SEC Filing | First Busey Corporation

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 1O-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended 6/30/96 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 or organization) Identification No.) 201 W. Main St. Urbana, Illinois 61801 ------------------------------- -------------------- (Address of principal executive offices) (Zip Code) 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 practicable date. Class Outstanding at July 31, 1996 --------------------------------------- ----------------------------- Class A Common Stock, without par value 5,671,523 Class B Common Stock, without par value 1,125,000

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 1996 December 31, 1995 ------------------ ----------------- (Dollars in thousands) ASSETS Cash and due from banks $37,530 $39,358 Federal funds sold 0 650 Securities held to maturity (fair value 1996 $61,422; 1995 $62,625) 61,293 61,501 Securities available for sale (amort. cost 1996 $177,040; 1995 $218,257) 179,912 223,016 Trading Securities at fair value 1,854 - Loans (net of unearned interest) 537,873 481,772 Allowance for loan losses (5,543) (5,473) ------------------ ----------------- Net loans $532,330 $476,299 Premises and equipment 21,300 21,857 Other assets 21,250 21,985 ------------------ ----------------- Total assets $855,469 $844,666 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $76,183 $72,386 Interest bearing 682,980 672,511 ------------------ ----------------- Total deposits $759,163 $744,897 Short-term borrowings 16,916 21,674 Long-term debt 5,000 5,000 Other liabilities 5,704 5,317 ------------------ ----------------- Total liabilities $786,783 $776,888 ================== ================= STOCKHOLDER'S EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 20,395 20,380 Retained earnings 44,858 42,474 Unrealized gain (loss) on securities available for sale, net 1,868 3,093 ------------------ ----------------- Total stockholders' equity before treasury stock, unearned ESOP $73,412 $72,238 shares and deferred compensation for stock grants Treasury stock, at cost (4,000) (3,659) Unearned ESOP shares and deferred compensation for stock grants (726) (801) ------------------ ----------------- Total stockholders' equity $68,686 $67,778 ------------------ ----------------- Total liabilities and stockholders' equity $855,469 $844,666 ================== ================= Class A Common Shares outstanding at period end 5,669,306 5,686,958 ================== ================= Class B Common Shares outstanding at period end 1,125,000 1,125,000 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 1996 June 30, 1995 ------------------ ----------------- (Dollars in thousands) ASSETS Cash and due from banks $37,530 $40,848 Federal funds sold 0 9,125 Securities held to maturity (fair value 1996 $61,422; 1995 $67,440) 61,293 66,822 Securities available for sale (amort. cost 1996 $177,040; 1995 $170,514) 179,912 173,492 Trading securities at fair value 1,854 0 Loans (net of unearned interest) 537,873 452,973 Allowance for loan losses (5,543) (5,261) ------------------ ----------------- Net loans $532,330 $447,712 Premises and equipment 21,300 21,317 Other assets 21,250 18,241 ------------------ ----------------- Total assets $855,469 $777,557 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Non-interest bearing $76,183 $70,944 Interest bearing 682,980 604,951 ------------------ ----------------- Total deposits $759,163 $675,895 Short-term borrowings 16,916 28,178 Long-term debt 5,000 5,000 Other liabilities 5,704 4,719 ------------------ ----------------- Total liabilities $786,783 $713,792 ------------------ ----------------- STOCKHOLDER'S EQUITY Preferred stock $ - $ - Common stock 6,291 6,291 Surplus 20,395 20,336 Retained earnings 44,858 39,891 Unrealized gain (loss) on securities available for sale, net 1,868 1,937 ------------------ ----------------- Total stockholders' equity before treasury stock, unearned ESOP $73,412 $68,455 shares and deferred compensation for stock grants Treasury stock, at cost (4,000) (3,592) Unearned ESOP shares and deferred compensation for stock grants (726) (1,098) ------------------ ----------------- Total stockholders' equity $68,686 $63,765 ------------------ ----------------- Total liabilities and stockholders' equity $855,469 $777,557 ================== ================= Class A Common Shares outstanding at period end 5,669,306 5,687,132 ================== ================= Class B Common Shares outstanding at period end 1,125,000 1,125,000 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Six Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $21,774 $18,908 Interest and dividends on investment securities: Taxable interest income 6,768 5,583 Non-taxable interest income 1,036 986 Dividends 61 67 Interest on federal funds sold 392 361 ------------------ ----------------- Total interest income $30,031 $25,905 ------------------ ----------------- INTEREST EXPENSE: Deposits $14,072 $11,680 Short-term borrowings 623 640 Long-term debt 138 137 ------------------ ----------------- Total interest expense $14,833 $12,457 ------------------ ----------------- Net interest income $15,198 $13,448 Provision for loan losses 250 100 ------------------ ----------------- Net interest income after provision for loan losses $14,948 $13,348 ------------------ ----------------- OTHER INCOME: Trust $1,286 $1,311 Service charges on deposit accounts 1,432 1,296 Other service charges and fees 862 642 Security gains (losses), net 5 48 Trading security gains (losses), net (132) 28 Gain on sales of pooled loans 116 413 Other operating income 485 626 ------------------ ----------------- Total other income $4,054 $4,364 ------------------ ----------------- OTHER EXPENSES: Salaries and wages $5,759 $5,201 Employee benefits 1,124 1,005 Net occupancy expense of bank premises 948 840 Furniture and equipment expenses 793 740 Data processing 684 705 Stationery, supplies and printing 344 352 Foreclosed property write-downs and expenses 75 89 Amortization expense 660 430 Other operating expenses 2,091 2,355 ------------------ ----------------- Total other expenses $12,478 $11,717 ------------------ ----------------- Income before income taxes $6,524 $5,995 Income taxes 1,905 1,770 ------------------ ----------------- Net income $4,619 $4,225 ================== ================= NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.67 $0.61 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.3333 $0.2933 ================== ================= Class B Common Stock $0.3030 $0.2667 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Quarters Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) INTEREST INCOME: Interest and fees on loans $11,171 $9,609 Interest and dividends on investment securities: Taxable interest income 3,237 2,882 Non-taxable interest income 525 506 Dividends 28 33 Interest on federal funds sold 70 240 ------------------ ----------------- Total interest income $15,031 $13,270 ------------------ ----------------- INTEREST EXPENSE: Deposits $6,943 $6,063 Short-term borrowings 262 368 Long-term debt 69 69 ------------------ ----------------- Total interest expense $7,274 $6,500 ------------------ ----------------- Net interest income $7,757 $6,770 Provision for loan losses 100 50 ------------------ ----------------- Net interest income after provision for loan losses $7,657 $6,720 ------------------ ----------------- OTHER INCOME: Trust $670 $639 Service charges on deposit accounts 733 674 Other service charges and fees 456 332 Security gains (losses), net 4 146 Trading security gains (losses), net (44) 19 Gain on sales of pooled loans 68 73 Other operating income 228 228 ------------------ ----------------- Total other income $2,115 $2,111 ------------------ ----------------- OTHER EXPENSES: Salaries and wages $2,907 $2,607 Employee benefits 556 486 Net occupancy expense of bank premises 480 423 Furniture and equipment expenses 399 379 Data processing 348 361 Stationery, supplies and printing 186 187 Foreclosed property write-downs and expenses 71 27 Amortization expense 330 215 Other operating expenses 1,048 1,269 ------------------ ----------------- Total other expenses $6,325 $5,954 ------------------ ----------------- Income before income taxes $3,447 $2,877 Income taxes 1,019 823 ------------------ ----------------- Net income $2,428 $2,054 ================== ================= NET INCOME PER SHARE OF COMMON STOCK AND STOCK EQUIVALENTS: $0.35 $0.30 DIVIDENDS DECLARED PER SHARE: Class A Common Stock $0.1667 $0.1467 ================== ================= Class B Common Stock $0.1515 $0.1333 ================== =================

