
Federal deposit insurance premiums 13 0
Other 743 959
Total noninterest expense 3,465 3,670
Income before income taxes 2,098 1,630
Income taxes 698 534
Net income $1,400 $1,096
Per share data:
Net income $0.27 $0.21
Weighted average shares of common stock and
equivalents outstanding 5,246,450 5,260,640
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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CENTRAL ILLINOIS FINANCIAL CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ending June 30, 1997 and 1996
(Unaudited, in thousands)
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $2,612 $2,099
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 565 576
Amortization of bond premiums, net 6 111
Provision for loan losses 150 300
Gain on sales of loans, net (119) (15)
Loss on disposal of premises and equipment, net 135 4
Increase in accrued interest receivable (209) (247)
Decrease in accrued interest payable (50) (504)
Increase in other assets (1,480) (236)
Increase in other liabilities 248 107
Increase in mortgage loans held-for-sale (513) (440)
Stock appreciation rights 36 0
Net cash provided by operating
activities 1,381 1,755
Cash flows from investing activities:
Net decrease (increase) in loans (10,578) 24,402
Proceeds from maturity of investments in
debt securities:
Held-to-maturity 4,939 8,638
Available-for-sale 19,000 16,655
Proceeds from sales of investments:
Non-marketable securities 145 0
Purchases of investments:
Held-to-maturity (7,025) (5,500)
Available-for-sale (29,457) (48,856)
Principal paydowns from mortgage-backed and
mortgage-related securities:
Held-to-maturity 170 244
Available-for-sale 667 522
Purchases of premises and equipment (998) (456)
Proceeds from sale of premises and equipment 1 0
Net cash used in investing activities (23,136) (4,351)
Cash flows from financing activities:
Net decrease in demand and savings deposits (2,891) (2,089)
Net decrease in time deposits $100 and over (3,797) (13,538)
Net decrease in other time deposits (2,812) (20,757)
Net decrease in federal funds purchased and
securities sold under repurchase
agreements (17) (405)
Dividends paid 0 (378)
Treasury stock transactions, net (254) (374)
Fractional shares purchased following
stock dividend (3) (3)
Net cash used in financing activities (9,774) (37,544)
Net decrease in cash and cash
equivalents (31,529) (40,140)
Cash and cash equivalents at beginning of period 59,195 80,700
Cash and cash equivalents at end of period $27,666 $40,560
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $9,480 $9,500
Income taxes 774 672
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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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, 1997 and for the three-month and six-month periods
ended June 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 six-month periods ended June
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.
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ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
ASSETS AND LIABILITIES
Total assets decreased $7,107,000, or 1.4%, from $515,440,000 at December
31, 1996 to $508,333,000 at June 30, 1997. Decreases in federal funds sold and
cash and due from banks, offset somewhat by increases in loans, securities
available-for-sale, securities held-to-maturity, other assets, mortgage loans
held-for-sale, and premises and equipment, resulted in the decrease in assets.
Federal funds sold decreased $19,500,000, or 69.6%, at June 30, 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
the increase in loans.
The decrease in cash and due from banks of $12,029,000, or 38.6%, at June
30, 1997 compared to December 31, 1996 was attributable to a smaller dollar
amount of deposit items in process of collection at June 30, 1997 compared to
December 31, 1996.
Investments in securities available-for-sale increased $9,632,000, or 7.4%,
at June 30, 1997 compared to December 31, 1996. Investments in securities
held-to-maturity increased $1,889,000, or 8.6%, at June 30, 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 $10,428,000, or 3.7%, from December 31, 1996 to June 30,
1997. Included in this change was an increase of $15,694,000, or 22.7%, in
commercial real estate and an increase of $929,000, or 1.9%, in consumer loans.
Somewhat offsetting these increases were a $3,221,000, or 2.9%, decrease in
commercial loans and a $2,872,000, or 4.9%, decrease in residential real
estate. The increase in loans was due to strong loan demand in the Company's
market area, especially with respect to commercial real estate loans.
Other assets increased $1,457,000, or 24.4%, from December 31, 1996 to June
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. Somewhat
offsetting this increase was the sale of other real estate totaling $237,000
during the first six months of 1997.
Premises and equipment increased $320,000, or 3.0%, from December 31, 1996
to June 30, 1997. Included in this change was the purchase of parking lots
located near the Bank's main offices for $420,000.
