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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended 6/30/2000 Commission File No. 0-15950
FIRST BUSEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 37-1078406
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
201 West Main Street
Urbana, Illinois 61801
------------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (217) 365-4556
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 2000
----------------------------------------------------------------
Common Stock, without par value 13,467,845
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2000 December 31, 1999
--------------- -------------------
(Dollars in thousands)
ASSETS
Cash and due from banks $ 39,335 $ 69,722
Federal funds sold 5,000 13,500
Securities available for sale (amortized cost 2000, $211,382;
1999, $221,601) 213,789 225,046
Loans (net of unearned interest) 951,333 886,684
Allowance for loan losses (11,110) (10,403)
--------------- ----------------
Net loans $ 940,223 $ 876,281
Premises and equipment 30,449 28,647
Goodwill and other intangibles 13,872 14,344
Other assets 19,892 19,583
--------------- ----------------
Total assets $ 1,262,560 $ 1,247,123
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 122,682 $ 103,001
Interest bearing 911,509 924,980
--------------- ----------------
Total deposits $ 1,034,191 $ 1,027,981
Securities sold under agreements to repurchase 22,736 23,580
Short-term borrowings 49,320 48,327
Long-term debt 61,929 55,849
Other liabilities 9,499 9,102
--------------- ----------------
Total liabilities $ 1,177,675 $ 1,164,839
--------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock $ - $ -
Common stock 6,291 6,291
Surplus 21,956 21,750
Retained earnings 69,875 65,572
Accumulated other comprehensive income 1,449 2,074
--------------- ----------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $ 99,571 $ 95,687
Treasury stock, at cost (12,061) (10,773)
Unearned ESOP shares and deferred compensation for stock grants (2,625) (2,630)
--------------- ----------------
Total stockholders' equity $ 84,885 $ 82,284
--------------- ----------------
Total liabilities and stockholders' equity $ 1,262,560 $ 1,247,123
=============== ================
Common Shares outstanding at period end 13,490,845 13,538,809
=============== ================
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
--------- --------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $37,611 $27,859
Interest and dividends on investment securities:
Taxable interest income 5,350 4,455
Non-taxable interest income 1,011 950
Dividends 64 65
Interest on federal funds sold 295 158
------- --------
Total interest income $44,331 $33,487
------- --------
INTEREST EXPENSE:
Deposits $19,198 $14,342
Short-term borrowings 2,571 331
Long-term debt 1,497 780
------- --------
Total interest expense $23,266 $15,453
------- --------
Net interest income $21,065 $18,034
Provision for loan losses 985 600
------- --------
Net interest income after provision for loan losses $20,080 $17,434
------- --------
OTHER INCOME:
Trust $ 2,256 $ 2,050
Commissions and brokers fees, net 955 719
Service charges on deposit accounts 2,508 1,559
Other service charges and fees 1,145 1,049
Security gains, net 25 466
Trading security gains (losses), net - (1)
Gain on sales of loans 520 520
Net commissions from travel services 484 594
Other operating income 1,115 555
------- --------
Total other income $ 9,008 $ 7,511
------- --------
OTHER EXPENSES:
Salaries and wages $ 7,801 $ 7,144
Employee benefits 1,448 1,395
Net occupancy expense of premises 1,435 1,314
Furniture and equipment expenses 1,677 1,569
Data processing 723 353
Stationery, supplies and printing 453 464
Amortization of intangible assets 796 587
Other operating expenses 3,111 2,972
------- --------
Total other expenses $17,444 $15,798
------- --------
Income before income taxes $11,644 $ 9,147
Income taxes 4,105 2,850
------- --------
Net income $ 7,539 $ 6,297
======= ========
BASIC EARNINGS PER SHARE $ 0.56 $ 0.46
======= ========
DILUTED EARNINGS PER SHARE $ 0.55 $ 0.45
======= ========
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.24 $ 0.22
======= ========
4 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
--------- --------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $19,372 $14,186
Interest and dividends on investment securities:
Taxable interest income 2,578 2,149
Non-taxable interest income 507 486
Dividends 34 31
Interest on federal funds sold 96 37
------- -------
Total interest income $22,587 $16,889
------- -------
INTEREST EXPENSE:
Deposits $ 9,738 $ 7,127
Short-term borrowings 1,348 226
Long-term debt 715 412
------- -------
Total interest expense $11,801 $ 7,765
------- -------
Net interest income $10,786 $ 9,124
Provision for loan losses 595 300
------- -------
Net interest income after provision for loan losses $10,191 $ 8,824
------- -------
OTHER INCOME:
Trust $ 1,161 $ 1,062
Commissions and brokers fees, net 547 364
Service charges on deposit accounts 1,327 827
Other service charges and fees 515 569
Security gains, net 32 287
Gains on sales of pooled loans 74 306
Net commissions from travel services 231 315
Other operating income 729 221
------- -------
Total other income $ 4,616 $ 3,951
------- -------
OTHER EXPENSES:
Salaries and wages $ 3,911 $ 3,564
Employee benefits 721 684
Net occupancy expense of premises 710 667
Furniture and equipment expenses 860 839
Data processing 430 185
Stationary, supplies and printing 244 213
Amortization of intangible assets 413 246
Other operating expenses 1,440 1,475
------- -------
Total other expenses $ 8,729 $ 7,873
------- -------
Income before income taxes $ 6,078 $ 4,902
Income taxes 2,146 1,544
------- -------
NET INCOME $ 3,932 $ 3,358
======= =======
BASIC EARNINGS PER SHARE $ 0.29 $ 0.25
======= =======
DILUTED EARNINGS PER SHARE $ 0.29 $ 0.24
======= =======
DIVIDENDS DECLARED PER SHARE:
Common Stock $ 0.12 $ 0.11
======= =======
5 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,539 $ 6,297
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,567 2,228
Provision for loan losses 985 600
Decrease in deferred income taxes (806) (748)
Amortization of investment security discounts (182) (46)
Gain on sales of investment securities, net (25) (466)
Proceeds from sales of pooled loans 20,843 56,271
Loans originated for sale (17,133) (51,664)
Gain on sale of pooled loans (520) (520)
(Gain) loss on sale and disposition of premises and equipment (168) 8
Change in assets and liabilities:
Decrease (increase) in other assets 617 (785)
(Decrease) increase in accrued expenses (2,204) 81
Increase (decrease) in interest payable 537 (161)
Increase in income taxes payable 2,064 589
---------- ----------
Net cash provided by operating activities $ 14,114 $ 11,684
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale $ 14,620 $ 4,651
Proceeds from maturities of securities classified available for sale 29,144 70,032
Purchase of securities classified available for sale (33,338) (61,625)
Decrease (increase) in federal funds sold 8,500 (2,900)
Increase in loans (68,117) (52,931)
Proceeds from sale of premises and equipment 407 21
Purchases of premises and equipment (3,838) (2,231)
---------- ----------
Net cash (used in) investing activities ($52,622) ($44,983)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in certificates of deposit ($66,582) $ 12,903
Net increase in demand, money market and saving deposits 72,792 15,539
Cash dividends paid (3,236) (3,016)
Purchase of treasury stock (1,482) (1,928)
Proceeds from sale of treasury stock 400 378
Net (decrease) increase in securities sold under agreement to
repurchase & federal funds purchased (844) 5,000
Proceeds from short-term borrowings 16,925 400
Principal payments on short-term borrowings (15,932) -
Proceeds from long-term borrowings 20,000 6,000
Principal payments on long-term borrowings (13,920) -
---------- ----------
Net cash provided by financing activities $ 8,121 $ 35,276
---------- ----------
Net increase (decrease) in cash and cash equivalents ($30,387) $ 1,977
Cash and due from banks, beginning $ 69,722 $ 35,644
---------- ----------
Cash and due from banks, ending $ 39,335 $ 37,621
========== ==========
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
--------- ---------
(Dollars in thousands,
except per share amounts)
Net income $ 7,539 $ 6,297
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding losses arising during period ($ 1,038) ($ 3,503)
Less reclassification adjustment for gains included in net income (25) (466)
--------- ---------
Other comprehensive income, before tax ($ 1,063) ($ 3,969)
Income tax expense related to items of other comprehensive income 438 1,385
--------- ---------
Other comprehensive income, net of tax ($ 625) ($ 2,580)
Comprehensive income $ 6,914 $ 3,717
========= =========
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: INTERIM FINANCIAL STATEMENTS
The consolidated interim financial statements of First Busey Corporation and
Subsidiaries are unaudited, but in the opinion of management reflect all
necessary adjustments, consisting only of normal recurring accruals, for a fair
presentation of results as of the dates and for the periods covered by the
financial statements. The results for the interim periods are not necessarily
indicative of the results of operations that may be expected for the fiscal
year.
NOTE 2: LOANS
The major classifications of loans at June 30, 2000 and December 31, 1999 were
as follows:
June 30, 2000 December 31, 1999
-----------------------------------
(Dollars in thousands)
Commercial $ 131,504 $ 119,800
Real estate construction 54,054 52,479
Real estate - farmland 16,001 15,841
Real estate - 1-4 family residential mortgage 390,817 345,114
Real estate - multifamily mortgage 70,168 63,805
Real estate - non-farm nonresidential mortgage 216,145 213,156
Installment 53,099 56,470
Agricultural 19,407 20,126
-----------------------------------
$ 951,195 $ 886,791
Less:
Unearned Interest (138) 107
-----------------------------------
$ 951,333 $ 886,684
Less:
Allowance for loan losses 11,110 10,403
-----------------------------------
Net loans $ 940,223 $ 876,281
===================================
The real estate-mortgage category includes loans held for sale with carrying
values of $2,300,000 at June 30, 2000 and $1,375,000 at December 31, 1999;
these loans had fair market values of $2,325,000 and $1,393,000 respectively.
On December 31, 1999, the installment category includes loans held for sale with
carrying values of $4,115,000; these loans had a fair market value of
$4,558,000.