FIRST BUSEY CORPORATION and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 ------------------ ----------------- (Dollars in thousands, except per share amounts) CASH FLOWS FROM OPERATING ACTIVITIES Net income $4,619 $4,225 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,646 1,384 Provision for loan losses 250 100 Increase in deferred income taxes (401) (512) Amortization of investment security discounts (892) (199) Gain on sales of investment securities, net (5) (48) Proceeds from sales of pooled loans 12,995 14,498 Loans originated for sale (14,834) (7,194) Gain on sale of pooled loans (116) (413) Loss on sales and dispositions of premises and equipment 9 0 Change in assets and liabilities: Increase (decrease) in other assets 1,486 (198) Increase (decrease) in accrued expenses (23) 505 Increase (decrease) in interest payable (164) 766 Increase in income taxes payable 574 259 ------------------ ----------------- Net cash provided by operating activities $5,144 $13,173 ------------------ ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities classified available for sale $8,049 $32,718 Proceeds from maturities of securities classified available for sale 352,724 45,997 Proceeds from maturities of securities classified held to maturity 18,323 5,228 Purchase of securities classified available for sale (320,675) (103,901) Purchase of securities classified held to maturity (17,951) (5,329) (Increase) decrease in federal funds sold 650 (9,125) Increase in loans (54,677) (9,456) Purchases of premises and equipment (412) (300) ------------------ ----------------- Net cash (used in) investing activities ($13,969) ($44,168) ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in certificates of deposit ($18,255) $33,352 Net increase in demand, money market and saving deposits 32,521 6,849 Cash dividends paid (2,235) (1,973) Purchase of treasury stock (367) (546) Proceeds from sale of treasury stock 41 217 Proceeds from short-term borrowings 0 5,250 Principal payments on short-term borrowings (1,250) (250) Net increase (decrease) in federal funds purchased, repurchase agreements and Federal Reserve discount borrowings (3,458) (2,382) ------------------ ----------------- Net cash provided by (used in) financing activities $6,997 $40,517 ------------------ ----------------- Net increase (decrease) in cash and cash equivalents ($1,828) $9,522 Cash and due from banks, beginning 39,358 31,326 ------------------ ----------------- Cash and due from banks, ending $37,530 $40,848 ================== =================

