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 6/30/2001 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 August 10, 2001
- -------------------------------------------------------------------
Common Stock, without par value 13,562,413
1 of 24
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND 2000
(UNAUDITED)
June 30, 2001 December 31, 2000
------------- -----------------
(Dollars in thousands)
ASSETS
Cash and due from banks $ 53,398 $ 58,585
Federal funds sold 42,500 34,700
Securities available for sale (amortized cost 2001, $210,334; 222,143 228,597
2000, $218,790)
Loans 969,784 984,369
Allowance for loan losses (12,997) (12,268)
------------ ------------
Net loans $ 956,787 $ 972,101
Premises and equipment 30,075 31,253
Goodwill and other intangibles 11,540 12,255
Other assets 18,104 17,553
------------ ------------
Total assets $ 1,334,547 $ 1,355,044
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 121,920 $ 134,669
Interest bearing 1,012,895 1,014,118
------------ ------------
Total deposits $ 1,134,815 $ 1,148,787
Securities sold under agreements to repurchase 16,402 18,890
Short-term borrowings 7,283 32,283
Long-term debt 43,000 52,976
Company obligated mandatorily redeemable preferred securities
of subsidiary trust holding solely subordinated debentures 25,000 -
Other liabilities 9,448 9,783
------------ ------------
Total liabilities $ 1,235,948 $ 1,262,719
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 6,291 6,291
Surplus 21,746 22,044
Retained earnings 77,846 73,215
Accumulated other comprehensive income 7,125 5,917
------------ ------------
Total stockholders' equity before treasury stock, unearned ESOP
shares and deferred compensation for stock grants $ 113,008 $ 107,467
Treasury stock, at cost (12,123) (12,858)
Unearned ESOP shares and deferred compensation for stock grants (2,286) (2,284)
------------ ------------
Total stockholders' equity $ 98,599 $ 92,325
------------ ------------
Total liabilities and stockholders' equity $ 1,334,547 $ 1,355,044
============ ============
Common Shares outstanding at period end 13,546,813 13,451,180
============ ============
See notes to unaudited consolidated financial statements.
3 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
2001 2000
------- -------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $40,513 $37,611
Interest and dividends on investment securities:
Taxable interest income 5,278 5,350
Non-taxable interest income 1,038 1,011
Dividends 59 64
Interest on federal funds sold 749 295
------- -------
Total interest income $47,637 $44,331
------- -------
INTEREST EXPENSE:
Deposits $23,083 $19,198
Short-term borrowings 1,536 2,571
Long-term debt 1,314 1,497
Trust preferred securities 72 -
------- -------
Total interest expense $26,005 $23,266
------- -------
Net interest income $21,632 $21,065
Provision for loan losses 895 985
------- -------
Net interest income after provision for loan losses $20,737 $20,080
------- -------
OTHER INCOME:
Trust $ 2,406 $ 2,256
Commissions and brokers fees, net 1,164 955
Service charges on deposit accounts 2,907 2,508
Other service charges and fees 815 1,145
Security gains, net 872 25
Gain on sales of loans 966 520
Net commissions from travel services 526 484
Other operating income 1,448 1,115
------- -------
Total other income $11,104 $ 9,008
------- -------
OTHER EXPENSES:
Salaries and wages $ 8,641 $ 7,801
Employee benefits 1,803 1,448
Net occupancy expense of premises 1,533 1,435
Furniture and equipment expenses 1,968 1,677
Data processing 391 723
Stationery, supplies and printing 541 453
Amortization of intangible assets 715 796
Other operating expenses 3,538 3,111
------- -------
Total other expenses $19,130 $17,444
------- -------
Income before income taxes $12,711 $11,644
Income taxes 4,586 4,105
------- -------
Net income $ 8,125 $ 7,539
======= =======
BASIC EARNINGS PER SHARE $ 0.60 $ 0.56
======= =======
DILUTED EARNINGS PER SHARE $ 0.60 $ 0.55
======= =======
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.26 $ 0.24
======= =======
See notes to unaudited consolidated financial statements.