Total deposits decreased $9,500,000, or 2.4%, from $404,130,000 at December
31, 1996 to $394,630,000 at June 30, 1997. The decrease included a
$10,238,000, or 15.8%, decrease in noninterest bearing demand deposits, a
$3,797,000, or 10.7%, decrease in time deposits $100,000 and over, a decrease
of $2,812,000, or 1.8%, in other time deposits, and a $125,000,
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or 0.7%, decrease in savings deposits. These decreases were somewhat offset by
an increase of $7,472,000, or 5.9%, in interest bearing demand deposits. 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 $394,630,000 at June 30, 1997 compared to $382,773,000 at
June 30, 1996, a 3.1% increase.
CAPITAL
Total stockholders' equity increased $2,273,000 from December 31, 1996
to June 30, 1997. The change is summarized as follows:
(IN THOUSANDS)
Stockholders' equity, December 31, 1996 $52,096
Net income 2,612
Purchase of treasury stock (254)
Stock appreciation rights 36
Purchase of fractional shares related to stock dividend (3)
Change in unrealized gain/(loss) on securities
available-for-sale (118)
Stockholders' equity, June 30, 1997 $54,369
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 June
30, 1997, that the Company and BankIllinois meet all capital adequacy
requirements to which they are subject.
As of June 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 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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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:
<S> <C> <C> <C> <C> <S><C> <C>
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 1997:
Total capital
(to risk-weighted assets)
Consolidated $58,636 18.0% $26,096 8.0% N/A
BankIllinois $55,166 16.9% $26,060 8.0% $32,575 10.0%
Tier I capital
(to risk-weighted assets)
Consolidated $54,539 16.7% $13,048 4.0% N/A
BankIllinois $51,074 15.7% $13,030 4.0% $19,545 6.0%
Tier I capital
(to average assets)
Consolidated $54,539 10.8% $20,289 4.0% N/A
BankIllinois $51,074 10.1% $20,188 4.0% $25,235 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 June 30, 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 $8,500 $-- $-- $-- $-- $8,500
Debt and equity securities <F1> 4,734 12,200 13,276 20,501 114,157 164,868
Loans <F2> 74,070 19,255 21,687 41,008 142,287 298,307
Total earning assets 87,304 31,455 34,963 61,509 256,444 471,675
Interest bearing liabilities:
Savings and interest-bearing
demand deposits $152,548 $-- $-- $-- $-- $152,548
Time deposits 13,462 17,388 19,446 62,007 75,180 187,483
Federal funds purchased and securities
sold under repurchase agreements 38,286 168 5,120 300 50 43,924
Federal Home Loan Bank advances -- -- 1,000 1,000 7,000 9,000
Total interest bearing liabilities 204,296 17,556 25,566 63,307 82,230 392,955
Net asset (liability) funding gap ($116,992) $13,899 $9,397 ($1,798) $174,214 $78,720
Repricing gap 0.43 1.79 1.37 0.97 3.12 1.20
Cumulative repricing gap 0.43 0.54 0.62 0.69 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, 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 $1,170,000 in the 1-30 days category and
$1,031,000 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
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 $31,529,000 from December 31, 1996 to June 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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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, 1997, net cash
provided by operating activities was $374,000 less than the net cash provided
by operating activities for the same period in 1996. Cash provided by operating
activities included $2,612,000 net income during the first six months of 1997,
compared to $2,099,000 during the same period in 1996, an increase of $513,000.
The provision for loan losses was $150,000 during the first six months of 1997,
compared to $300,000 during the same period in 1996, a change of $150,000. A
loss on disposal of premises and equipment during the first six months of 1997
of $135,000 also positively affected cash provided by operating activities
compared to $4,000 during the same period in 1996, a change of $131,000. The
majority of the loss on disposal was due to the closing of the Champaign Money
Market branch in May 1997. Other liabilities increased $248,000 during the
first six months of 1997, compared to an increase of $107,000 during the same
period in 1996, a change of $141,000. Somewhat offsetting cash provided by
operating activities was the increase in other assets of $1,480,000 during
the first six months of 1997, compared to an increase of $236,000 during the
same period in 1996, a $1,244,000 change. Another use of cash was the increase
in mortgage loans held for sale of $513,000 during the first six months of
1997, compared to an increase of $440,000 during the same period in 1996, a
change of $73,000. Accrued interest payable decreased $50,000 during the
first six months of 1997, compared to a decrease of $504,000 during the same
period in 1996, a change of $454,000.