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, 1996 and December 31, 1995 were as follows: June 30, 1996 December 31, 1995 ------------------------------------------ (Dollars in thousands) Commercial $61,532 $55,687 Real estate construction 23,883 25,566 Real estate - farmland 11,128 11,162 Real estate - 1-4 family residential mortgage 201,947 179,047 Real estate - multifamily mortgage 69,795 57,364 Real estate - non-farm nonresidential mortgage 114,883 98,006 Installment 41,142 42,353 Agricultural 13,567 12,594 ------------------------------------------ $537,877 $481,779 Less: Unearned interest 4 7 ------------------------------------------ $537,873 $481,772 ------------------------------------------ Less: Allowance for loan losses 5,543 5,473 ------------------------------------------ Net loans $532,330 $476,299 ========================================== The real estate-mortgage category includes loans held for sale with carrying values of $3,758,000 at June 30, 1996 and $1,803,000 at December 31, 1995; these loans had fair market values of $3,769,000 and $1,840,000, respectively.

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, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net income $2,428,000 $2,054,000 $4,619,000 $4,225,000 Shares: Weighted average common shares outstanding 6,795,518 6,823,326 6,800,539 6,825,734 Dilutive effect of outstanding options, as determined by the application of the treasury stock method 133,507 91,784 120,583 93,156 ---------- ---------- ---------- ---------- Weighted average common shares outstanding, as adjusted 6,929,025 6,915,110 6,921,122 6,918,890 ========== ========== ========== ========== Net income per share of common stock and stock equivalents: $0.35 $0.30 $0.67 $0.61 ========== ========== ========== ========== NOTE 4: SUPPLEMENTAL CASH FLOW DISCLOSURES FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995. 1996 1995 ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $14,997 $11,691 ========== ========== Income taxes $1,713 $1,908 ========== ========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Other real estate acquired in settlement of loans $351 $569 ========== ========== Change in unrealized gain (loss) on securities available for sale $1,885 $4,255 ========== ========== (Decrease) increase in deferred income taxes attributable to the unrealized (gain) loss on investment securities available for sale $660 ($1,476) ========== ==========