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FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: INCOME PER SHARE
Net income per common share has been computed as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------
Net income $ 3,932,000 $ 3,358,000 $ 7,539,000 $ 6,297,000
Shares:
Weighted average common shares outstanding 13,358,126 13,628,514 13,363,559 13,658,804
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 259,693 358,454 266,670 328,710
--------------------------------------------------
Weighted average common shares outstanding,
as adjusted for diluted earnings per share calculation 13,617,819 13,986,968 13,630,229 13,987,514
==================================================
Basic earnings per share $ 0.29 $ 0.25 $ 0.56 $ 0.46
==================================================
Diluted earnings per share $ 0.29 $ 0.24 $ 0.55 $ 0.45
==================================================
NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE SIX MONTHS ENDED JUNE 30,
2000 AND 1999.
2000 1999
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $22,729 $15,614
======= =======
Income taxes $ 2,295 $ 2,956
======= =======
9 of 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the financial condition
of First Busey Corporation and Subsidiaries ("Corporation") at June 30, 2000
(unaudited) when compared with December 31, 1999 and the results of operations
for the six months ended June 30, 2000 and 1999 (unaudited) and the results of
operations for the three months ended June 30, 2000 and 1999 (unaudited). This
discussion and analysis should be read in conjunction with the Corporation's
consolidated financial statements and notes thereto appearing elsewhere in this
quarterly report.
First Busey Corporation acquired First Federal Savings & Loan Association of
Bloomington on October 29, 1999, when it acquired the outstanding shares of
First Federal's parent Eagle BancGroup, Inc. On June 10, 2000, First Federal's
name was changed to Busey Bankfsb. On this same date Busey Bank branch offices
located in McLean County in Illinois were transferred to Busey Bankfsb. Busey
Bankfsb had total assets of $266 million as of June 30, 2000, and $183 million
as of December 31, 1999. A summary of this subsidiary's earnings for the six
months ending June 30, 2000, is included in the Reportable Segments section of
this report.
FINANCIAL CONDITION AT JUNE 30, 2000 AS COMPARED TO DECEMBER 31, 1999
Total assets increased $15,437,000 or 1.2%, to $1,262,560,000 at June 30, 2000
from $1,247,123,000 at December 31, 1999.
Securities available for sale decreased $11,257,000, or 5.0%, to $213,789,000 at
June 30, 2000 from $225,046,000 at December 31, 1999.
Loans increased $64,649,000, or 7.3%, to $951,333,000 at June 30, 2000 from
$886,684,000 at December 31, 1999, primarily due to increases in commercial, 1-4
family mortgages, and multifamily mortgages. These increases were partially
offset by decreases in installment and agricultural loans.
Total deposits increased $6,210,000, or 0.6%, to $1,034,191,000 at June 30, 2000
from $1,027,981,000 at December 31, 1999. Non-interest bearing deposits
increased 19.1% to $122,682,000 at June 30, 2000 from $103,001,000 at December
31, 1999. Interest-bearing deposits decreased 1.5% to $911,509,000 at June 30,
2000 from $924,980,000 at December 31, 1999.
Short-term borrowings increased $993,000 to $49,320,000 at June 30, 2000 as
compared to $48,327,000 at December 31, 1999. Long-term debt increased
$6,080,000 or 10.9% to $61,929,000 at June 30, 2000, as compared to $55,849,000
at December 31, 1999.
In the first six months of 2000, the Corporation repurchased 67,964 shares of
its common stock at an aggregate cost of $1,482,000. The Corporation is
purchasing shares for the treasury as they become available in order to meet
future issuance requirements of previously granted non-qualified stock options.
The following table sets forth the components of non-performing assets and past
due loans.
June 30, 2000 December 31, 1999
--------------- -----------------
(Dollars in thousands)
Non-accrual loans $ 552 $ 1,220
Loans 90 days past due, still accruing 542 897
Restructured loans - -
Other real estate owned 962 459
Non-performing other assets 7 5
--------------- -----------------
Total non-performing assets $ 2,063 $ 2,581
=============== =================
Total non-performing assets as a percentage of total assets 0.16% 0.21%
=============== =================
Total non-performing assets as a percentage of loans plus non-performing assets 0.22% 0.29%
=============== =================
The ratio of non-performing assets as a percentage of total assets decreased to
0.22% at June 30, 2000 from 0.29% at December 31, 1999. This was due to
decreases in the balances of non-accrual loans and loans 90 days past due and
still accruing, offset partially by an increase in other real estate owned.
10 of 23
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 AS COMPARED TO JUNE 30, 1999
SUMMARY
- -------
Net income for the six months ended June 30, 2000 increased 19.7% to $7,539,000
as compared to $6,297,000 for the comparable period in 1999. Diluted earnings
per share increased 22.2% to $.55 at June 30, 2000 as compared to $.45 for the
same period in 1999.
Operating earnings, which exclude security gains and the related tax expense,
were $7,524,000, or $.55 per share for the six months ended June 30, 2000, as
compared to $5,994,000, or $.43 per share for the same period in 1999.
The Corporation's return on average assets was 1.24% for the six months ended
June 30, 2000, as compared to 1.32% for the comparable period in 1999. The
return on average assets from operations of 1.23% for the six months ended June
30, 2000 was 3 basis points lower than the 1.26% level achieved in the
comparable period of 1999.
The Corporation's net interest margin expressed as a percentage of average
earning assets stated on a fully taxable equivalent basis, was 3.83% for the six
months ended June 30, 2000, as compared to 4.21% for the same period in 1999.