Net cash used in investing activities was $23,136,000 for the first six
months of 1997, compared to cash used of $4,351,000 for the same period in
1996, an increase of $18,785,000. Purchases of investments in debt and
equity securities available-for-sale were $29,457,000 during the first six
months of 1997 compared to purchases of $48,856,000 during the same period in
1996, a change of $19,399,000. Due to strong loan demand, loans increased
$10,578,000 during the first six months of 1997, compared to a $24,402,000
decrease during the same period in 1996, a change of $34,980,000. Purchases
of investments in debt and equity securities held-to-maturity during the
first six months of 1997 used $7,025,000 of cash compared to $5,500,000
during the same period in 1996, an increase of $1,525,000. Purchases of
premises and equipment were $998,000 during the first six months of 1997,
compared to $456,000 during the same period in 1996, a change of $542,000.
Somewhat offsetting these uses of cash were proceeds from maturities of
investments in debt securities available-for-sale of $19,000,000 during the
first six months of 1997, compared to $16,655,000 during the same period in
1996, a change of $2,345,000. Proceeds from the maturity of investments in
debt securities held-to-maturity were $4,939,000 during the first six months
of 1997 compared to $8,638,000 during the same period in 1996, a change of
$3,699,000.
Net cash used in financing activities for the first six months of 1997 was
$9,774,000 compared to cash used of $37,544,000 during the same period in
1996, a decrease of $27,770,000. Included in cash used by financing
activities was a decrease in total deposits of $9,500,000 during the first
six months of 1997 compared to a decrease of $36,384,000 during the same
period in 1996, a change of $26,884,000. Treasury stock purchases totalled
$254,000 during the first six months of 1997, compared to $374,000 during the
same period of 1996, a change of $120,000. The decrease in federal funds
purchased and securities sold under repurchase agreements was $17,000 during
the first six months of 1997, compared to a decrease of $405,000 during the
same period in 1996, a change of $388,000. There were no cash
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dividends paid during the first six months of 1997, compared to $378,000
during the same period in 1996, a change of $378,000. It is management's
intention to reinvest in the Company rather than pay cash dividends in the
near future.
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 $5,689,000 at June 30, 1997
compared to $5,587,000 at December 31, 1996. Although the allowance for loan
loss balance rose by $102,000 from December 31, 1996 to June 30, 1997, the
allowance for loan losses as a percentage of total loans decreased slightly
from 1.95% to 1.91% as total loans increased during the second quarter.
The allowance for loan losses as a percentage of nonperforming loans was
157% at June 30, 1997 compared to 212% at December 31, 1996. This reduction
was due to the $1,606,500 increase in loans 90 days past due and still
accruing and the reduction of non-accrual loans by $621,000 as two
residential real estate properties were sold by their owners. The increase
in loans 90 days past due and still accruing was divided largely between
commercial real estate ($638,000), personal real estate ($561,000) and
commercial and industrial loans ($414,000). 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 SIX MONTHS ENDED JUNE 30, 1997
Net income for the first six months of 1997 was $2,612,000, a $513,000, or
24.4%, increase from the first six months of 1996. Net income per share
increased $0.10, or 25.0%, to $0.50 in the first six months of 1997 from
$0.40 in the same period of 1996.
Net interest income was $261,000, or 3.0% higher for the first six months
of 1997 compared to 1996. Total interest income was $695,000, or 3.9% higher
in 1997 compared to 1996, and interest expense increased $434,000, or 4.8%.
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 an increase in average
interest bearing liabilities.
The increase in total interest income included an increase of $2,125,000,
or 74.0%, 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 $973,000, or 74.5%, which was reflective of
moving funds into higher yielding investment alternatives. Also
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<PAGE>
offsetting the increase in investment income was a decrease in total loan
interest income of $415,000, or 3.1% due to continued focus on maintaining a
loan portfolio that is both profitable and high quality.
The provision for loan losses recorded was $150,000 during the first six
months of 1997. This was $150,000, or 50.0%, less than the amount recorded
during the first six 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 six months of 1997 was based on
management's analysis of the Bank's loan portfolio and adequacy of allowance
for loan losses.
Total noninterest income decreased $10,000, or 0.4%, during the first six
months of 1997 compared to the first six months of 1996. Included in this
decrease were decreases of $98,000, or 8.9%, in trust fees, and $42,000, or
11.4%, in service charges on deposit accounts. Somewhat offsetting those
decreases was an increase of $104,000 in gains on sales of mortgage loans
held-for-sale.