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, 1996 (unaudited) when compared with December 31, 1995 and the results of operations for the six months ended June 30, 1996 and 1995 (unaudited) and the results of operations for the three months ended June 30, 1996 and 1995 (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, 1996 AS COMPARED TO DECEMBER 31, 1995 Total assets increased $10,803,000, or 1.3%, to $855,469,000 at June 30, 1996 from $844,666,000 at December 31, 1995. Securities held to maturity decreased $208,000, or .3%, to $61,293,000 at June 30, 1996 from $61,501,000 at December 31, 1995. Securities available for sale decreased $53,104,000, or 22.8%, to $179,912,000 at June 30, 1996 from $233,016,000 at December 31, 1995, as security maturities were used to finance loan growth. Loans increased $56,101,000 or 11.6%, to $537,873,000 at June 30, 1996 from $481,772,000 at December 31, 1995, primarily due to increases in commercial and mortgage loans. Total deposits increased $14,266,000, or 1.9%, to $759,163,000 at June 30, 1996 from $744,897,000 at December 31, 1995. Non-interest bearing deposits increased 5.2% to $76,183,000 at June 30, 1996 from $72,386,000 at December 31, 1995. Interest bearing deposits increased 1.6% to $682,980,000 at June 30, 1996 from $672,511,000 at December 31, 1995. Short-term borrowings decreased $4,758,000, or 22.0%, to $16,916,000 at June 30, 1996, as compared to $21,674,000 at December 31, 1995. This was due primarily to a decrease in repurchase agreements. In the first six months of 1996, the Corporation repurchased 19,977 shares of its Class A stock at an aggregate cost of $367,000. 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. As of June 30, 1996, 10,500 of the 64,500 options which became exercisable on January 1, 1993 (and expire December 31, 1996) have not yet been exercised and 28,500 of the 39,000 options which became exercisable on January 1, 1995 (and expire December 31, 1997) have not yet been exercised. The Corporation's Board of Directors has extended the Stock Repurchase Plan to June 30, 1997. It is anticipated that the Corporation may from time to time continue to make purchases of its common stock in order to meet future issuance requirements. The following table sets forth the components of non-performing assets and past due loans. June 30, 1996 December 31,1995 -------------- ---------------- (Dollars in thousands) Non-accrual loans $0 $532 Loans 90 days past due, still accruing 1,567 897 Restructured loans 0 0 Other real estate owned 820 1,380 Non-performing other assets 1 1 -------------- ---------------- Total non-performing assets $2,388 $2,810 ============== ================ Total non-performing assets as a percentage of total assets 0.28% 0.33% ============== ================ Total non-performing assets as a percentage of loans plus non-performing assets 0.44% 0.58% ============== ================ The ratio of non-performing assets to loans plus non-performing assets decreased to 0.44% at June 30, 1996 from 0.58% at December 31, 1995. This was due to decreases in the balance of non-accrual loans and other real estate owned, offset partially by an increase in the balance of loans 90 days past due and still accruing. The balance of loans outstanding increased during the period, while the balance of non-performing assets decreased thereby causing a further decrease in the percentage of non-performing assets.

RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO JUNE 30, 1995 SUMMARY Net income for the six months ended June 30, 1996 increased 9.3% to $4,619,000 as compared to $4,225,000 for the comparable period in 1995. Earnings per share increased 9.8% to $.67 at June 30, 1996 as compared to $.61 for the same period in 1995. Operating earnings, which exclude security gains and the related tax expense, were $4,616,000, or $.67 per share for the six months ended June 30, 1996, as compared to $4,193,000, or $.61 per share for the same period in 1995. The Corporation's return on average assets was 1.09% for the six months ended June 30, 1996, as compared to 1.15% for the comparable period in 1995. The return on average assets from operations of 1.09% for the six months ended June 30, 1996 was 5 basis points lower that the 1.14% level achieved in the comparable period of 1995. Net interest margin, the Corporation's net interest income expressed as a percentage of average earning assets stated on a fully taxable equivalent basis, was 4.07% for the six months ended June 30, 1996, as compared to 4.23% for the same period in 1995. The net interest margin expressed as a percentage of average total assets, also on a fully taxable equivalent basis, was 3.74% for the six months ended June 30, 1996, compared to 3.86% for the same period in 1995. The decrease in the net interest margin reflects the increase in interest expense the Corporation experienced due to the $78 million in deposit liabilities assumed in December 1995. The Corporation has been reinvesting investment security maturities and sales proceeds in higher yielding loans in order to increase the net interest margin. During the six months ended June 30, 1996, the Corporation recognized security gains of approximately $3,000, after income taxes, representing 0.1% of net income. During the same period in 1995, security gains of $32,000, after income taxes, were recognized, representing 0.8% of net income. INTEREST INCOME Interest income, on a tax equivalent basis, for the six months ended June 30, 1996 increased 15.6% to $30,727,000 from $26,571,000 for the comparable period in 1995. The increase in interest income resulted from an increase in average earning assets of $112,527,000 for the period ended June 30, 1996, as compared to the same period of 1995, offset in part by a 10 basis point decrease in the average yield on interest earning assets to 7.87% in the current period when compared to the same period in 1995. INTEREST EXPENSE Total interest expense increased 19.1% for the six months ended June 30, 1996 as compared to the prior year period. This increase resulted in large part from a $61,172,000 increase in average time deposit balances and a $25,180,000 increase in average savings deposit balances for the six months ended June 30, 1996, as compared to the same period in 1995.