4 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
2001 2000
------- -------
(Dollars in thousands,
except per share amounts)
INTEREST INCOME:
Interest and fees on loans $19,945 $19,372
Interest and dividends on investment securities:
Taxable interest income 2,554 2,578
Non-taxable interest income 520 507
Dividends 29 34
Interest on federal funds sold 240 96
------- -------
Total interest income $23,288 $22,587
------- -------
INTEREST EXPENSE:
Deposits $11,056 $ 9,738
Short-term borrowings 703 1,349
Long-term debt 665 714
------- -------
Total interest expense $12,424 $11,801
------- -------
Net interest income $10,864 $10,786
Provision for loan losses 495 595
------- -------
Net interest income after provision for loan losses $10,369 $10,191
------- -------
OTHER INCOME:
Trust $ 1,255 $ 1,161
Commissions and brokers fees, net 567 547
Service charges on deposit accounts 1,528 1,327
Other service charges and fees 418 515
Security gains, net 221 32
Gains on sales of pooled loans 533 74
Net commissions from travel services 254 231
Other operating income 936 729
------- -------
Total other income $ 5,712 $ 4,616
------- -------
OTHER EXPENSES:
Salaries and wages $ 4,377 $ 3,911
Employee benefits 835 721
Net occupancy expense of premises 731 710
Furniture and equipment expenses 997 860
Data processing 201 430
Stationary, supplies and printing 284 244
Amortization of intangible assets 357 413
Other operating expenses 2,020 1,440
------- -------
Total other expenses $ 9,802 $ 8,729
-------
Income before income taxes $ 6,279 $ 6,078
Income taxes 2,252 2,146
------- -------
NET INCOME $ 4,027 $ 3,932
======= =======
BASIC EARNINGS PER SHARE $ 0.30 $ 0.29
======= =======
DILUTED EARNINGS PER SHARE $ 0.30 $ 0.29
======= =======
DIVIDENDS DECLARED PER SHARE:
Common Stock $ 0.13 $ 0.12
======= =======
See notes to unaudited consolidated financial statements.
5 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
2001 2000
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,125 $ 7,539
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,770 2,567
Provision for loan losses 895 985
Provision for deferred income taxes (1,533) (806)
Amortization of investment security discounts (543) (182)
Gain on sales of investment securities, net (872) (25)
Proceeds from sales of pooled loans 98,391 20,843
Loans originated for sale (118,109) (17,133)
Gain on sale of pooled loans (966) (520)
Gain on sale and disposition of premises and equipment (1) (168)
Change in assets and liabilities:
(Increase) decrease in other assets (723) 617
Increase (decrease) in accrued expenses 1,184 (2,204)
(Decrease) increase in interest payable (1,031) 537
Decrease in income taxes receivable 172 -
Increase in income taxes payable 251 2,064
---------- ----------
Net cash (used in) provided by operating activities ($11,990) $ 14,114
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities classified available for sale 3,213 $ 14,620
Proceeds from maturities of securities classified available for sale 73,762 29,144
Purchase of securities classified available for sale (67,104) (33,338)
(Increase) decrease in federal funds sold (7,800) 8,500
Decrease (increase) in loans 35,103 (68,117)
Proceeds from sale of premises and equipment 2 407
Purchases of premises and equipment (875) (3,838)
---------- ----------
Net cash provided by (used in) investing activities $ 36,301 ($52,622)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in certificates of deposit ($25,074) ($66,582)
Net increase in demand, money market and saving deposits 11,102 72,792
Cash dividends paid (3,494) (3,236)
Purchase of treasury stock (2,454) (1,482)
Proceeds from sale of treasury stock 2,886 400
Net (decrease) increase in securities sold under agreement to
repurchase & federal funds purchased (2,488) (844)
Proceeds from short-term borrowings 2,500 16,925
Principal payments on short-term borrowings (27,500) (15,932)
Proceeds from issuance of long-term debt - 20,000
Proceeds from issuance of trust preferred securities 25,000 -
Principal payments on long-term borrowings (9,976) (13,920)
---------- ----------
Net cash (used in) provided by financing activities ($29,498) $ 8,121
---------- ----------
Net increase (decrease) in cash and cash equivalents ($5,187) ($30,387)
Cash and due from banks, beginning $ 58,585 $ 69,722
---------- ----------
Cash and due from banks, ending $ 53,398 $ 39,335
========== ==========
See notes to unaudited consolidated financial statements.
6 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
2001 2000
------- ---------
(Dollars in thousands,
except per share amounts)
Net income $8,125 $ 7,539
------- ---------
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during period $2,874 ($1,038)
Less reclassification adjustment for gains included in net income (872) (25)
------- ---------
Other comprehensive income (loss), before tax $2,002 ($1,063)
Income tax expense related to items of other comprehensive income 794 438
------- ---------
Other comprehensive income (loss), net of tax $1,208 ($625)
------- ---------
Comprehensive income $9,333 $ 6,914
======= =========
7 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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, 2001 and December 31, 2000 were
as follows:
June 30, 2001 December 31, 2000
------------- -----------------
(Dollars in thousands)
Commercial $119,164 $124,052
Real estate construction 80,262 75,672
Real estate - farmland 14,800 15,411
Real estate - 1-4 family residential mortgage 389,412 404,226
Real estate - multifamily mortgage 53,660 61,954
Real estate - non-farm nonresidential mortgage 241,620 231,230
Installment 50,692 50,980
Agricultural 20,174 20,844
-------- --------
$969,784 $984,369
Less:
Allowance for loan losses 12,997 12,268
-------- --------
Net loans $956,787 $972,101
======== ========
The real estate-mortgage category includes loans held for sale with carrying
values of $26,176,000 at June 30, 2001 and $5,492,000 at December 31, 2000;
these loans had fair market values of $26,346,000 and $5,568,000 respectively.