The net interest margin expressed as a percentage of average total assets, also
on a fully taxable equivalent basis, was 3.57% for the six months ended June 30,
2000, compared to 3.92% for the same period in 1999. The decrease in the net
interest margin is due to the fact that while the yield on interest-earning
assets increased 23 basis points the cost of interest-bearing liabilities
increased 52 basis points.
During the six months ended June 30, 2000, the Corporation recognized net
security gains of approximately $15,000, after income taxes, representing 0.20%
of net income. During the same period in 1999, net security gains of $303,000,
after income taxes, were recognized, representing 4.8% of net income.
INTEREST INCOME
- ---------------
Interest income, on a tax equivalent basis, for the six months ended June 30,
2000 increased $10,917,000 or 32.0% to $45,030,000 from $34,113,000 for the
comparable period in 1999. The increase in interest income resulted from an
increase in average earning assets of $248,295,000 for the period ended June 30,
2000, as compared to the same period of 1999. The average yield on
interest-earning assets decreased from 7.70% for the six months ended June 30,
1999 to 7.93% for the same period in 2000. This is due to increases in the
yields on all categories of interest-earning assets
INTEREST EXPENSE
- ----------------
Total interest expense increased $7,813,000 or 50.6% for the six months ended
June 30, 2000 as compared to the prior year period. This increase resulted
primarily from an increase of $254,439,000 in total interest-bearing liabilities
combined with increases in costs of all categories of interest-bearing
liabilities.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses of $985,000 for the six months ended June 30, 2000
is $385,000 more than the provision for the comparable period in 1999. The
provision and the net charge-offs for the period resulted in the reserve
representing 1.17% of total loans and 539% of non-performing loans at June 30,
2000, as compared to the reserve representing 1.17% of total loans and 403% of
non-performing loans at December 31, 1999. The adequacy
11 of 23
of the reserve for loan losses is consistent with management's consideration of
the composition of the portfolio, recent credit quality experience, and
prevailing economic conditions.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security gains, increased $1,938,000 or 27.5% for
the six months ended June 30, 2000 as compared to the same period in 1999. This
was a combination of increases in trust revenue, commissions and brokers fees,
and service charges for the six months ended June 30, 2000 as compared to the
same period in 1999. As of June 30, 2000, the trust company of the Corporation
had $969,188,000 in assets under care, an increase of10.2% from $879,243,000 at
June 30, 2000. Gains of $520,000 were recognized on the sale of $20,323,000 of
pooled loans for the six months ended June 30, 2000 as compared to gains of
$520,000 on the sale of $55,751,000 of pooled loans in the prior year period.
The gains recognized in the six months ending June 30, 2000 include $350,000 in
gains of the sale of the Corporation's credit card loan portfolio, which had
balances of $4,116,000.
Management anticipates continued sales from the current mortgage loan production
of the Corporation if mortgage loan originations allow and the sales of the
loans are necessary to maintain the asset/liability structure that the
Corporation is trying to effect. The Corporation may realize gains and/or
losses on these sales dependent upon interest rate movements and upon how
receptive the debt markets are to mortgage backed securities.
Total other expense increased 10.4% or $1,646,000 to $17,444,000 for the six
months ended June 30, 2000 as compared to the same period in 1999.
Salaries and wages expense increased $657,000 or 9.2% and employee benefits
expense increased $53,000 for the six months ended June 30, 2000, as compared to
the same period last year. The Corporation had 500 full-time equivalent
employees as of June 30, 2000 as compared to 433 as of June 30, 1999. Occupancy
and furniture and equipment expenses increased 7.9% to $3,112,000 for the six
months ended June 30, 2000 from $2,883,000 in the prior year period. Data
processing expense increased $370,000 to $723,000 for the six months ended June
30, 2000 from the prior year period. Most of the growth in these expenses is
associated with the addition of Busey Bank fsb.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, decreased to 1.39% for the six
months ended June 30, 2000 from 1.84% in the prior year period as a result of
the income and expense items described above.
The Corporation's efficiency ratio is defined as operating expenses divided by
net revenue. (More specifically it is defined as non interest expense
expressed as a percentage of the sum of tax equivalent net interest income and
non interest income, excluding security gains). The consolidated efficiency
ratio for the six months ended June 30, 2000, was 56.7%, an improvement from
61.5% for the same period in 1999. When the gains on the sales of pooled loans
are excluded these ratios are 57.7% and 62.7% for the six month periods ending
June 30, 2000, and June 30, 1999, respectively.
Income taxes for the six months ended June 30, 2000 increased to $4,105,000 as
compared to $2,850,000 for the
comparable period in 1999. As a percent of income before taxes, the provision
for income taxes increased to 35.3% for the six months ended June 30, 2000 from
31.2% for the same period in 1999.
12 of 23
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED TO JUNE 30, 1999
SUMMARY
- -------
Net income for the three months ended June 30, 2000 increased 17.1% to
$3,932,000 as compared to $3,358,000 for the comparable period in 1999. Diluted
earnings per share increased 20.8% to $.29 at June 30, 2000 as compared to $.24
for the same period in 1999.
Operating earnings, which exclude security gains and the related tax expense,
were $3,913,000, or $.29 per share for the three months ended June 30, 2000, as
compared to $3,171,000, or $.23 per share for the same period in 1999.