PROVISION FOR LOAN LOSSES The provision for loan losses of $250,000 for the six months ended June 30, 1996 is $150,000 more than the provision for the comparable period in 1995. The provision and the net charge-offs of $180,000 for the period resulted in the reserve representing 1.03% of total loans and 354% of non-performing loans at June 30, 1996, as compared to the reserve representing 1.14% of total loans and 383% of non-performing loans at December 31, 1995. The adequacy 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. Within the last three years, the Corporation has grown its installment loan portfolio through bank -approved dealer paper, installment car loans originated by dealers at the time of sale. It is possible that a weakening in the economic cycle could adversely affect the quality of these loans and resultant charge-offs may necessitate larger loan loss provisions. OTHER INCOME, OTHER EXPENSE AND INCOME TAXES Total other income, excluding security gains, decreased 6.2% for the six months ended June 30, 1996 as compared to the same period in 1995. This was a combination of decreases in trust revenue and gains on sales of pooled loans, offset partially by increased service charges on deposit accounts and other service charges and fees, for the six months ended June 30, 1996 as compared to the same period in 1995. Gains of $116,000 were recognized on the sale of $12,879,000 of pooled loans for the six months ended June 30, 1996 as compared to gains of $413,000 on the sale of $14,085,000 of pooled loans in the prior year period. Management anticipates continued sales from the current mortgage loan production of the Corporation if mortgage loan originations are high relative to historic norms 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 6.5% or $761,000 for the six months ended June 30, 1996 as compared to the same period in 1995. Salaries and wages expense increased $558,000 or 10.7% and employee benefits expense increased $119,000 or 11.8% for the six months ended June 30, 1996, as compared to the same period last year as a result of new staffing at the banking centers added in December 1995. The Corporation had 387 full time equivalent employees as of June 30, 1996 as compared to 366 as of June 30, 1995. Occupancy and furniture and equipment expenses increased 10.2% to $1,741,000 for the six months ended June 30, 1996 from $1,580,000 in the prior year period. Data processing expense decreased $21,000 or 3.0% to $684,000 for the six months ended June 30, 1996 from the prior year period. Foreclosed property write-downs and expenses decreased $14,000 to $75,000 for the six months ended June 30, 1996 from the prior year period. The Corporation's net overhead expense, total non-interest expense less non-interest income divided by average assets, decreased to 1.95% for the six months ended June 30, 1996 from 2.03% 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, 1996 was 62.6% as compared to 63.6% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are 62.9% and 65.0%, respectively. The change in the current year efficiency ratio is due to the income and expense items noted above. Income taxes for the six months ended June 30, 1996 increased to $1,905,000 as compared to $1,770,000 for the comparable period in 1995. As a percent of income before taxes, the provision for income taxes decreased to 29.2% for the six months ended June 30, 1996 from 29.5% for the same period in 1995.

RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 AS COMPARED TO JUNE 30, 1995 SUMMARY Net income for the three months ended June 30, 1996 increased 18.2% to $2,428,000 as compared to $2,054,000 for the comparable period in 1995. Earnings per share increased 16.7% to $.35 at June 30, 1996 as compared to $.30 for the same period in 1995. Operating earnings, which exclude security gains (losses) and the related tax expense (benefit), were $2,426,000, or $.35 per share for the three months ended June 30, 1996, as compared to $1,958,000, or $.28 per share for the same period in 1995. The Corporation's return on average assets was 1.15% for the three months ended June 30, 1996, as compared to 1.10% achieved for the comparable period in 1995. The return on average assets from operations of 1.14% for the three months ended June 30, 1996 was more than the 1.05% level achieved in the comparable period of 1995. The net interest margin expressed as a percentage of average earning assets was 4.17% for the three months ended June 30, 1996, the same as the level achieved for the like period in 1995. The net interest margin expressed as a percentage of average total assets was 3.83% for the three months ended June 30, 1996, compared to 3.81% for the same period in 1995. During the three months ended June 30, 1996, the Corporation recognized security gains of approximately $2,000, after income taxes, representing an insignificant portion of net income. During the same period in 1995, security gains of approximately $96,000, after income taxes, were recognized, representing 4.7% of net income. INTEREST INCOME Interest income on a fully taxable equivalent basis increased $1,776,000, or 13.1% for the three months ended June 30, 1996 from the same period in 1995. The increase resulted from a higher level of interest income on greater average volumes of loans and U.S. government obligations outstanding for the three months ended June 30, 1996 as compared to the same period of 1995. The yield on interest earning assets decreased 8 basis points for the three months ended June 30, 1996 as compared to the same period in 1995. INTEREST EXPENSE Total interest expense increased 11.9% for the three months ended June 30, 1996 as compared to the prior year period. This increase resulted in large part from a $40,581,000 increase in average time deposit balances and from a $37,759,000 increase in average savings deposit balances for the three months ended June 30, 1996, as compared to the same period in 1995.