The following table sets forth the maturities of the loan portfolio:
1 year or less Over 1 year Over 5 years Total
through 5 years
--------------- ---------------- ------------- --------
Commercial and agricultural $ 89,371 $ 32,890 $ 17,077 $139,338
Real Estate 163,923 309,367 306,464 779,754
Installment 10,277 39,198 1,217 50,692
--------------- ---------------- ------------- --------
$ 263,571 $ 381,455 $ 324,758 $969,784
=============== ================ ============= ========
Fixed Rate $ 108,119 $ 255,075 $ 79,380 $442,574
Floating Rate 155,452 126,380 245,378 527,210
--------------- ---------------- ------------- --------
$ 263,571 $ 381,455 $ 324,758 $969,784
=============== ================ ============= ========
8 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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,
------------------------ ------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net income $ 4,027,000 $ 3,932,000 $ 8,125,000 $ 7,539,000
Shares:
Weighted average common shares outstanding 13,500,603 13,358,126 13,435,161 13,363,559
Dilutive effect of outstanding options, as determined
by the application of the treasury stock method 51,339 259,693 161,879 266,670
----------- ----------- ----------- -----------
Weighted average common shares outstanding,
as adjusted for diluted earnings per share calculation 13,551,942 13,617,819 13,597,040 13,630,229
=========== =========== =========== ===========
Basic earnings per share $ 0.30 $ 0.29 $ 0.60 $ 0.56
=========== =========== =========== ===========
Diluted earnings per share $ 0.30 $ 0.29 $ 0.60 $ 0.55
=========== =========== =========== ===========
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, 2001
(unaudited) when compared with December 31, 2000 and the results of operations
for the six months ended June 30, 2001 and 2000 (unaudited) and the results of
operations for the three months ended June 30, 2001 and 2000 (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.
FINANCIAL CONDITION AT JUNE 30, 2001 AS COMPARED TO DECEMBER 31, 2000
Total assets decreased $20,497,000 or 1.5%, to $1,334,547,000 at June 30, 2001
from $1,355,044,000 at December 31, 2000.
Securities available for sale decreased $6,454,000, or 2.8%, to $222,143,000 at
June 30, 2001 from $228,597,000 at December 31, 2000.
Loans decreased $14,585,000, or 1.5%, to $969,784,000 at June 30, 2001 from
$984,369,000 at December 31, 2000, primarily due to decreases in commercial, 1-4
family mortgages, and multifamily mortgages. These decreases were partially
offset by increases in real estate construction and non-farm nonresidential
mortgage loans.
Total deposits decreased $13,972,000, or 1.2%, to $1,134,815,000 at June 30,
2001 from $1,148,787,000 at December 31, 2000. Non-interest bearing deposits
decreased 9.5% to $121,920,000 at June 30, 2001 from $134,669,000 at December
31, 2000. Interest-bearing deposits decreased 0.1% to $1,012,895,000 at June
30, 2001 from $1,014,118,000 at December 31, 2000.
Short-term borrowings decreased $25,000,000 to $7,283,000 at June 30, 2001 as
compared to $32,283,000 at December 31, 2000. In June, 2001, the Corporation
issued $25,000,000 in trust preferred securities. The proceeds were used to
reduce short-term debt associated with the purchase of Busey Bank fsb in October
1999. Long-term debt decreased $9,976,000 or 18.8% to $43,000,000 at June 30,
2001, as compared to $52,976,000 at December 31, 2000.
9 of 24
In the first six months of 2001, the Corporation repurchased 129,617 shares of
its common stock at an aggregate cost of $2,454,000. 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, 2001 December 31, 2000
------------- -----------------
(Dollars in thousands)
Non-accrual loans $1,206 $ 767
Loans 90 days past due, still accruing 1,447 4,667
Restructured loans - -
Other real estate owned 245 230
Non-performing other assets 9 11
------- -------
Total non-performing assets $2,907 $5,675
======= =======
Total non-performing assets as a percentage of total assets 0.22% 0.42%
======= =======
Total non-performing assets as a percentage of loans plus non-performing assets 0.30% 0.57%
======= =======
The ratio of non-performing assets to loans plus non-performing assets decreased
to 0.30% at June 30, 2001, from 0.57% at December 31, 2000. This was due to a
decrease in loans 90 days past due, still accruing, offset partially by an
increase in nonaccrual loans. The overall reduction in non-performing assets is
the result of management's efforts to implement more vigorous underwriting
standards and more aggressive collection procedures to reduce the balance of
non-performing loans.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO JUNE 30, 2000
SUMMARY
- -------
Net income for the six months ended June 30, 2001 increased 7.8% to $8,125,000
as compared to $7,539,000 for the comparable period in 2000. Year-to-date
diluted earnings per share increased 9.1% to $.60 at June 30, 2001 as compared
to $.55 for the same period in 2000.
Operating earnings, which exclude security gains and the related tax expense,
were $7,599,000, or $.56 per share for the six months ended June 30, 2001, as
compared to $7,524,000, or $.55 per share for the same period in 2000.