The Corporation's return on average assets was 1.29% for the three months ended
June 30, 2000, as compared to 1.39% achieved for the comparable period in 1999.
The return on average assets from operations for the three months ended June 30,
2000 of 1.28% was four basis points lower than the 1.32% level achieved in the
comparable period of 1999.
The net interest margin expressed as a percentage of average earning assets was
3.92% for the three months ended June 30, 2000, a decrease of 28 basis points
from the level achieved for the like period in 1999. The net interest margin
expressed as a percentage of average total assets was 3.65% for the three months
ended June 30, 2000, compared to 3.92% for the same period in 1999.
During the three months ended June 30, 2000, the Corporation recognized security
gains of approximately $19,000, after income taxes, representing 0.48% of net
income. During the same period in 1999, security gains of approximately
$187,000, after income taxes, were recognized, representing 5.6% of net income.
INTEREST INCOME
- ---------------
Interest income on a fully taxable equivalent basis increased $5,752,000, or
33.4% for the three months ended June 30, 2000 from the same period in 1999.
The increase resulted primarily from growth in average volumes of U.S.
Government obligations and loans. The yield on interest earning assets
increased 41 basis points for the three months ended June 30, 2000 as compared
to the same period in 1999, due to increases in the yields on all categories of
interest-earning assets.
INTEREST EXPENSE
- ----------------
Total interest expense increased $4,036,000 or 52.0% for the three months ended
June 30, 2000 as compared to the prior year period. The increase is the result
of growth in the average balances of all categories of interest-bearing
liabilities combined with increases in costs of all categories of deposit and
short-term borrowings.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security transactions, increased 25.1% for the
three months ended June 30, 2000 as compared to the same period in 1999. This
was a combination of increased trust revenue, commissions and brokers fees, and
service charges, offset by declines in net commissions from travel services and
gains on the sale of sold loans. Gains of $74,000 were recognized on the sale
of $9,386,000 of pooled loans for the three months ended June 30, 2000 as
compared to gains of $306,000 on the sale of $30,296,000 of pooled loans in the
prior year period.
Total other expense increased 10.9% or $856,000 to $8,729,000 for the three
months ended June 30, 2000 as compared to the same period in 1999.
13 of 23
Salaries and wages expense increased $347,000 or 9.7% and employee benefits
expense increased $37,000 or 5.4% for the three months ended June 30, 2000, as
compared to the same period last year. Occupancy and furniture and equipment
expenses increased 4.3% to $1,570,000 for the three months ended June 30, 2000
from $1,506,000 in the prior year period. Data processing expense increased
$245,000 to $430,000 for the three months ended June 30, 2000 from the prior
year period.
The consolidated efficiency ratio for the three months ended June 30, 2000 was
55.4% as compared to 60.1% for the prior year period. When the gains on the
sales of pooled loans are excluded, this ratio is 55.7% for the three months
ended June 30, 2000 compared to 61.5% for the same period in 1999. The change
in the current year efficiency ratio is due to the income and expense items
noted above.
Income taxes for the three months ended June 30, 2000 increased to $2,146,000 as
compared to $1,544,000 for the comparable period in 1999. As a percent of
income before taxes, the provision for income taxes increased to 35.3% for the
three months ended June 30, 2000 from 31.5% for the same period in 1999.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued in June 1998 by the Financial
Accounting Standards Board. The Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The Statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999. In June
of 1999, Statement of Financial Accounting
Standard No. 137 was issued to extend the effective date by one year to all
fiscal quarters of fiscal years beginning after June 15, 2000. Because the
Corporation does not use derivatives, management does not believe the adoption
of the Statement will have a material impact on the consolidated financial
statements. Statement of Financial Accounting Standard No. 138 was issued in
June of 2000 and amended and clarified various issues within Statement No. 133.
14 of 23
REPORTABLE SEGMENTS AND RELATED INFORMATION
- -------------------------------------------
First Busey Corporation has three reportable segments, Busey Bank, Busey Bank
fsb, and First Busey Trust & Investment Co. Busey Bank provides a full range of
banking services to individual and corporate customers through its branch
network in central Illinois, through its branch in Indianapolis, Indiana, and
through its loan production office in Fort Myers, Florida. First Busey Trust &
Investment Co. provides trust and asset management services to individual and
corporate customers throughout central Illinois. Busey Bank fsb provides a full
range of banking services to individual and corporate customers in McLean
County.
The Corporation's three reportable segments are strategic business units that
are separately managed as they offer different products and services and have
different marketing strategies.
The segment financial information provided below has been derived from the
internal profitability reporting system used by management to monitor and manage
the financial performance of the Corporation. The accounting policies of the
three segments are the same as those described in the summary of significant
accounting policies in the annual report. The Corporation accounts for
intersegment revenue and transfers at current market value.
