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, 1999
Commission File Number: 33-90342
BANKILLINOIS FINANCIAL CORPORATION
(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 3, 1999:
BankIllinois Financial Corporation Common Stock 5,546,055
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<PAGE>
Table of Contents
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures 20
About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(Unaudited, in thousands, except share data)
<S> <C> <C>
June 30, Dec. 31,
1999 1998
ASSETS
Cash and due from banks $ 15,807 $ 19,080
Federal funds sold 600 6,500
Investments in debt and equity securities:
Available-for-sale, at fair value 107,016 124,055
Held-to-maturity, at cost (fair value of $72,046 and
$65,581 at June 30, 1999 and December 31, 1998, respectively) 73,535 65,509
Non-marketable equity securities 1,613 1,572
Mortgage loans held for sale 1,602 10,951
Loans, net of allowance for loan losses of $5,012 and
$5,279 at June 30, 1999 and December 31, 1998,
respectively 317,248 287,306
Premises and equipment 12,478 12,195
Accrued interest receivable 4,523 4,865
Other assets 6,051 5,340
Total assets $ 540,473 $ 537,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 55,565 $ 63,002
Demand, interest bearing 149,539 157,052
Savings 17,731 17,748
Time, $100 and over 37,896 34,582
Other time 133,246 137,514
Total deposits 393,977 409,898
Federal funds purchased and securities sold under
repurchase agreements 68,964 49,963
Federal Home Loan Bank advances and
other borrowings 9,207 10,000
Accrued interest payable 1,369 1,399
Other liabilities 5,544 5,406
Total liabilities 479,061 476,666
Stockholders' equity:
Preferred stock, no par value; 300,000 shares authorized - -
Common stock, $0.01 par value; 6,500,000 shares authorized;
5,739,965 shares issued 57 57
Paid in capital 35,396 35,374
Retained earnings 29,760 26,877
Accumulated other comprehensive income (38) 1,033
65,175 63,341
Less: treasury stock, at cost, 193,910 and 144,875 shares
at June 30, 1999 and December 31, 1998, respectively (3,763) (2,634)
Total stockholders' equity 61,412 60,707
Total liabilities and stockholders' equity $ 540,473 $ 537,373
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Income
For the Six Months Ended June 30, 1999 and 1998
(Unaudited, in thousands, except share data)
<S> <C> <C>
Interest income: 1999 1998
Loans and fees on loans $ 13,085 $ 13,966
Investments in debt and equity securities
Taxable 4,812 4,575
Tax-exempt 414 203
Federal funds sold and interest-bearing deposits 312 366
Total interest income 18,623 19,110
Interest expense:
Demand, savings, and other time deposits 6,461 7,136
Time deposits $100 and over 907 1,124
Federal funds purchased and securities sold under repurchase agreements 1,363 1,146
Federal Home Loan Bank advances and other borrowings 277 239
Total interest expense 9,008 9,645
Net interest income 9,615 9,465
Provision for loan losses 180 255
Net interest income after provision for loan losses 9,435 9,210
Non-interest income:
Trust fees 1,220 1,102
Service charges on deposit accounts 304 303
Security transactions, net 46 35
Gain on sales of mortgage loans held-for-sale, net 289 254
Other 858 671
Total non-interest income 2,717 2,365
Non-interest expense:
Salaries and employee benefits 3,917 4,429
Occupancy 602 703
Equipment 476 448
Data processing 378 374
Federal deposit insurance premiums 24 25
Other 1,265 1,732
Total non-interest expense 6,662 7,711
Income before income taxes 5,490 3,864
Income taxes 1,734 1,257
Net income $ 3,756 $ 2,607
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains arising during period, net of tax of
($550) and $67, for June 30, 1999 and 1998, respectively (1,068) 131
Less: reclassification adjustment for gains included in net income, net of
tax of ($1) and ($10), for June 30, 1999 and 1998, respectively (3) (20)
Other comprehensive income, net of tax (1,071) 111
Comprehensive income $ 2,685 $ 2,718
Per share data:
Basic earnings per share $ 0.67 $ 0.46
Weighted average shares of common stock outstanding 5,574,180 5,674,350
Diluted earnings per share $ 0.65 $ 0.45
Weighted average shares of common stock and dilutive potential
common shares outstanding 5,774,750 5,851,341
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
For the Three Months Ended June 30, 1999 and 1998
(Unaudited, in thousands, except share data)
<S> <C> <C>
Interest income: 1999 1998
Loans and fees on loans $ 6,751 $ 7,046
Investments in debt and equity securities
Taxable 2,425 2,256
Tax-exempt 211 118
Federal funds sold and interest-bearing deposits 56 154
Total interest income 9,443 9,574
Interest expense:
Demand, savings, and other time deposits 3,202 3,513
Time deposits $100 and over 472 590
Federal funds purchased and securities sold under repurchase agreements 769 591
Federal Home Loan Bank advances and other borrowings 138 117
Total interest expense 4,581 4,811
Net interest income 4,862 4,763
Provision for loan losses 90 90
Net interest income after provision for loan losses 4,772 4,673
Non-interest income:
Trust fees 607 547
Service charges on deposit accounts 158 148
Gain on sales of mortgage loans held-for-sale, net 74 146
Security transactions, net 1 8
Other 516 339
Total non-interest income 1,356 1,188
Non-interest expenses:
Salaries and employee benefits 1,947 1,946
Occupancy 292 343
Equipment 242 231
Data processing 187 182
Federal deposit insurance premiums 12 13
Other 701 805
Total non-interest expenses 3,381 3,520
Income before income taxes 2,747 2,341
Income taxes 872 764
Net income $ 1,875 $ 1,577
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains arising during period, net of tax of
($337) and $53, for June 30, 1999 and 1998, respectively (654) 103
Less: reclassification adjustment for gains included in net income, net of
tax of $0 and ($4), for June 30, 1999 and 1998, respectively (1) (5)
Other comprehensive income, net of tax (655) 98
Comprehensive income $ 1,220 $ 1,675
Per share data:
Basic earnings per share $ 0.34 $ 0.28