The Corporation's return on average assets was 1.24% for the six months ended
June 30, 2001, as compared to 1.24% for the comparable period in 2000. The
return on average assets from operations of 1.16% for the six months ended June
30, 2001 was 7 basis points lower than the 1.23% level achieved in the
comparable period of 2000.
The Corporation's net interest margin expressed as a percentage of average
earning assets stated on a fully taxable equivalent basis, was 3.61% for the six
months ended June 30, 2001, as compared to 3.83% for the same period in 2000.
The net interest margin expressed as a percentage of average total assets, also
on a fully taxable equivalent basis, was 3.40% for the six months ended June 30,
2001, compared to 3.57% for the same period in 2000. The decrease in the net
interest margin is due to the decline in the yield on interest-earning assets of
10 basis points combined with the increase in the cost of interest-bearing
liabilities of 21 basis points. The contraction in the net interest margin
results from a reduction of 275 basis points in the banking subsidiaries prime
rate since December 31, 2000. The prime rate reduction followed Federal Reserve
Board rate reductions. Liability costs have not moved as quickly due to
contractual maturities on time deposit portfolios.
10 of 24
During the six months ended June 30, 2001, the Corporation recognized net
security gains of approximately $526,000, after income taxes, representing 6.50%
of net income. During the same period in 2000, net security gains of $15,000,
after income taxes, were recognized, representing 0.20% of net income.
INTEREST INCOME
- ---------------
Interest income, on a tax equivalent basis, for the six months ended June 30,
2001 increased $3,281,000 or 7.3% to $48,311,000 from $45,030,000 for the
comparable period in 2000. The increase in interest income resulted from an
increase in average earning assets of $102,755,000 for the period ended June 30,
2001, as compared to the same period of 2000. The average yield on
interest-earning assets decreased from 7.93% for the six months ended June 30,
2000 to 7.83% for the same period in 2001 due to decreases in the yields on all
categories of interest-earning assets
INTEREST EXPENSE
- ----------------
Total interest expense increased $2,739,000 or 11.8% for the six months ended
June 30, 2001 as compared to the prior year period. This increase resulted
primarily from an increase of $74,002,000 in average interest-bearing
liabilities combined with increases in costs of time deposits and short-term
borrowings.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses of $895,000 for the six months ended June 30, 2001
is $90,000 less than the provision for the comparable period in 2000. The
provision and the low level of net charge-offs for the period resulted in the
reserve representing 1.34% of total loans and 447% of non-performing loans at
June 30, 2001, as compared to the reserve representing 1.25% of total loans and
216% of non-performing loans at December 31, 2000. The adequacy of the reserve
for loan losses is consistent with management's consideration of the composition
of the portfolio, non-performing asset levels, recent credit quality experience,
historic charge-off trends, prevailing economic conditions among other factors.
Like many other financial institutions, the corporation is concerned about the
continued weakening of the economy in 2001. Should the economic climate
continue to deteriorate, borrowers may experience difficulty, and the level of
non-performing loans, charge-offs, and delinquencies could rise and require
further increases in the provision for loan losses which may cause the
Corporation's net income to decrease.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security gains, increased $1,249,000 or 13.9% for
the six months ended June 30, 2001 as compared to the same period in 2000. This
was a combination of increases in trust revenue, commissions and brokers fees,
service charges, loan gains, and other operating income for the six months ended
June 30, 2001 as compared to the same period in 2000. As of June 30, 2001, the
trust company of the Corporation had $1,028,288,000 in assets under care, an
increase of 6.1% from $969,188,000 at June 30, 2000.
Gains of $966,000 were recognized on the sale of $97,425,000 of pooled loans for
the six months ended June 30, 2001 as compared to gains of $520,000 on the sale
of $20,323,000 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
in order 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 9.7% or $1,686,000 to $19,130,000 for the six
months ended June 30, 2001 as compared to $17,444,000 for the same period in
2000.
11 of 24
Salaries and wages expense increased $840,000 or 10.8% and employee benefits
expense increased $355,000 or 24.5% for the six months ended June 30, 2001, as
compared to the same period last year. The Corporation had 502 full-time
equivalent employees as of June 30, 2001 as compared to 500 as of June 30, 2000.
Occupancy and furniture and equipment expenses increased 12.5% to $3,501,000 for
the six months ended June 30, 2001 from $3,112,000 in the prior year period. In
October 2000, Busey Bank fsb opened a full-service branch office in Fort Myers,
Florida. The majority of the increases in occupancy, furniture and equipment
can be attributed to the opening of this branch office. Data processing expense
decreased $332,000 to $391,000 for the six months ended June 30, 2001 from the
prior year period. This decrease is due to the savings associated with
converting Busey Bank fsb's data processing to the same in-house system employed
by Busey Bank. This conversion was completed in June, 2000.