June 30, 2000
First Busey
Trust & Consolidated
Busey Bank Busey Bank, fsb Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------------------------
Interest income $ 37,593 $ 6,614 $ 86 $ 68 $ 44,361 $ (30) $ 44,331
Interest expense 18,540 3,405 - 1,250 23,195 $ 71 23,266
Other income 4,965 292 2,274 11,437 18,968 $ (9,960) 9,008
Net income 7,122 534 769 8,428 16,853 $ (9,314) 7,539
Total assets 985,164 265,741 3,459 156,096 1,410,460 $ (147,900) 1,262,560
June 30, 1999
First Busey
Trust & Consolidated
Busey Bank Investment Co. All Other Totals Eliminations Totals
-----------------------------------------------------------------------------------
Interest income $ 33,343 $ 93 $ 51 $ 33,487 $ - $ 33,487
Interest expense 15,251 - 189 15,440 $ 13 15,453
Other income 4,293 2,075 8,807 15,175 $ (7,664) 7,511
Net income 6,061 745 6,611 13,417 $ (7,120) 6,297
Total assets 975,559 3,944 102,742 1,082,245 $ (91,199) 991,046
LIQUIDITY
- ---------
Liquidity is the availability of funds to meet all present and future financial
obligations arising in the daily operations of the business at a minimal cost.
These financial obligations consist of needs for funds to meet extensions of
credit, deposit withdrawals and debt servicing.
The sources of short-term liquidity utilized by the Corporation consist of
non-reinvested asset maturities, deposits and capital funds. Long-term
liquidity needs will be satisfied primarily through retention of capital funds.
The Corporation does not deal in or use brokered deposits as a source of
liquidity. Additional liquidity is provided by bank lines of credit, repurchase
agreements and the ability to borrow from the Federal Reserve Bank and the
Federal Home Loan Bank of Chicago. The Corporation has an operating line with
American National Bank and Trust Company of Chicago in the amount of $10,000,000
with $4,000,000 available as of June 30, 2000.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) decreased to 14.6% at June 30, 2000 from
15.4% at December 31, 1999. This is the ratio of total large liabilities to
total liabilities, and is low in comparison to the Corporation's peers. This
change was due largely to a $7,290,000 decrease in time deposits over $100,000.
15 of 23
CAPITAL RESOURCES
- -----------------
Other than from the issuance of common stock, the Corporation's primary source
of capital is retained net income. During the six months ended June 30, 2000,
the Corporation earned $7,539,000 and paid dividends of $3,236,000 to
stockholders, resulting in a retention of current earnings of $4,303,000. The
Corporation's dividend payout for the six months ended June 30, 2000 was 42.9%.
The Corporation's risk-based capital ratio was 9.46% and the leverage ratio was
5.73% as of June 30, 2000, as compared to 9.40% and 5.62% respectively as of
December 31, 1999. The Corporation and its bank subsidiaries were well above
all minimum required capital ratios as of June 30, 2000.
RATE SENSITIVE ASSETS AND LIABILITIES
- -------------------------------------
Interest rate sensitivity is a measure of the volatility of the net interest
margin as a consequence of changes in market rates. The rate-sensitivity chart
shows the interval of time in which given volumes of rate-sensitive, earning
assets and rate-sensitive, interest bearing liabilities would be responsive to
changes in market interest rates based on their contractual maturities or terms
for repricing. It is however, only a static, single-day depiction of the
Corporation's rate sensitivity structure, which can be adjusted in response to
changes in forecasted interest rates.
The following table sets forth the static rate-sensitivity analysis of the
Corporation as of June 30, 2000.
Rate Sensitive Within
--------------------------------------------------------------------------
1-30 31-90 91-180 181 Days - Over
Days Days Days 1 Year 1 Year Total
--------------------------------------------------------------------------
(Dollars in thousands)
Interest-bearing deposits $ 3,902 $ - $ - $ - $ - $ 3,902
Federal funds sold 5,000 - - - - 5,000
Investment securities
U.S. Governments 2,927 1,936 12,882 29,647 106,459 153,851
Obligations of states and
political subdivisions - - 3,475 152 37,057 40,684
Other securities 7,875 1,311 - - 10,068 19,254
Loans (net of unearned int.) 267,326 77,959 94,237 131,295 380,516 951,333
--------------------------------------------------------------------------
Total rate-sensitive assets $ 287,030 $ 81,206 $ 110,594 $ 161,094 $534,100 $1,174,024
--------------------------------------------------------------------------
Interest bearing transaction
deposits $ 57,113 $ - $ - $ - $ - $ 57,113
Savings deposits 91,597 - - - - 91,597
Money market deposits 303,262 - - - - 303,262
Time deposits 59,155 61,626 72,047 115,383 151,326 459,537
Short-term borrowings:
Federal funds purchased &
repurchase agreements 22,736 - - - - 22,736
Other 34,320 15,000 - - - 49,320
Long-term debt 14,978 4,976 1,982 21,994 17,999 61,929
--------------------------------------------------------------------------
Total rate-sensitive
liabilities $ 583,161 $ 81,602 $ 74,029 $ 137,377 $169,325 $1,045,494
--------------------------------------------------------------------------
Rate-sensitive assets less
rate-sensitive liabilities ($296,131) ($396) $ 36,565 $ 23,717 $364,775 $ 128,530
--------------------------------------------------------------------------
Cumulative Gap ($296,131) ($296,527) ($259,962) ($236,245) $128,530
==========================================================================
Cumulative amounts as a
percentage of total
rate-sensitive assets -25.22% -25.26% -22.14% -20.12% 10.95%
==========================================================================
Cumulative ratio 0.49 0.55 0.65 0.73 1.12
==========================================================================
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $296.1 million in the 1-30 day and a negative rate-sensitive gap of $296.5
million in the 31-90 day repricing category. The gap beyond 90 days becomes
slightly less liability sensitive as rate-sensitive assets that reprice in those
time periods are greater in volume than rate-sensitive liabilities that are
subject to repricing in the same respective time periods. The composition of
the gap structure at June 30, 2000 will benefit the Corporation more if interest
rates fall during the next 90 days by allowing the net interest margin to grow
as liability rates would reprice more quickly than rates on interest
rate-sensitive assets. After 90 days, a rate increase would benefit the
Corporation because the volume of rate-sensitive assets repricing would exceed
the volume of rate-sensitive liabilities that would be repricing.