Weighted average shares of common stock outstanding 5,555,857 5,677,461
Diluted earnings per share $ 0.33 $ 0.27
Weighted average shares of common stock and dilutive potential
common shares outstanding 5,755,623 5,841,619
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For the Six Months Ending June 30, 1999 and 1998
(Unaudited, in thousands)
<S> <C> <C>
Cash flows from operating activities: 1999 1998
Net income $ 3,756 $ 2,607
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 589 532
Amortization of bond premiums, net 220 -
Provision for loan losses 180 255
Gain on security transactions (46) (35)
Gain on sales of loans, net (289) (254)
Decrease (increase) in accrued interest receivable 342 (74)
Decrease in accrued interest payable (30) (304)
Increase in other assets (302) (545)
Increase in other liabilities 672 505
Stock appreciation rights 26 63
Proceeds from sales of loans originated for sale 33,438 27,922
Loans originated for sale (23,800) (31,041)
Net cash provided by (used in) operating activities 14,756 (369)
Cash flows from investing activities:
Net (increase) decrease in loans (30,532) 677
Proceeds from maturities and calls of investments in debt securities:
Held-to-maturity 12,900 2,065
Available-for-sale 39,708 32,350
Purchases of investments in debt and equity securities:
Held-to-maturity (21,608) (11,403)
Available-for-sale (25,885) (35,906)
Non-Marketable (41) (70)
Principal paydowns from mortgage-backed securities:
Held-to-maturity 701 -
Available-for-sale 1,401 7,685
Purchases of premises and equipment (871) (404)
Proceeds from sale of premises and equipment - 1,380
Net cash used in investing activities (24,227) (3,626)
Cash flows from financing activities:
Net decrease in demand and savings deposits (14,967) (2,216)
Net increase (decrease) in time deposits $100 and over 3,314 (2,618)
Net decrease in other time deposits (4,268) (9,803)
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements 19,001 (1,753)
Net decrease in Federal Home Loan Bank advances (793) (1,000)
Cash dividends paid (852) (824)
Treasury stock transactions, net (1,132) (237)
Fractional shares purchased following stock dividend (5) (4)
Net cash provided by (used in) financing activities 298 (18,455)
Net decrease in cash and cash equivalents (9,173) (22,450)
Cash and cash equivalents at beginning of year 25,580 48,558
Cash and cash equivalents at end of period $ 16,407 $ 26,108
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 9,038 $ 9,950
Income taxes 1,978 984
Disposal of equipment subject to valuation allowance - 304
Change in unrealized gain (loss) on securities available-for-sale (1,622) 168
Change in deferred taxes attributable to unrealized gain (loss) on
securities available-for-sale (551) 57
Real estate acquired through or in lieu of foreclosure 410 26
Dividends declared not paid 444 432
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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BANKILLINOIS FINANCIAL CORPORATION AND SUBSIDIARY
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 BankIllinois Financial Corporation (the "Company") and its
subsidiary, BankIllinois, as of June 30, 1999 and for the three-month and
six-month periods ended June 30, 1999 and 1998 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, 1999 are not necessarily indicative of the results which may be
expected for the year ended December 31, 1999.
For purposes of the consolidated statements of cash flows, cash and
cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods.
Note 2. Gains on Security Transactions
Gains on security transactions include proceeds from sales, calls and
maturities of available-for-sale securities as well as calls and maturities
of held-to-maturity securities. Gross gains and losses are as follows:
<TABLE>
Six Months Ended Three Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
<S> <C> <C> <C> <C>
Available-for-sale $4 $30 $1 $8
Held-to-maturity 42 5 - -
$46 $35 $1 $8
</TABLE>
Note 2. Stock Dividend
At its regular board meeting on May 18, 1999, 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 24, 1999, and the
distribution date was June 4, 1999. The accompanying unaudited condensed
consolidated financial statements have been restated to take the stock
dividend into account.
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Note 3. New Accounting Rules and Regulations
In June 1998, the Statement on Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued,
which is required to be adopted in years beginning after June 15, 1999.
The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt the Statement
effective January 1, 2000. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item
is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings.
Management does not anticipate that the adoption of the new Statement will
have a significant effect on the Company's earnings or financial position.
In July 1999 the Statement on Financial Accounting Standards No. 137 was
issued. This Statement delayed the implementation of Statement No. 133
until fiscal years beginning after June 15, 2000.
In October 1998, the Statement on Financial Accounting Standards No.
134, "Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," was issued, which is effective for the first quarter beginning
after December 15, 1998. The Statement changes the way mortgage banking
firms account for certain securities and other interests they retain after
securitizing mortgage loans which were held for sale. The Company does not
securitize mortgages; therefore, the Statement had no effect on its
financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Assets and Liabilities
Total assets increased $3,100,000, or 0.6%, from $537,373,000 at
December 31, 1998 to $540,473,000 at June 30, 1999. There were increases
in loans, securities held-to-maturity, other assets, and premises and
equipment. These increases were offset somewhat by decreases in securities
available-for-sale, mortgage loans held-for-sale, federal funds sold, cash
and due from banks, and accrued interest receivable.