The Corporation's net overhead expense, total non-interest expense less
non-interest income divided by average assets, decreased to 1.22% for the six
months ended June 30, 2001 from 1.39% in the prior year period as a result of
the changes in 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, 2001, was 58.8% as compared to 56.7% for
the same period in 2000. When the gains on the sales of pooled loans are
excluded these ratios are 60.6% and 57.7% for the six month periods ending June
30, 2001, and June 30, 2000, respectively.
Income taxes for the six months ended June 30, 2001 increased to $4,586,000 as
compared to $4,105,000 for the
comparable period in 2000. As a percent of income before taxes, the provision
for income taxes increased to 36.1% for the six months ended June 30, 2001 from
35.3% for the same period in 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 AS COMPARED TO JUNE 30, 2000
SUMMARY
- -------
Net income for the three months ended June 30, 2001 increased 2.4% to $4,027,000
as compared to $3,932,000 for the comparable period in 2000. Diluted earnings
per share increased 3.4% to $.30 at June 30, 2001 as compared to $.29 for the
same period in 2000.
Operating earnings, which exclude security gains and the related tax expense,
were $3,894,000, or $.29 per share for the three months ended June 30, 2001, as
compared to $3,913,000, or $.29 per share for the same period in 2000.
The Corporation's return on average assets was 1.29% for the three months ended
June 30, 2001, as compared to 1.39% achieved for the comparable period in 2000.
The return on average assets from operations for the three months ended June 30,
2001 of 1.23% was five basis points lower than the 1.28% level achieved in the
comparable period of 2000.
The net interest margin expressed as a percentage of average earning assets was
3.63% for the three months ended June 30, 2001, a decrease of 29 basis points
from the level achieved for the like period in 2000. The net interest margin
expressed as a percentage of average total assets was 3.42% for the three months
ended June 30, 2001, compared to 3.65% for the same period in 2000.
During the three months ended June 30, 2001, the Corporation recognized security
gains of approximately $133,000, after income taxes, representing 3.3% of net
income. During the same period in 2000, security gains of approximately
$19,000, after income taxes, were recognized, representing 0.5% of net income.
12 of 24
INTEREST INCOME
- ---------------
Interest income on a fully taxable equivalent basis increased $663,000, or 33.4%
for the three months ended June 30, 2001 from the same period in 2000. The
increase resulted primarily from growth in Federal Funds sold, average volumes
of other securities and loans. The yield on interest earning assets declined 41
basis points for the three months ended June 30, 2001 as compared to the same
period in 2000, due to increases in the yields on all categories of
interest-earning assets.
INTEREST EXPENSE
- ----------------
Total interest expense increased $623,000 or 5.3% for the three months ended
June 30, 2001 as compared to the prior year period. The increase is primarily
due to growth in the average balances of money market and time deposits combined
with an increase in the costs of time deposits.
OTHER INCOME, OTHER EXPENSE AND INCOME TAXES
- --------------------------------------------
Total other income, excluding security transactions, increased 19.8% to
$5,491,000 for the three months ended June 30, 2001 as compared to the same
period in 2000. This was a combination of increased trust revenue, commissions
and brokers fees, service charges, and loan gains. Gains of $533,000 were
recognized on the sale of $62,019,000 of pooled loans for the three months ended
June 30, 2001 as compared to gains of $74,000 on the sale of $9,386,000 of
pooled loans in the prior year period.
Total other expense increased 12.3% or $1,073,000 to $9,802,000 for the three
months ended June 30, 2001 as compared to the same period in 2000.
Salaries and wages expense increased $466,000 or 11.9% and employee benefits
expense increased $114,000 or 15.8% for the three months ended June 30, 2001, as
compared to the same period last year. Occupancy and furniture and equipment
expenses increased 10.1% to $1,728,000 for the three months ended June 30, 2001
from $1,570,000 in the prior year period. The majority of the increases in
salaries, benefits, occupancy, and furniture and equipment expenses can be
attributed to the opening of the Busey Bankfsb's full-service branch office in
Fort Myers, Florida. Data processing expense decreased $229,000 to $201,000 for
the three months ended June 30, 2001 from the prior year period.
The consolidated efficiency ratio for the three months ended June 30, 2001 was
58.7% as compared to 55.4% for the prior year period. When the gains on the
sales of pooled loans are excluded, this ratio is 60.7% for the three months
ended June 30, 2001 compared to 55.7% for the same period in 2000. 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, 2001 increased to $2,252,000 as
compared to $2,146,000 for the comparable period in 2000. As a percent of
income before taxes, the provision for income taxes increased to 35.9% for the
three months ended June 30, 2001 from 35.3% for the same period in 2000.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In June 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business Combinations." This Statement addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16, "Business
Combinations" and SFAS No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." SFAS No. 141 requires all business combinations in the
scope of this SFAS to be accounted for using the purchase method. SFAS No. 141
is effective for business combinations initiated after June 30, 2001, and all
business combinations accounted for using the purchase method for which the
acquisition date is July 1, 2001, or later.