OTHER INCOME, OTHER EXPENSE AND INCOME TAXES Total other income, excluding security transactions, increased 7.4% for the three months ended June 30, 1996 as compared to the same period in 1995. This was a combination of increased trust revenue, service charges on deposit accounts, and other service charges and fees, and trading security losses. Gains of $68,000 were recognized on the sale of $8,419,000 of pooled loans for the three months ended June 30, 1996 as compared to gains of $73,000 on the sale of $4,824,000 of pooled loans in the prior year period. Total other expense increased 6.2% or $371,000 for the three months ended June 30, 1996 as compared to the same period in 1995. Salaries and wages expense increased $300,000 or 11.5% and employee benefits expense increased $70,000 or 14.4% for the three months ended June 30, 1996, as compared to the same period last year as a result of new staffing at the banking centers added in December 1995. Occupancy and furniture and equipment expenses increased 9.6% to $879,000 for the three months ended June 30, 1996 from $802,000 in the prior year period. Data processing expense decreased $13,000 or 3.6% to $348,000 for the three months ended June 30, 1996 from the prior year period. Foreclosed property write-downs and expenses increased $44,000 to $71,000 for the three months ended June 30, 1996 from the prior year period. The consolidated efficiency ratio for the three months ended June 30, 1996 was 61.9% as compared to 65.6% for the prior year period. When the gains on the sales of pooled loans are excluded, these ratios are 62.3% and 66.2%, respectively. 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, 1996 increased to $1,019,000 as compared to $823,000 for the comparable period in 1995. As a percent of income before taxes, the provision for income taxes increased to 29.6% for the three months ended June 30, 1996 from 28.6% for the same period in 1995.

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. The Corporation purchases federal funds as a service to its respondent banks, but generally does not rely upon these purchases for liquidity needs. Additional liquidity is provided by bank lines of credit, repurchase agreements and the ability to borrow from the Federal Reserve Bank. The Corporation has an operating line with American National Bank and Trust Company of Chicago in the amount of $10,000,000 with $2,750,000 available as of June 30, 1996. The Corporation's dependence on large liabilities (defined as time deposits over $100,000 and short-term borrowings) decreased to 8.2% at June 30, 1996 from 9.6% at December 31, 1995. 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 $5,177,000 decrease in time deposits over $100,000 and a $3,458,000 decrease in repurchase agreements which resulted in a lower ratio of large liabilities to total liabilities. 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, 1996, the Corporation earned $4,619,000 and paid dividends of $2,235,000 to stockholders, resulting in a retention of current earnings of $2,384,000. The Corporation's dividend payout for the six months ended June 30, 1996 was 48.4%. The Corporation's risk-based capital ratio was 12.29% and the leverage ratio was 6.80% as of June 30, 1996, as compared to 12.36% and 6.92% respectively as of December 31, 1995. The Corporation and its bank subsidiary were well above all minimum required capital ratios as of June 30, 1996. 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, 1996. Rate Sensitive Within ---------------------------------------------------------------------- 1-30 31-90 91-180 181 Days- Over Days Days Days 1 Year 1 Year Total ---------------------------------------------------------------------- (Dollars in thousands) Investment securities U.S. Governments $13,636 $14,489 $39,752 $37,263 $80,593 $185,733 Obligations of states and political subdivisions 250 0 3,370 1,312 33,769 38,701 Other securities 3,579 0 1,575 126 13,345 18,625 Loans (net of unearned int.) 152,912 28,636 32,212 75,759 248,354 537,873 ---------------------------------------------------------------------- Total rate-sensitive assets $170,377 $43,125 $76,909 $114,460 $376,061 $780,932 ---------------------------------------------------------------------- Interest bearing transactions deposits $127,928 $0 $0 $0 $0 $127,928 Savings deposits 81,956 0 0 0 0 81,956 Money market deposits 145,591 0 0 0 0 145,591 Time deposits 35,603 54,326 64,324 84,891 88,361 327,505 Short-term borrowings: Federal funds purchased & repurchase agreements 8,100 0 0 0 866 8,966 Other 7,950 0 0 0 0 7,950 Long-term debt 0 0 0 0 5,000 5,000 ---------------------------------------------------------------------- Total rate-sensitive liabilities $407,128 $54,326 $64,324 $84,891 $97,227 $704,896 ---------------------------------------------------------------------- Rate-sensitive assets less rate-sensitive liabilities ($236,751) ($11,201) $12,585 $29,569 $281,834 $76,036 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Cumulative Gap ($236,751) ($247,952) ($235,367) ($205,798) $76,036 --- ====================================================================== Cumulative amounts as percentage of total rate-sensitive assets -30.32% -31.75% -30.14% -26.35% 9.74% --- ====================================================================== Cumulative ratio (cumulative RSA/RSL) 0.42X 0.46X 0.55X 0.66X 1.11X 1.11X ====================================================================== The foregoing table shows a negative (liability sensitive) rate-sensitivity gap of $236.8 million in the 1-30 day repricing category. The gap beyond 30 days, through 90 days, becomes slightly more liability sensitive as rate- sensitive assets that reprice in those time periods are slightly less in volume than rate-sensitive liabilities that are subject to repricing in the same respective time periods. The gap beyond 90 days becomes less liability sensitive as rate-sensitive assets that reprice after 90 days become 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, 1996, 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.