Loans increased $29,942,000, or 10.4%, from December 31, 1998 to June
30, 1999. Included in this change was an increase of $20,137,000, or
23.3%, in commercial real estate loans and an increase of $19,895,000, or
42.0%, in consumer loans. These increases were somewhat offset by a
decrease of $6,444,000, or 5.7%, in commercial loans and a decrease in
residential real estate loans of $3,911,000, or 8.4%. The loan increase
from December 31, 1998 was mainly due to increased funding in the
commercial real estate area as well as increased demand in the indirect
market resulting in higher consumer loans.
Other assets increased $711,000, or 13.3%, from December 31, 1998 to
June 30, 1999. Contributing to the change was an increase of $551,000 in
deferred taxes caused by the decrease in unrealized gains on securities
available-for-sale from December 31, 1998 to June 30, 1999.
Premises and equipment increased $283,000, or 2.3%, from December 31,
1998 to June 30, 1999. This increase was primarily due to the purchase in
the first quarter of 1999 of a parking lot located at the main bank
facility with a book value of $266,000.
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Investments in securities available-for-sale decreased $17,039,000 or
13.7%, at June 30, 1999 compared to December 31, 1998. Investments in
securities held-to-maturity increased $8,026,000, or 12.3%, at June 30,
1999 compared to December 31, 1998. The net decrease in investments in
debt and equity securities was a result of shifting assets to fund loan
growth.
Mortgage loans held-for-sale decreased $9,349,000 or 85.4%, from
December 31, 1998 to June 30, 1999. The decrease was due to lower demand
in the mortgage loan area at June 30, 1999 than at December 31, 1998 when
low interest rates led to increased refinancing as well as origination of
new mortgage loans.
Federal funds sold decreased $5,900,000, or 90.8%, at June 30, 1999
compared to December 31, 1998. This decrease was a result of excess
federal funds sold also being used to fund the increase in loans.
The decrease in cash and due from banks of $3,273,000, or 17.2%, at
June 30, 1999 compared to December 31, 1998 was attributable to a smaller
dollar amount of deposit items in process of collection at June 30, 1999
compared to December 31, 1998.
Total liabilities increased $2,395,000, or 0.5%, from $476,666,000 at
December 31, 1998 to $479,061,000 at June 30, 1999. Increases in federal
funds purchased and securities sold under repurchase agreements were offset
somewhat by a decrease in deposits as well as Federal Home Loan Bank
advances and other borrowings.
Federal funds purchased and securities sold under repurchase
agreements increased $19,001,000, or 38.0%, from $49,963,000 at December
31, 1998 to $68,964,000 at June 30, 1999. Included in this change were
increases in federal funds purchased of $14,675,000 and term repurchase
agreements of $5,000,000, offset by a decrease in daily repurchase
agreements of $674,000. The net increase was used to fund loan growth.
Total deposits decreased $15,921,000, or 3.9%, from $409,898,000 at
December 31, 1998 to $393,977,000 at June 30, 1999. The decrease included
a $7,513,000, or 4.8%, decrease in interest bearing demand deposits, a
$7,437,000, or 11.8%, decrease in non-interest bearing demand deposits, a
$4,268,000, or 3.1% decrease in other time deposits, and a $17,000, or 0.1%
decrease in savings deposits. These decreases were somewhat offset by a
$3,314,000, or 9.6% increase in time deposits $100,000 and over.
Federal Home Loan Bank advances and other borrowings decreased
$793,000, or 7.9%, from $10,000,000 at December 31, 1998 to $9,207,000 at
June 30, 1999. The decrease was mainly the result of a $1,000,000 Federal
Home Loan Bank advance maturing during the first quarter of 1999. Somewhat
offsetting this was a $207,000 increase in other borrowings due to the
contract purchase of a parking lot at the main bank facility.
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Capital
Total stockholders' equity increased $705,000 from December 31, 1998
to June 30, 1999. The change is summarized as follows:
(in thousands)
Stockholders' equity, December 31, 1998 $60,707
Net income 3,756
Treasury stock transactions, net (1,132)
Stock appreciation rights 26
Purchase of fractional shares related to stock dividend (5)
Cash dividends declared (869)
Other comprehensive income (1,071)
Stockholders' equity, June 30, 1999 $61,412
The Company declared a cash dividend of $0.08 per share, or $444,000,
payable on July 16, 1999 to holders of record on July 6, 1999. A first
quarter cash dividend of $0.08 per share, or $425,000, was paid April 16,
1999.
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 June 30, 1999, that the Company and BankIllinois exceed all
capital adequacy requirements to which they are subject.
As of June 30, 1999, the most recent notification from its primary
regulatory agency 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:
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1999:
Total capital
(to risk-weighted assets)
Consolidated $66,142 18.2% $29,021 8.0% N/A
BankIllinois $59,001 16.5% $28,662 8.0% $35,827 10.0%
Tier I capital
(to risk-weighted assets)
Consolidated $61,441 16.9% $14,511 4.0% N/A
BankIllinois $54,488 15.2% $14,331 4.0% $21,496 6.0%
Tier I capital
(to average assets)
Consolidated $61,441 11.2% $21,934 4.0% N/A
BankIllinois $54,488 10.0% $21,765 4.0% $27,206 5.0%
</TABLE>
Interest Rate Sensitivity
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 as well as financial
forecasting/budgeting/reporting software packages.