Total noninterest expenses decreased $396,000, or 5.3%, during the first
six months of 1997 compared to the first six months of 1996. Included in the
decrease were decreases in salaries and employee benefits of $50,000,
equipment of $41,000, and other expenses of $340,000. 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 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 JUNE 30, 1997
Net income for the second quarter of 1997 was $1,400,000, a $304,000, or
27.7%, increase compared to the same period in 1996. Net income per share
increased $0.06, or 28.6%, to $0.27 in 1997 from $0.21 in 1996.
Net interest income was $195,000, or 4.5% higher for the second quarter of
1997 compared to 1996. Total interest income was $580,000, or 6.7% higher in
the second quarter of 1997 compared to the second quarter of 1996, and
interest expense increased $385,000, or 8.8% during the same periods. 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 due to both an increase in average interest
bearing liabilities and higher interest rates.
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The increase in total interest income included an increase of $965,000,
or 61.6%, on taxable investments in debt and equity securities, and
an increase of $51,000, or 0.8% on interest and fees on loans. Somewhat
offsetting these increases were decreases in interest income on federal
funds sold of $416,000, or 78.2%, which was reflective of moving funds
into higher yielding investment alternatives.
The provision for loan losses recorded was $75,000 during the second
quarter of 1997. This was $75,000, or 50.0%, less than the amount recorded
during the second quarter 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 second quarter of 1997 was based on
management's analysis of the Bank's loan portfolio and adequacy of allowance
for loan losses.
Total noninterest income decreased $7,000, or 0.6%, during the second
quarter of 1997 compared to the second quarter of 1996. Included in this
decrease were decreases of $49,000, or 8.9%, in trust fees, and $20,000, or
10.9%, in service charges on deposit accounts. Somewhat offsetting those
decreases was an increase of $53,000 in gains on sales of mortgage loans
held-for-sale.
Total noninterest expenses decreased $205,000, or 5.6%, during the second
quarter of 1997 compared to the second quarter of 1996. Included in the
decrease were decreases in salaries and employee benefits of $20,000, and
other expenses of $216,000. The reduction in salary and employee benefits
reflected continued efficiency improvements which resulted in lowering the
Company's number of employees. The decrease in other expenses included
decreases in expenses for marketing, 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.
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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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
The Committee on Banking and Financial Services of the U.S. House of
Representatives has approved legislation that would allow bank holding
companies to engage in a wider range of nonbanking activities, including
greater authority to engage in securities and insurance activities. 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, and if each of the depository institution subsidiaries of
the bank holding company had received at least a "satisfactory" rating under
the Community Reinvestment Act. The proposed legislation would 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 nonbanking activities permitted to such affiliates. At this
time, the Company is unable to predict whether the proposed legislation will
be enacted and, therefore, is unable to predict the impact such legislation
may have on the operations of the Company and its subsidiaries.
Additionally, legislation has been enacted in Illinois that would allow
Illinois banks, effective October 1, 1997, to engage in insurance activities,
subject to various conditions, including requirements for the manner in which
insurance products are marketed to bank customers and requirements that banks
selling insurance provide certain disclosures to customers. Legislation has
also been enacted in Illinois that would prohibit out-of-state banks from
acquiring an Illinois bank unless the Illinois bank has been in existence and
continuously operated for a period of at least five years.
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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
On April 21, 1997, the Company's annual meeting of stockholders was held. At
the meeting, Robert J. Cochran, Gregory B.Lykins and August C. Meyer, Jr.
were elected to serve as Class II directors with terms expiring in 2000.
Continuing as Class I directors until 1999 are David J. Downey, Van A.
Dukeman, Gene A. Salmon and James A. Sullivan. Continuing as Class III
directors until 1998 are Roy V. Van Buskirk, George T. Shapland and Dean R.
Stewart. The stockholders also voted to ratify the appointment of McGladrey
& Pullen, LLP, as independent auditors for the 1997 fiscal year.
There were 4,898,497 issued and outstanding shares of Common Stock entitled
to vote at the annual meeting. The voting on each item presented at the
annual meeting was as follows:
Election of Directors:
FOR WITHHELD
Robert J. Cochran 4,207,242 3,066
Gregory B. Lykins 4,207,242 3,066
August C. Meyer, Jr. 4,204,790 5,518
Ratification of Independent Auditors:
FOR AGAINST ABSTAIN BROKER NON-VOTES
4,194,625 610 15,073 None
ITEM 5. OTHER INFORMATION
None
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports
None
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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 14, 1997
By: /s/ David B. White
Executive Vice President
and Chief Financial Officer
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<PAGE>
<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>