16 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
------------------------------ ----------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------ ----------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $ 10,932 $ 295 5.43% $ 6,848 $ 158 4.65%
Investment securities
U.S. Government obligations 170,171 4,886 5.77% 145,301 4,066 5.64%
Obligations of states and political
subdivisions (1) 40,510 1,555 7.72% 39,415 1,462 7.48%
Other securities 20,596 528 5.16% 20,835 454 4.39%
Loans (net of unearned interest) (1) (2) 899,662 37,766 8.44% 681,177 27,973 8.28%
--------------------- -------------------
Total interest earning assets $1,141,871 $ 45,030 7.93% $893,576 $ 34,113 7.70%
======== ========
Cash and due from banks 32,898 29,364
Premises and equipment 29,883 24,730
Reserve for possible loan losses (10,655) (7,338)
Other assets 32,593 19,002
----------- ---------
Total Assets $1,226,590 $959,334
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 23,203 $ 315 2.73% $ 13,197 $ 98 1.50%
Savings deposits 95,819 1,436 3.01% 85,091 1,272 3.01%
Money market deposits 319,608 5,199 3.27% 301,032 4,428 2.97%
Time deposits 461,014 12,248 5.34% 336,346 8,544 5.12%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 28,030 823 5.90% 5,094 128 5.07%
Other 48,915 1,748 7.19% 6,071 203 6.74%
Long-term debt 53,327 1,497 5.65% 28,646 780 5.49%
--------------------- -------------------
Total interest-bearing liabilities $1,029,916 $ 23,266 4.54% $775,477 $ 15,453 4.02%
======== ========
Net interest spread 3.39% 3.68%
======= =======
Demand deposits 105,807 89,615
Other liabilities 8,847 7,916
Stockholders' equity 82,020 86,326
----------- ---------
Total Liabilities and Stockholders' Equity $1,226,590 $959,334
=========== =========
Interest income / earning assets (1) $1,141,871 $ 45,030 7.93% $893,576 $ 34,113 7.70%
Interest expense / earning assets $1,141,871 $ 23,266 4.10% $893,576 $ 15,453 3.49%
----------------- -----------------
Net interest margin (1) $ 21,764 3.83% $ 18,660 4.21%
================= =================
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2000 and 1999.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
17 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Change due to (1)
Average Average Total
Volume Yield/Rate Change
--------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $ 107 $ 30 $ 137
Investment securities:
U.S. Government obligations 722 98 820
Obligations of states and political
subdivisions (2) 43 50 93
Other securities (5) 79 74
Loans (2) 9,235 558 9,793
--------------------------------
Change in interest income (2) $ 10,102 $ 815 $10,917
--------------------------------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 105 $ 112 $ 217
Savings deposits 164 - 164
Money market deposits 289 482 771
Time deposits 3,319 385 3,704
Short-term borrowings:
Federal funds purchased and repurchase
agreements 670 25 695
Other 1,530 15 1,545
Long-term debt 695 22 717
--------------------------------
Change in interest expense $ 6,772 $ 1,041 $ 7,813
--------------------------------
Increase in net interest income (2) $ 3,330 ($226) $ 3,104
================================
(1) Changes due to both rate and volume have been allocated proportionally.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2000 and 1999.