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The following table presents the Company's interest rate sensitivity at
various intervals at June 30, 1999:
<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 $600 -- -- -- -- $600
Debt and equity securities <F1> 2,487 9,820 8,892 20,196 140,769 182,164
Loans <F2> 71,859 14,300 30,738 37,398 169,567 323,862
Total interest earning assets 74,946 24,120 39,630 57,594 310,336 506,626
Interest bearing liabilities:
Savings and interest-bearing
demand deposits***
Money market savings deposits 108,846 -- -- -- -- 108,846
Time deposits 13,983 17,026 29,797 36,913 73,423 171,142
Federal funds purchased
securities sold under repurchase
agreements 61,764 -- 2,000 5,000 200 68,964
FHLB advances and other
other borrowings -- 1,000 1,000 23 7,184 9,207
Total interest bearing liabilities 189,620 20,952 37,372 51,079 117,560 416,583
Net asset (liability) funding gap ($114,674) 3,168 2,258 6,515 192,776 $90,043
Interest earning assets as a percentage
of interest bearing liabilities 0.40 1.15 1.06 1.13 2.64 1.22
Cumulative interest earning assets as
a percentage of interest bearing
liabilities 0.40 0.47 0.56 0.66 1.22 1.22
<FN>
<F1> Debt and equity securities include securities available-for-sale,
securities held to maturity, and non-marketable equity securities.
<F2> Loans are gross and include mortgage loans held-for-sale.
<F3> Included in the 1-30 day category of savings and interest-bearing demand
deposits is non-core deposits plus a percentage, based upon industry-
accepted assumptions, of the core deposits. "Core deposits" are the
lowest average balance of the prior twelve months for each product type
included in this category. "Non-core deposits" are the difference
between the current balance and core deposits. The time frames include
a percentage, based upon industry-accepted assumptions, of the core
deposits, as follows:
1-30 Days 31-90 Days 91-180 Days 181-365 Days Over 1 Year
Savings and interest-bearing
demand deposits 2.7% 5.3% 8.3% 16.7% 67.0%
</FN>
</TABLE>
At June 30, 1999, the Company was liability-sensitive due to the
levels of savings and interest bearing demand deposits, short-term time
deposits, and short-term borrowings. As such, the effect of a decrease in
the interest rate for
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all interest earning assets and interest bearing liabilities of 100 basis
points would increase annualized net interest income by approximately
$1,147,000 in the 1-30 days category and $1,115,000 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.
In addition to managing interest sensitivity and liquidity through the
use of gap reports, the Company has provided for emergency liquidity
situations with informal agreements with correspondent banks which permit
the Company to borrow federal funds on an unsecured basis and an additional
$3,951,000 from the Federal Home Loan Bank on a secured basis.
The Company uses financial forecasting/budgeting/reporting software
packages to perform interest rate sensitivity analysis for all product
categories. Previously, the Company disclosed the potential effects of
interest rate changes on the market value of equity. Effective with the
quarter ended June 30, 1999, the Company has changed the primary focus of
its analysis to the effect of interest rate increases and decreases on net
interest income. Management believes that this change more directly
reflects the potential effects on current earnings of interest rate
changes. Call criteria and prepayment assumptions are taken into
consideration for investments in debt and equity securities. All of the
Company's financial instruments are analyzed by a software database which
includes each of the different product categories which are tied to key
rates such as prime, Treasury Bills, or the federal funds rate. The
relationships of each of the different products to the key rate that the
product is tied to is proportional. The software reprices the products
based on current offering rates. The software performs interest rate
sensitivity analysis by performing rate shocks of plus or minus 200 basis
points in 100 basis point increments.
The following table shows projected results at June 30, 1999 and
December 31, 1998 of the impact on net interest income from an immediate
change in interest rates. The results are shown as a percentage change in
net interest income over the next twelve months.
BASIS POINT CHANGE
+200 +100 -100 -200
June 30, 1999 (2.9%) (1.4%) 1.4% 2.8%
December 31, 1998 (3.5%) (1.7%) 1.7% 2.4%
As shown in the above table, there was only a slight change on the
impact of interest rate changes on net interest income at June 30, 1999
compared to December 31, 1998. The Company continues to remain liability
sensitive, causing a projected decrease in net interest income from an
increase in interest rates, and having an opposite affect from a decrease
in interest rates.
The foregoing computations are based on numerous assumptions,
including relative levels of market interest rates, prepayments and deposit
mix. The computed estimates should not be relied upon as a projection of
actual results. Despite the limitations on preciseness inherent in these
computations, management believes that the information provided is
reasonably indicative of the effect of changes in interest rate levels on
the net earning capacity of the Company's current mix of interest earning
assets and interest bearing liabilities. Management continues to use the
results of these computations, along with the results of its computer model
projections, in order to maximize current earnings while positioning the
Company to minimize the effect of a prolonged shift in interest rates that
would adversely affect future results of operations.
At the present time, the most significant market risk affecting the
Company is interest rate risk. Other market risks such as foreign currency
exchange risk and commodity price risk do not occur in the normal business
of the Company. The Company also is not currently using trading activities
or derivative instruments to control interest rate risk.
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Liquidity and Cash Flows
The Company was able to meet liquidity needs during the first six
months of 1999. 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 $9,173,000 from December 31,
1998 to June 30, 1999. This decrease came from net cash used in investing
activities offset by net cash provided by operating and financing
activities.