FIRST BUSEY CORPORATION and Subsidiaries AVERAGE BALANCE SHEETS AND INTEREST RATES SIX MONTHS ENDED JUNE 30, 1996 AND 1995 1996 1995 --------------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate --------------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $14,548 $392 5.42% $12,093 $361 6.02% Investment securities U.S. Government obligations 210,816 6,146 5.86% 163,110 4,967 6.14% Obligations of states and political subdivisions (1) 37,977 1,594 8.44% 35,271 1,518 8.68% Other securities 24,079 683 5.70% 21,289 683 6.47% Loans (net of unearned interest) (1) (2) 497,514 21,912 8.86% 440,644 19,042 8.71% ------------------ ------------------ Total interest earning assets $784,934 $30,727 7.87% $672,407 $26,571 7.97% ======= ======= Cash and due from banks 34,832 31,379 Premises and equipment 21,465 21,532 Reserve for possible loan losses (5,582) (5,425) Other assets 20,045 17,872 -------- -------- Total Assets $855,694 $737,765 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $131,916 $1,059 1.61% $123,543 $1,158 1.89% Savings deposits 79,040 1,225 3.12% 53,860 741 2.78% Money market deposits 134,735 2,538 3.79% 129,329 2,351 3.67% Time deposits 341,868 9,250 5.44% 280,696 7,429 5.34% Short-term borrowings: Federal funds purchased and repurchase agreements 12,347 318 5.17% 10,702 336 6.33% Other 8,557 305 7.17% 7,334 305 8.37% Long-term debt 5,000 138 5.55% 5,000 137 5.54% ------------------ ------------------ Total interest bearing liabilities $713,463 $14,833 4.18% $610,464 $12,457 4.12% ======= ======= Net interest spread 3.69% 3.85% ======= ======= Demand deposits 68,535 61,829 Other liabilities 5,554 4,169 Stockholders' equity 68,142 61,303 -------- -------- Total Liabilities and Stockholders' Equity $855,694 $737,765 ======== ======== Interest income / earning assets (1) $784,934 $30,727 7.87% $672,407 $26,571 7.97% Interest expense / earning assets 784,934 14,833 3.80% 672,407 12,457 3.74% ----------------- ----------------- Net interest margin (1) $15,894 4.07% $14,114 4.23% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995. (2) Non-accrual loans have been included in average loans, net of unearned interest.

FIRST BUSEY CORPORATION and Subsidiaries CHANGES IN NET INTEREST INCOME SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Change due to (1) Average Average Total Volume Yield/Rate Change ----------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold $59 ($28) $31 Investment securities: U.S. Government obligations 1,375 (196) 1,179 Obligations of states and political subdivisions (2) 111 (35) 76 Other securities (22) 22 0 Loans (2) 2,494 376 2,870 ----------------------------------- Change in interest income (2) $4,017 $139 $4,156 ----------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits $89 ($188) ($99) Savings deposits 380 104 484 Money market deposits 100 87 187 Time deposits 1,648 173 1,821 Short-term borrowings: Federal funds purchased and repurchase agreements 102 (120) (18) Other (1) 1 0 Long-term debt 0 1 1 ----------------------------------- Change in interest expense $2,318 $58 $2,376 ----------------------------------- Increase in net interest income (2) $1,699 $81 $1,780 =================================== (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 1996 and 1995.