18 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED JUNE 30, 2000 AND 1999
2000 1999
------------------------------ ----------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------ ----------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $ 7,318 $ 96 5.28% $ 3,203 $ 37 4.63%
Investment securities
U.S. Government obligations 162,966 2,327 5.74% 141,249 1,950 5.54%
Obligations of states and political
subdivisions (1) 40,503 780 7.75% 40,363 748 7.43%
Other securities 19,887 286 5.78% 20,683 230 4.46%
Loans (net of unearned interest) (1) (2) 913,762 19,473 8.57% 695,931 14,245 8.21%
--------------------- -------------------
Total interest earning assets $1,144,436 $ 22,962 8.07% $901,429 $ 17,210 7.66%
======== ========
Cash and due from banks 32,143 29,017
Premises and equipment 30,246 24,960
Reserve for possible loan losses (10,799) (7,472)
Other assets 32,561 18,290
----------- ---------
Total Assets $1,228,587 $966,224
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 26,053 $ 177 2.73% $ 13,117 $ 47 1.44%
Savings deposits 93,773 704 3.02% 84,333 627 2.98%
Money market deposits 313,384 2,608 3.35% 301,324 2,183 2.91%
Time deposits 461,297 6,249 5.45% 338,187 4,270 5.06%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 30,981 467 6.06% 9,657 123 5.11%
Other 50,164 882 7.07% 6,200 103 6.66%
Long-term debt 52,952 714 5.43% 30,165 412 5.48%
--------------------- -------------------
Total interest-bearing liabilities $1,028,604 $ 11,801 4.61% $782,983 $ 7,765 3.98%
======== ========
Net interest spread 3.46% 3.68%
======= =======
Demand deposits 107,808 89,255
Other liabilities 9,438 7,887
Stockholders' equity 82,737 86,099
----------- ---------
Total Liabilities and Stockholders' Equity $1,228,587 966,224
=========== =========
Interest income / earning assets (1) $1,144,436 $ 22,962 8.07% $901,429 $ 17,210 7.66%
Interest expense / earning assets $1,144,436 $ 11,801 4.15% $901,429 7,765 3.45%
----------------- -----------------
Net interest margin (1) $ 11,161 3.92% $ 9,445 4.20%
================= =================
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2000 and 1999.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
19 of 23
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED JUNE 30, 2000 AND 1999
Change due to (1)
Average Average Total
Volume Yield/Rate Change
--------------------------------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $ 53 $ 6 $ 59
Investment securities:
U.S. Government obligations 304 73 377
Obligations of states and political
subdivisions (2) 2 30 32
Other securities (8) 64 56
Loans (2) 4,584 644 5,228
--------------------------------
Change in interest income (2) $ 4,935 $ 817 $ 5,752
--------------------------------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 67 $ 63 $ 130
Savings deposits 69 8 77
Money market deposits 89 336 425
Time deposits 1,638 341 1,979
Short-term borrowings:
Federal funds purchased and repurchase
Agreements 316 28 344
Other 773 6 779
Long-term debt 306 (4) 302
--------------------------------
Change in interest expense $ 3,258 $ 778 $ 4,036
--------------------------------
Increase in net interest income (2) $ 1,677 $ 39 $ 1,716
================================
(1) Changes due to both rate and volume have been allocated proportionally.
(2) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2000 and 1999.
20 of 23
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
MARKET RISK
- -----------
Market risk is the risk of change in asset values due to movements in underlying
market rates and prices. Interest rate risk is the risk to earnings and capital
arising from movements in interest rates. Interest rate risk is the most
significant market risk affecting the Corporation as other types of market risk,
such as foreign currency exchange rate risk and commodity price risk, do not
arise in the normal course of the Corporation's business activities.
The Corporation's banking subsidiary, Busey Bank, has an asset-liability
committee which meets monthly to review current market conditions and attempts
to structure the bank's balance sheet to ensure stable net interest income
despite potential changes in interest rates with all other variables constant.
The asset-liability committee uses gap analysis to identify mismatches in the
dollar value of assets and liabilities subject to repricing within specific time
periods. The Funds Management Policy established by the asset-liability
committee and approved by the Corporation's board of directors establishes
guidelines for maintaining the ratio of cumulative rate-sensitive assets to
rate-sensitive liabilities within prescribed ranges at certain intervals. A
summary of the Corporation's gap analysis is summarized on page 15.
The committee does not rely solely on gap analysis to manage interest-rate risk
as interest rate changes do not impact all categories of assets and liabilities
equally or simultaneously. The asset-liability committee supplements gap
analysis with balance sheet and income simulation analysis to determine the
potential impact on net interest income of changes in market interest rates.
In these simulation models the balance sheet is projected out over a one-year
period and net interest income is calculated under current market rates, and
then assuming permanent instantaneous shifts in the yield curve of +/- 100 basis
point and +/- 200 basis points. These interest-rate scenarios indicate the
interest rate risk of the Corporation over a one-year time horizon due to
changes in interest rates, as of June 30, 2000, is as follows:
Basis Point Changes
----------------------------------
-200 -100 +100 +200
----------------------------------
Percentage change in net interest income due to an
Immediate change in interest over a one-year period (0.07%) (0.01%) (1.35%) (4.02%)
21 of 23
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
Not Applicable
ITEM 2: Changes in Securities and Use of Proceeds
Not Applicable
ITEM 3: Defaults Upon Senior Securities
Not Applicable
ITEM 4: Submission of Matters to a Vote of Security Holders
Not Applicable
ITEM 5: Other Information
Not Applicable
ITEM 6: Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed during the six months
ending June 30, 2000.
22 of 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BUSEY CORPORATION
(REGISTRANT)
By: //Barbara J. Jones//
-------------------------------------------
Barbara J. Jones
Chief Financial Officer
(Principal financial and accounting officer)
Date: August 14, 2000
23 of 23
9 1,000 3-MOS DEC-31-2000 JUN-30-2000 35,433 3,902 5,000 0 213,789 0 0 951,333 11,110 1,262,560 1,034,191 72,056 9,499 61,929 0 0 6,291 78,594 1,262,560 37,611 6,425 295 44,331 19,198 23,266 21,065 985 25 17,444 11,644 7,539 0 0 7,539 0.56 0.55 7.93 552 542 0 5,548 10,403 336 58 11,110 0 0 333