There were differences in sources and uses of cash during the first
half of 1999 compared to the first half of 1998. More cash was used in the
area of investing activities in the first half of 1999. This was primarily
due to funding a higher dollar amount of loans in the first half of 1999
due to increased loan demand. Paydowns on securities, which are reflective
of the current interest rate environment, were also lower in the first half
of 1999 compared to the first half of 1998. Purchases of debt and equity
securities during the first six months of 1999 was comparable to the same
period of 1998, but proceeds of debt and equity securities were higher
during the first six months of 1999 compared to the same period of 1998.
The investment portfolio was decreased as more cash was needed to fund the
growth in loans. More cash was provided by operating activities in the
first six months of 1999 compared to the first six months of 1998 primarily
due to more proceeds from sales of loans originated for sale and less funds
used for loans originated for sale. There were substantially more loans in
the process of funding at December 31, 1998 compared to December 31, 1997,
thus causing the higher proceeds in the first half of 1999. Cash was
provided by financing activities in the first half of 1999 compared to the
same period in 1998 in which cash was used in financing activities. This
was primarily due to an increase in short-term borrowings which was used to
fund the growth in loans.
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, assessment of Year 2000 credit
risk, 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 $5,012,000 at June 30, 1999 compared to $5,279,000 at
December 31, 1998, as net charge-offs of $447,000 exceeded provisions of
$180,000 during the six month period. The allowance for loan losses as a
percentage of total loans fell to 1.55% at June 30, 1999, compared to 1.74%
at December 31, 1998 as gross loans, including loans held-for-sale,
increased from $304,000,000 to $324,000,000. Net charge-offs of $447,000
during the first six months of 1999 stemmed primarily from the resolution
of a commercial credit which had been identified by management as a
sensitive asset since 1995.
The allowance for loan losses as a percentage of nonperforming loans
rose to 1,836% at June 30, 1999, compared to 343% at December 31, 1998.
This increase was primarily due to a $1,268,000 reduction in non-performing
loans. The total non-accrual loan balance was reduced by $899,000, with
$838,000 of the reduction due to the resolution of a nonaccrual loan, of
which $428,000 was charged off and $410,000 was transferred to other real
estate. The real estate was sold during the second quarter of 1999. The
remainder of the reduction in nonperforming loans was a $369,000 decrease
in loans over 90 days past due and still accruing. 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, 1999
Net income for the first six months of 1999 was $3,756,000, a
$1,149,000, or 44.1%, increase from $2,607,000 during the first six months
of 1998. Basic earnings per share increased $0.21, or 45.7%, to $0.67 in
the first six months
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of 1999 from $0.46 in the same period of 1998. Diluted earnings per share
increased $0.20, or 44.4%, to $0.65 in the first six months of 1999 from
$0.45 in the same period of 1998.
Operating earnings for the six months ended June 30, 1999, were
$3,756,000 compared to $3,089,000 for the same period in 1998, an increase
of $667,000, or 21.6%. Basic earnings per share on operating earnings
increased $0.13, or 24.10%, to $0.67 in the first six months of 1999 from
$0.54 during the first six months of 1998. Diluted earnings per share on
operating earnings increased $0.12, or 22.6%, to $0.65 in the first six
months of 1999 from $0.53 in the same period of 1998. Net income for the
first half of 1999 and 1998 was $3,756,000 and $2,607,000, respectively.
The difference between operating and net earnings was due to non-recurring
items affecting the first quarter of 1998. The non-recurring expense
items, net of tax, in the first quarter of 1998 were $482,000. Included in
these items was $317,000 related to organizational changes implemented to
improve efficiency, including expenses related to the merger of
BankIllinois Trust Company into BankIllinois. Also included was $165,000
of expense related to a loss on disposal of property.
The following table presents, on a tax equivalent basis, an analysis
of changes in net interest income resulting from changes in average volumes
of earning assets and interest bearing liabilities and average rates earned
and paid. The change in interest due to the combined rate/volume variance
has been allocated to rate and volume changes in proportion to the absolute
dollar amounts of change in each.
<TABLE>
Analysis of Volume and Rate Changes
(in thousands)
Six Months Ended June 30, 1999 and 1998
Increase
(Decrease)
from
Previous Due to Due to
Year Volume Rate
<S> <C> <C> <C>
Interest Income
Taxable investment securities $237 $1,002 ($765)
Tax-exempt investment
securities 317 401 (84)
Federal funds sold and interest-bearing deposits (54) 15 (69)
Loans (881) (373) (508)
Total interest income ($381) $1,045 ($1,426)
Interest Expense
Interest bearing demand deposits ($105) $484 ($589)
Savings 15 10 5
Time deposits (802) (500) (302)
Federal funds purchased and securities
sold under repurchase agreements 217 567 (350)
FHLB advances and other borrowings 38 103 (65)
Total interest expense ($637) $664 ($1,301)
Net Interest Income (TE) $256 $381 ($125)
</TABLE>
Net interest income on a tax equivalent basis was $256,000, or 2.7%
higher for the first six months of 1999 compared to 1998. Total interest
income was $381,000, or 2.0% lower in 1999 compared to 1998, and interest
expense decreased $637,000, or 6.6%. The decrease in interest income was
primarily due to lower interest rates offset somewhat by an increase in
average earning assets. The decrease in interest expense was primarily due
to lower interest rates.