13 of 24
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets"
(FAS 142). The standard addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
"Intangible Assets." It addresses how intangible assets should be accounted for
at acquisition and in subsequent periods. Most significantly, goodwill and
intangible assets that have indefinite useful lives will not be amortized but
rather will be tested at least annually for impairment. Intangible assets that
have finite useful lives will continue to be amortized over their useful lives.
The standard also provides specific guidance for testing goodwill for impairment
and requires additional disclosures about goodwill and intangible assets.
The standard is effective for fiscal years beginning after December 15, 2001.
The standard is required to be applied to the beginning of an entity's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its financial statements at that date. Impairment losses for goodwill and other
intangible assets with indefinite lives that arise due to the initial
application of this standard are to be reported as resulting from a change in
accounting principle.
At this time First Busey Corporation has not yet determined what effect the
adoption of SFAS No. 141 and 142 will have on the consolidated financial
statements.
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 Champaign and Ford Counties in Illinois, through its branch in
Indianapolis, Indiana, and through its loan production office in Fort Myers,
Florida. Busey Bank fsb provides a full range of banking services to individual
and corporate customers in Bloomington-Normal, Illinois, and the surrounding
communities, and through its branch in Fort Myers, Florida. First Busey Trust &
Investment Co. provides trust and asset management services to individual and
corporate customers throughout central Illinois and Florida.
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.
14 of 24
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, 2001
--------------------------------------------------------------------------------------------------
First Busey
Busey Bank, Trust & Consolidated
Busey Bank fsb Investment Co. All Other Totals Eliminations Totals
----------- ------------ --------------- ---------- ---------- -------------- -------------
Interest income $ 36,229 $ 11,288 $ 92 $ 143 $ 47,752 $ (115) $ 47,637
Interest expense 18,213 6,722 - 1,133 26,068 $ (63) 26,005
Other income 6,616 1,206 2,431 10,804 21,057 $ (9,953) 11,104
Net income 7,143 948 769 8,381 17,241 $ (9,116) 8,125
Total assets 1,030,811 300,300 3,614 163,568 1,498,293 $ (163,746) 1,334,547
June 30, 2000
--------------------------------------------------------------------------------------------------
First Busey
Busey Bank, Trust & Consolidated
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
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 $5,000,000 available as of June 30, 2001.
The Corporation's dependence on large liabilities (defined as time deposits over
$100,000 and short-term borrowings) decreased to 13.2% at June 30, 2001 from
17.3% at December 31, 2000. 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 $27,708,000 decrease in time deposits over $100,000
and a $27,488,000 decrease in short-term borrowings and securities sold under
agreements to repurchase. Proceeds of $25,000,000 from the issuance of trust
preferred securities were used to reduce short-term debt associated with the
purchase of Busey Bank fsb in October, 1999.
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, 2001,
the Corporation earned $8,125,000 and paid dividends of $3,494,000 to
stockholders, resulting in a retention of current earnings of $4,631,000. The
Corporation's dividend payout for the six months ended June 30, 2001 was 43.0%.
The Corporation's risk-based capital ratio was 13.28% and the leverage ratio was
6.19% as of June 30, 2001, as compared to 9.43% and 5.71% respectively as of
December 31, 2000. The Corporation and its bank subsidiaries were above all
minimum required capital ratios as of June 30, 2001.
15 of 24
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, 2001.
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 $ 9,510 $ - $ - $ - $ - $ 9,510
Federal funds sold 42,500 - - - - 42,500
Investment securities
U.S. Governments 7,007 11,070 29,726 23,410 83,763 154,976
Obligations of states and
political subdivisions 112 - 3,427 2,084 38,295 43,918
Other securities 10,326 - 50 682 12,191 23,249
Loans (net of unearned int.) 315,219 81,476 99,850 112,828 360,411 969,784
----------- ----------- ----------- ------------ --------- ----------
Total rate-sensitive assets $ 384,674 $ 92,546 $ 133,053 $ 139,004 $494,660 $1,243,937
----------- ----------- ----------- ------------ --------- ----------
Interest bearing transaction
deposits $ 51,591 $ - $ - $ - $ - $ 51,591
Savings deposits 90,509 - - - - 90,509
Money market deposits 350,001 - - - - 350,001
Time deposits 92,395 86,330 92,441 140,035 109,593 520,794
Short-term borrowings:
Federal funds purchased &