FIRST BUSEY CORPORATION and Subsidiaries AVERAGE BALANCE SHEETS AND INTEREST RATES QUARTERS ENDED JUNE 30, 1996 AND 1995 1996 1995 --------------------------------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate --------------------------------------------------------------- (Dollars in thousands) ASSETS Federal funds sold $5,421 $71 5.22% $15,808 $240 6.09% Investment securities U.S. Government obligations 199,395 2,919 5.89% 168,265 2,573 6.13% Obligations of states and political subdivisions (1) 38,778 808 8.38% 36,237 779 8.61% Other securities 24,066 346 5.79% 21,596 342 6.35% Loans (net of unearned interest) (1) (2) 513,897 11,239 8.80% 441,753 9,674 8.78% ------------------ ------------------ Total interest earning assets $781,557 $15,383 7.92% $683,659 $13,608 7.98% ======= ======= Cash and due from banks 35,010 31,262 Premises and equipment 21,313 21,395 Reserve for possible loan losses (5,658) (5,431) Other assets 20,403 17,664 -------- -------- Total Assets $852,625 $748,549 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing transaction deposits $131,937 $539 1.64% $123,796 $581 1.88% Savings deposits 81,161 624 3.09% 43,402 382 3.54% Money market deposits 137,953 1,300 3.79% 130,995 1,203 3.68% Time deposits 335,981 4,480 5.36% 295,400 3,896 5.29% Short-term borrowings: Federal funds purchased and repurchase agreements 8,925 117 5.27% 10,296 167 6.51% Other 8,162 145 7.14% 10,174 202 7.94% Long-term debt 5,000 69 5.55% 5,000 69 5.54% ------------------ ------------------ Total interest bearing liabilities $709,119 $7,274 4.13% $619,063 $6,500 4.21% ======= ======= Net interest spread 3.79% 3.77% ======= ======= Demand deposits 69,853 62,451 Other liabilities 5,585 4,442 Stockholders' equity 68,068 62,593 -------- -------- Total Liabilities and Stockholders' Equity $852,625 $748,549 ======== ======== Interest income / earning assets (1) $781,557 $15,383 7.92% $683,659 $13,608 7.98% Interest expense / earning assets 781,557 7,274 3.75% 683,659 6,500 3.81% ----------------- ----------------- Net interest margin (1) $8,109 4.17% $7,108 4.17% ================= ================= (1) On a tax-equivalent basis, assuming a federal income tax rate of 35% for 1996 and 1995. (2) Non-accrual loans have been included in average loans, net of unearned interest.

FIRST BUSEY CORPORATION and Subsidiaries CHANGES IN NET INTEREST INCOME QUARTERS ENDED JUNE 30, 1996 AND 1995 Change due to (1) Average Average Total Volume Yield/Rate Change ----------------------------------- (Dollars in thousands) Increase (decrease) in interest income: Federal funds sold ($139) ($30) ($169) Investment securities: U.S. Government obligations 450 (104) 346 Obligations of states and political subdivisions (2) 51 (22) 29 Other securities 21 (17) 4 Loans (2) 1,578 (13) 1,565 ----------------------------------- Change in interest income (2) $1,961 ($186) $1,775 ----------------------------------- Increase (decrease) in interest expense: Interest bearing transaction deposits $43 ($85) ($42) Savings deposits 283 (41) 242 Money market deposits 65 32 97 Time deposits 541 43 584 Short-term borrowings: Federal funds purchased and repurchase agreements (20) (30) (50) Other (37) (20) (57) Long-term debt 0 0 0 ----------------------------------- Change in interest expense $875 ($101) $774 ----------------------------------- Increase in net interest income (2) $1,086 ($85) $1,001 =================================== (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 1996 and 1995.

ITEM 6: Exhibits and Reports on Form 8-K (a) There were no reports on Form 8-K filed during the three months ending June 30, 1996.

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: //Scott L. Hendrie// --------------------------- Scott L. Hendrie Senior Vice President and Chief Financial Officer (Principal financial and accounting officer) Date: August 12, 1996

9 1,000 3-MOS DEC-31-1996 JUN-30-1996 37,530 0 0 1,854 179,912 61,293 61,422 537,873 5,543 855,469 759,163 16,916 5,704 5,000 0 0 6,291 62,395 855,469 11,171 3,790 70 15,031 6,943 7,274 7,757 100 4 6,325 3,447 2,428 0 0 2,428 0.35 0.35 7.92 0 1,567 0 418 5,569 250 124 5,543 0 0 0