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<PAGE>
The decrease in total interest income was mainly due to a decrease in
interest income from loans, offset somewhat by increases in taxable and
tax-exempt investment interest. The decrease in interest income from loans
was due to both the decrease in average loans outstanding as well as lower
interest rates during the first half of 1999 compared to the first half of
1998. Although average loans outstanding were lower for the first six
months of 1999 compared to 1998, gross loans at June 30, 1999 were
$323,862,000 compared to $318,984,000 at June 30, 1998, a 1.5% increase.
The increase in investment interest income was mainly due to an increase in
total average investments, somewhat offset by lower yields. The increase
in the total average investment portfolio included an increase in
investments held-to-maturity of $43,228,000, or 169.0%, offset somewhat by
a decrease in average investments available-for-sale of $12,377,000, or
9.2%, during the first six months of 1999 compared to 1998. Average total
investments were higher in the first half of 1999 due to more funds
available for investing.
The decrease in total interest expense was mainly due to a decrease in
interest on time deposits, offset somewhat by an increase in interest
expense on federal funds purchased and securities sold under repurchase
agreements. Interest expense on time deposits decreased during the first
six months of 1999 compared to the first six months of 1998 mainly because
of lower volume as well as lower rates. Interest expense on federal funds
purchased and securities sold under repurchase agreements increased in the
first half of 1999 compared to 1998 due to an increased amount of
borrowings, mostly in the areas of federal funds purchased and daily
repurchase agreements. This was somewhat offset by lower rates on these
borrowings.
The provision for loan losses recorded was $180,000 during the first
six months of 1999. This was $75,000, or 29.4%, lower than the $255,000
recorded during the first six months of 1998. The provision during the
first six months of 1999 and 1998 was based on management's analysis of the
loan portfolio.
Total non-interest income increased $352,000, or 14.9%, during the
first six months of 1999 compared to the first six months of 1998.
Included in this increase was an increase of $187,000, or 27.9%, in other
non-interest income. This increase included $139,000 of consulting
revenue, an increase of $27,000 on fees from purchased customer receivables
(with recourse), and a $23,000 increase in ATM fees. Also contributing to
the increase in non-interest income was a $118,000, or 10.7%, net increase
in trust fees. This was due to both an increase in the number of accounts
as well as an increase in the market value of the portfolio under
management, somewhat offset by a decrease in farm management fees of
$42,000, or 28.0%, resulting from the declining farm economy. Non-interest
income was also positively affected by a $35,000, or 13.8%, increase in
gains on sales of mortgage loans held-for-sale. This increase reflected a
$5,481,000, or 19.8%, increase in mortgage loans held-for-sale which were
sold during the first half of 1999 compared to the first half of 1998.
Also contributing to the increase in non-interest income was an $11,000, or
31.4%, increase in security transactions. This increase was a result of
the Company amortizing discounts on securities to their maturity date. Due
to decreasing interest rates, several securities were called prior to their
maturity dates during the first half of 1999 which resulted in a gain being
recognized.
Total non-interest expense decreased $1,049,000, or 13.6%, during the
first six months of 1999 compared to the first six months of 1998.
Included in the decrease was a decrease in salaries and employee benefits
of $512,000, or 11.6%. Of this decrease, $472,000 was due to
organizational changes implemented during the first quarter of 1998 to
improve efficiency, including the merger of BankIllinois Trust Company into
BankIllinois. Other expenses decreased $467,000, or 27.0%. Included in
this decrease was a loss on disposal of property of $248,000 in 1998
compared to none in 1999, a gain on disposal of other real estate of
$39,000 in 1999, and a $56,000 decrease in Visa credit card expenses due to
selling the portfolio in September 1998. Net occupancy expense decreased
$101,000, or 14.4%, during the first six months of 1999 compared to the
same period in 1998. Included in occupancy expense in 1999 was rental
income on the Executive Center, which was net of maintenance and
depreciation expenses. This property was moved to premises and equipment
from other assets on December 31, 1998. Also affecting the decrease in
occupancy expense was the sale of a vacant building and the adjacent
parking lot in March 1998.
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<PAGE>
Income tax expense increased $477,000, or 37.9%, during the first half
of 1999 compared to the first half of 1998, due to higher income in 1999
resulting in more taxable income. The Company's effective tax rate was
comparable for both periods.
Results of Operations For the Three Months Ended June 30, 1999
Net income for the second quarter of 1999 was $1,875,000, a $298,000,
or 18.9%, increase from $1,577,000 during the second quarter of 1998.
Basic earnings per share increased $0.06, or 21.4%, to $0.34 in the second
quarter of 1999 from $0.28 in the same period of 1998. Diluted earnings
per share increased $0.06, or 22.2%, to $0.33 in the second quarter of 1999
from $0.27 in the same period of 1998.
The following table presents, on a tax equivalent basis, an analysis
of changes in net interest income resulting from changes in average volumes
of earning assets and interest bearing liabilities and average rates earned
and paid. The change in interest due to the combined rate/volume variance
has been allocated to rate and volume changes in proportion to the absolute
dollar amounts of change in each.