repurchase agreements 16,402 - - - - 16,402
Other - - - 7,283 - 7,283
Long-term debt 5,000 2,000 6,000 8,000 47,000 68,000
----------- ----------- ----------- ------------ --------- ----------
Total rate-sensitive
liabilities $ 605,898 $ 88,330 $ 98,441 $ 155,318 $156,593 $1,104,580
----------- ----------- ----------- ------------ --------- ----------
Rate-sensitive assets less
rate-sensitive liabilities ($221,224) $ 4,216 $ 34,612 ($16,314) $338,067
----------- ----------- ----------- ------------ ---------
Cumulative Gap ($221,224) ($217,008) ($182,396) ($198,710) $139,357
=========== =========== =========== ============ =========
Cumulative amounts as a
percentage of total
rate-sensitive assets -17.78% -17.45% -14.66% -15.97% 11.20%
=========== =========== =========== ============ =========
Cumulative ratio 0.63 0.69 0.77 0.79 1.13
=========== =========== =========== ============ =========
The foregoing table shows a negative (liability sensitive) rate-sensitivity gap
of $221.2 million in the 1-30 day and a positive rate-sensitive gap of $4.2
million in the 31-90 day and $34.6 million in the 91-180 day repricing
categories. The gap becomes slightly more liability sensitive in the 181-days
to 1-year repricing period as rate-sensitive liabilities that reprice in those
time periods are greater in volume than rate-sensitive assets that are subject
to repricing in the same respective time periods. The composition of the gap
structure at June 30, 2001 will benefit the Corporation more if interest rates
fall during the next year by allowing the net interest margin to grow as
liability rates would reprice more quickly than rates on interest rate-sensitive
assets. After 1 year, 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 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
2001 2000
------------------------------ ------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------ ------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $ 28,339 $ 749 5.33% $ 10,932 $ 295 5.43%
Investment securities
U.S. Government obligations 159,023 4,543 5.76% 170,171 4,886 5.77%
Obligations of states and political
subdivisions (1) 43,741 1,597 7.36% 40,510 1,555 7.72%
Other securities 37,017 794 4.33% 20,596 528 5.16%
Loans (net of unearned interest) (1) (2) 976,506 40,628 8.39% 899,662 37,766 8.44%
----------- -------- ----------- --------
Total interest earning assets $1,244,626 $ 48,311 7.83% $1,141,871 $ 45,030 7.93%
======== ========
Cash and due from banks 31,422 32,898
Premises and equipment 30,728 29,883
Reserve for possible loan losses (12,545) (10,655)
Other assets 28,344 32,593
----------- -----------
Total Assets $1,322,575 $1,226,590
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 37,576 $ 477 2.56% $ 23,203 $ 315 2.73%
Savings deposits 89,086 1,225 2.77% 95,819 1,436 3.01%
Money market deposits 338,982 5,347 3.18% 319,608 5,199 3.27%
Time deposits 542,634 16,034 5.96% 461,014 12,248 5.34%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 16,367 492 6.06% 28,030 823 5.90%
Other 27,840 1,044 7.56% 48,915 1,748 7.19%
Long-term debt 51,433 1,386 5.43% 53,327 1,497 5.65%
----------- -------- ----------- --------
Total interest-bearing liabilities $1,103,918 $ 26,005 4.75% $1,029,916 $ 23,266 4.54%
======== ========
Net interest spread 3.08% 3.39%
======= =======
Demand deposits 113,240 105,807
Other liabilities 10,155 8,847
Stockholders' equity 95,262 82,020
Total Liabilities and Stockholders' Equity $1,322,575 $1,226,590
=========== ===========
Interest income / earning assets (1) $1,244,626 $ 48,311 7.83% $1,141,871 $ 45,030 7.93%
Interest expense / earning assets $1,244,626 $ 26,005 4.22% $1,141,871 $ 23,266 4.10%
-------- ------- -------- -------
Net interest margin (1) $ 22,306 3.61% $ 21,764 3.83%
======== ======= ======== =======
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2001 and 2000.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
17 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
Change due to (1)
Average Average Total
Volume Yield/Rate Change
--------- ------------ --------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $ 459 ($5) $ 454
Investment securities:
U.S. Government obligations (332) (11) (343)
Obligations of states and political
subdivisions (2) 100 (58) 42
Other securities 333 (67) 266
Loans (2) 3,083 (221) 2,862
--------- ------------ --------
Change in interest income (2) $ 3,643 ($362) $ 3,281
--------- ------------ --------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 180 ($18) $ 162
Savings deposits (99) (112) (211)
Money market deposits 272 (124) 148
Time deposits 2,293 1,493 3,786
Short-term borrowings:
Federal funds purchased and repurchase
agreements (354) 23 (331)
Other (801) 97 (704)
Long-term debt (54) (57) (111)
--------- ------------ --------
Change in interest expense $ 1,437 $ 1,302 $ 2,739
--------- ------------ --------
Increase in net interest income (2) $ 2,206 ($1,664) $ 542
========= ============ ========
(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
2001 and 2000.