<TABLE>
Analysis of Volume and Rate Changes
(in thousands)
Three Months Ended June 30, 1999 and 1998
Increase
(Decrease)
from
Previous Due to Due to
Year Volume Rate
<S> <C> <C> <C>
Interest Income
Taxable investment securities $169 $895 ($726)
Tax-exempt investment
securities 141 238 (97)
Federal funds sold and interest-bearing deposits (98) (79) (19)
Loans (295) (4) (291)
Total interest income ($83) $1,050 ($1,133)
Interest Expense
Interest bearing demand deposits ($46) $435 ($481)
Savings 9 6 3
Time deposits (392) (240) (152)
Federal funds purchased and securities
sold under repurchase agreements 178 558 (380)
FHLB advances and other borrowings 21 88 (67)
Total interest expense ($230) $847 ($1,077)
Net Interest Income (TE) $147 $203 ($56)
</TABLE>
Net interest income on a tax equivalent basis was $147,000, or 3.0%,
higher for the second quarter of 1999 compared to the second quarter of
1998. Total interest income was $83,000, or 0.9%, lower in 1999 compared
to 1998, and interest expense decreased $230,000, or 4.8%. The decrease in
interest income was primarily due to lower interest rates offset somewhat
by an increase in average earning assets. The decrease in interest expense
was primarily due to lower interest rates offset somewhat by an increase in
interest bearing liabilities.
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The decrease in total interest income was mainly due to a decrease in
interest income from loans, somewhat offset by an increase in taxable and
tax-exempt investment interest income. The decrease in interest income
from loans was primarily due to a decrease in loan rates in the second
quarter of 1999 compared to the second quarter of 1998. The increase in
total investment income was mainly due to an increase in the average
balance of the investment portfolio, somewhat offset by lower yields. The
net increase in the average balance of the investment portfolio included a
$45,244,000, or 161.6% increase in average investments held-to-maturity and
a somewhat offsetting decrease of $13,771,000, or 10.4% in investments
available-for-sale. The net increase in average total investments was due
to more funds available for investing in the second quarter of 1999
compared to the second quarter of 1998.
The decrease in total interest expense was primarily due to a decrease
in interest expense on time deposits, somewhat offset by an increase in
interest expense on federal funds purchased and securities sold under
repurchase agreements. Interest expense on time deposits decreased during
the second quarter of 1999 compared to the second quarter of 1998 mainly
because of lower volume as well as lower rates. Interest expense on
federal funds purchased and securities sold under repurchase agreements
increased in the second quarter of 1999 compared to the second quarter of
1998 due to an increased amount of borrowings, mainly in the area of
federal funds purchased as well as in daily and term repurchase agreements.
This was somewhat offset by lower rates on these borrowings.
The provision for loan losses recorded was $90,000 during both the
second quarter of 1999 and the second quarter of 1998. The provision
during the second quarter of 1999 and 1998 was based on management's
analysis of the loan portfolio.
Total non-interest income increased $168,000, or 14.1%, during the
second quarter of 1999 compared to the second quarter of 1998. Included in
this increase was a $177,000, or 52.2% increase in other non-interest
income. This increase included $139,000 of consulting revenue and an
increase of $23,000 on fees from purchased customer receivables (with
recourse). Trust fees increased $60,000, or 11.0%, during the second
quarter of 1999 compared to the second quarter of 1998. This was due to
both an increase in the number of accounts as well as an increase in the
market value of the portfolio under management, somewhat offset by a
decrease in farm management fees of $21,000, or 28%, due to the declining
farm economy. Somewhat offsetting these net increases in non-interest
income was a decrease of $72,000, or 49.3%, on gains on sales of mortgage
loans held-for-sale. This decrease reflected a $5,774,000, or 36.7%,
decrease in mortgage loans held-for-sale which were sold during the second
quarter of 1999 compared to the second quarter of 1998.
Total non-interest expense decreased $139,000, or 3.9%, during the
second quarter 1999 compared to the second quarter of 1998. Included in
this decrease was a decrease in other non-interest expense of $104,000, or
12.9%. This decrease included a $25,000 decrease in Visa credit card
expenses due to selling the portfolio in September 1998, a $23,000 gain on
the sale of other real estate during the second quarter of 1999, a $23,000
decrease in legal expenses (legal expenses were higher in 1998 because of
costs associated with the BankIllinois and BankIllinois Trust Co. merger in
September 1998), and the absence of start-up and operating costs associated
with opening a new branch in May 1998. Occupancy expenses decreased
$51,000, or 14.9%, during the second quarter of 1999 compared to the same
period in 1998. Included in 1999 occupancy expense was the net income
(rental income less building expenses) for the Executive Center which was
transferred to premises and equipment from other assets on December 31,
1998. Also contributing to the decrease in occupancy expense was lower
building maintenance and repair costs during the second quarter 1999
compared to the second quarter 1998.
Income tax expense increased $108,000, or 14.1%, during the second
quarter of 1999 compared to the second quarter of 1998, due to higher
income in 1999 resulting in more taxable income. The Company's effective
tax rate was comparable for both periods.
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<PAGE>
Year 2000
In December 1996, the Company developed its Year 2000 Project Plan,
following the guidelines established by the FFIEC. An integral part of the
plan was to establish a Year 2000 Committee comprised of representatives
from key areas throughout the organization. The Committee's mission is to
identify issues related to the Year 2000 and to initiate remedial measures
designed to eliminate any adverse effects on the Company's operations. The
Committee has developed a comprehensive, prioritized inventory of all
hardware, software, and material third party providers that may be
adversely affected by the Year 2000 date change, and has contacted vendors
requesting their status as it relates to the Year 2000. This inventory
includes both information technology ("IT") and non-IT systems, such as
alarms, building access, elevators and heating and cooling systems, which
typically contain embedded technology such as microcontrollers. This
inventory is periodically reevaluated to ensure that previously assigned
priorities remain accurate and to track the progress each vendor is making
in resolving the problems associated with the issue. The Company relies on
software purchased from third-party vendors rather than internally-
generated software. As of June 30, 1999, the Company had tested 100% of
its systems on a test server that emulates the current network and systems
of the Company. The Company had renovated all but one of the mission
critical systems. The remaining mission critical system, the item capture
system, was upgraded to a Year 2000 compliant system with imaging
capabilities in mid-July, a timeframe determined by vendor availability.