18 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
AVERAGE BALANCE SHEETS AND INTEREST RATES
QUARTERS ENDED JUNE 30, 2001 AND 2000
2001 2000
------------------------------ ------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------ ------------------------------
(Dollars in thousands)
ASSETS
Federal funds sold $ 21,818 $ 240 4.41% $ 7,318 $ 96 5.28%
Investment securities
U.S. Government obligations 155,875 2,205 5.67% 162,966 2,327 5.74%
Obligations of states and political
subdivisions (1) 44,028 800 7.29% 40,503 780 7.75%
Other securities 38,107 378 3.98% 19,887 286 5.78%
Loans (net of unearned interest) (1) (2) 978,028 20,002 8.20% 913,762 19,473 8.57%
----------- -------- ----------- --------
Total interest earning assets $1,237,856 $ 23,625 7.66% $1,144,436 $ 22,962 8.07%
======== ========
Cash and due from banks 30,174 32,143
Premises and equipment 30,449 30,246
Reserve for possible loan losses (12,694) (10,799)
Other assets 28,355 32,561
----------- -----------
Total Assets $1,314,140 $1,228,587
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing transaction deposits $ 36,915 $ 203 2.21% $ 26,053 $ 177 2.73%
Savings deposits 90,213 577 2.57% 93,773 704 3.02%
Money market deposits 342,150 2,518 2.95% 313,384 2,608 3.35%
Time deposits 532,056 7,758 5.85% 461,297 6,249 5.45%
Short-term borrowings:
Federal funds purchased and
repurchase agreements 16,757 232 5.55% 30,981 467 6.06%
Other 24,883 471 7.59% 50,164 882 7.07%
Long-term debt 49,248 665 5.42% 52,952 714 5.43%
----------- -------- ----------- --------
Total interest-bearing liabilities $1,092,222 $ 12,424 4.56% $1,028,604 $ 11,801 4.61%
======== ========
Net interest spread 3.10% 3.46%
======= =======
Demand deposits 115,491 107,808
Other liabilities 9,793 9,438
Stockholders' equity 96,634 82,737
Total Liabilities and Stockholders' Equity $1,314,140 $1,228,587
=========== ===========
Interest income / earning assets (1) $1,237,856 $ 23,625 7.66% $1,144,436 $ 22,962 8.07%
Interest expense / earning assets $1,237,856 $ 12,424 4.03% $1,144,436 $ 11,801 4.15%
-------- ------- -------- -------
Net interest margin (1) $ 11,201 3.63% $ 11,161 3.92%
======== ======= ======== =======
(1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 2001 and 2000.
(2) Non-accrual loans have been included in average loans, net of unearned interest.
19 of 24
FIRST BUSEY CORPORATION AND SUBSIDIARIES
CHANGES IN NET INTEREST INCOME
QUARTERS ENDED JUNE 30, 2001 AND 2000
Change due to (1)
Average Average Total
Volume Yield/Rate Change
--------- ----------- --------
(Dollars in thousands)
Increase (decrease) in interest income:
Federal funds sold $ 157 ($13) $ 144
Investment securities:
U.S. Government obligations (96) (26) (122)
Obligations of states and political
subdivisions (2) 62 (42) 20
Other securities 140 (48) 92
Loans (2) 1,359 (830) 529
--------- ----------- --------
Change in interest income (2) $ 1,622 ($959) $ 663
--------- ----------- --------
Increase (decrease) in interest expense:
Interest-bearing transaction deposits $ 49 ($23) $ 26
Savings deposits (26) (101) (127)
Money market deposits 314 (404) (90)
Time deposits 1,022 487 1,509
Short-term borrowings:
Federal funds purchased and repurchase
Agreements (199) (36) (235)
Other (483) 72 (411)
Long-term debt (48) (1) (49)
--------- ----------- --------
Change in interest expense $ 629 ($6) $ 623
--------- ----------- --------
Increase in net interest income (2) $ 993 ($953) $ 40
========= =========== ========
(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
2001 and 2000.
FORWARD LOOKING STATEMENTS
- --------------------------
This presentation includes forward looking statements that are intended to be
covered by the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements include but are not
limited to comments with respect to the objectives and strategies, financial
condition, results of operations and business of the Corporation.
These forward looking statements involve numerous assumptions, inherent risks
and uncertainties, both general and specific, and the risk that predictions and
other forward looking statements will not be achieved. The Corporation cautions
you not to place undue reliance on these forward looking statements as a number
of important factors could cause actual future results to differ materially from
the plans, objectives, expectations, estimates and intentions expressed in such
forward looking statements.
These risks, uncertainties and other factors include the general state of the
economy, both on a local and national level, the ability of the Corporation to
successfully complete acquisitions, the continued growth of geographic regions
served by the Corporation, and the retention of individuals who currently are
very important in the management structure of the Corporation.
20 of 24
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 subsidiary banks, Busey Bank and Busey Bankfsb, have
asset-liability committees which meet at least quarterly to review current
market conditions and attempt to structure the banks' balance sheets 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, 2001, 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 (1.23%) (0.59%) (0.20%) (0.50%)
21 of 24
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
(a.) EXHIBITS
Not Applicable
(b.) REPORTS ON FORM 8-K
On April 17, 2001, the Corporation filed a report on Form
8-K (Item5) dated April 16, 2001, relating to Vision 2010,
First Busey Corporation's strategic plan, which was
presented at the Corporation's annual shareholder meeting
held April 16, 2001.
23 of 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this 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, 2001
24 of 24