The Company has received satisfactory Year 2000 testing results for this
equipment from the vendor. The Company is currently operating on the Year
2000 compliant releases for core systems supported by its third party data
processor.
The Year 2000 Committee has also developed a communication plan that
updates the Board of Directors, management, and employees on the Company's
Year 2000 status. A subcommittee was formed to develop and implement the
Company's Y2K Customer Awareness Program. The program outlines a strategy
for communicating with customers, determining key information to be
communicated to both customers and employees, and training employees to
respond appropriately to customer inquiries. In addition, the Company was
instrumental in forming a coalition with other local financial institutions
and a county-wide task force to promote Year 2000 customer awareness in the
community.
The Committee has developed a separate plan in order to manage the
Year 2000 risks posed by commercial borrowing customers. This plan will
identify material loan customers, assess their preparedness, evaluate their
credit risk to the Company, and implement appropriate controls to mitigate
the risk. As a means of creating awareness among these borrowers, the
Company has conducted a corporate customer seminar to provide customers
with information on how the Year 2000 can impact their own business, and
provides additional information in the quarterly Commercial Division
newsletter.
In accordance with regulatory guidelines, the Company has developed a
comprehensive contingency plan in the event that Year 2000 related failures
are experienced. The plan lists the various strategies and resources
available to restore core business processes. These strategies include
relying on back-up systems that do not utilize computers and, in some
cases, switching vendors. In the case of utility providers, the Company
has not identified any practical, long-term alternatives to relying on
these companies for basic utility services. The Company currently utilizes
a generator for emergency power at its main office during short-term power
outages. Since the generator does not supply sufficient power to allow the
main office to remain open during a power outage, the Company has ordered a
diesel generator capable of supplying sufficient power to operate a branch
office in case of power outages caused by Year 2000 issues.
Management anticipates that the total additional out-of-pocket
expenditures required for bringing the systems into compliance for the Year
2000 will be approximately $100,000. Management believes that these
required expenditures will not have a material adverse impact on
operations, cash flow, or financial condition. This amount, including
costs for upgrading equipment specifically for the purpose of Year 2000
compliance, fees to outside consulting firms, and certain administrative
expenditures, has been provided for in the Company's Year 2000 budget.
Although management feels confident that the Company has identified all
necessary upgrades, and budgeted accordingly, no assurance can be made that
Year 2000 compliance can be achieved without additional unanticipated
expenditures. It is not possible at this time to quantify the estimated
future costs due to possible business disruption caused by vendors,
suppliers, customers
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<PAGE>
or even the possible loss of electric power or phone service; however, such
costs could be substantial. As a result of the Year 2000 project, the
Company has not had any material delay regarding its information systems
projects.
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 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See pages 11 through 13.
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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
On April 19, 1999, the Company's annual meeting of stockholders was held.
At the meeting, David J. Downey, Van A. Dukeman, Gene A. Salmon and James
A. Sullivan were elected to serve as Class III directors with terms
expiring in 2002. Continuing as Class II directors until 2001 are George
T. Shapland, Dean R. Stewart and Roy V. VanBuskirk. Continuing as Class I
directors until 2000 are Gregory B. Lykins and August C. Meyer. The
stockholders also voted to ratify the appointment of McGladrey & Pullen,
LLP, as independent auditors for the 1999 fiscal year.
There were 5,329,460 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
David J. Downey 4,712,462 279
Van A. Dukeman 4,712,462 279
Gene A. Salmon 4,711,697 1,044
James A. Sullivan 4,712,462 279
Ratification of Independent Auditors:
For Against AbstainBroker Non-Votes
4,606,445 1,334 104,962 None
Item 5. Other Information
None
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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.
BANKILLINOIS FINANCIAL CORPORATION
Date: August 6, 1999
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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 15,807
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 108,629
<INVESTMENTS-CARRYING> 73,535
<INVESTMENTS-MARKET> 72,046
<LOANS> 318,850<F1>
<ALLOWANCE> 5,012
<TOTAL-ASSETS> 540,473
<DEPOSITS> 393,977
<SHORT-TERM> 68,964
<LIABILITIES-OTHER> 6,913
<LONG-TERM> 9,207
0
0
<COMMON> 57
<OTHER-SE> 61,355
<TOTAL-LIABILITIES-AND-EQUITY> 540,473
<INTEREST-LOAN> 13,085
<INTEREST-INVEST> 5,226
<INTEREST-OTHER> 312
<INTEREST-TOTAL> 18,623
<INTEREST-DEPOSIT> 7,368
<INTEREST-EXPENSE> 9,008
<INTEREST-INCOME-NET> 9,615
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 6,662
<INCOME-PRETAX> 5,490
<INCOME-PRE-EXTRAORDINARY> 5,490
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,756
<EPS-BASIC> 0.67
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 7.45
<LOANS-NON> 227
<LOANS-PAST> 46
<LOANS-TROUBLED> 115
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,279
<CHARGE-OFFS> 592
<RECOVERIES> 145
<ALLOWANCE-CLOSE> 5,012
<ALLOWANCE-DOMESTIC> 5,012
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes mortgages available-for-sale and net of allowance
for loan losses of $5,012.
</FN>
</TABLE>
